The main aim of every business is to lure new customers and retain the existing ones. They always try to provide different types of facilities to their customers so that they can feel comfort while shopping and billing. One of these facilities is the method of payment. Some businesses accept cash while some have started cashless transactions with the help of credit and debit cards, which are inserted in the card payment machine for small business. Businesses also use many other ways of making online payment. This has reduced the burden of the customers by carrying a lot of cash with them. People use credit and debit cards to make payments and in this this article, we are going to discuss about the steps, which are used in making payments through these cards.
First, we will see the actors who are involved in this type of payment.
A cardholder is the one who has received a debit or credit and he has to use his account in that bank to withdraw money or make purchases with the help of these cards.
A merchant is the one who has to accept the payment that is done by cards for the goods or services that he sells.
Merchant bank is a bank that creates and maintains merchant accounts. These are the banks, which helps the merchants to accept payment from debit and credit cards.
The transaction that are done by the debit and credit cards are processed by the payment processing companies. Payment processors have contact with merchants, businessmen, entrepreneur, etc. along with banks and card network, which help in making card payment easy.
Issuing banks are the banks that issue credit and debit cards tie the account holders. These cards are connected to the account and when the money is paid, the amount is deducted from the account.
Different processes included in the payment through cards
The processes included in the payment through cards are authorization, settlement, and funding. Let us discuss them one by one.
In this process, the card is provided to the merchant for the goods or services he has sold. The request is sent to payment processor for payment authorization and then the payment processor submit the transactional according to the card association and then the transaction reaches the issuing bank, which has issued the card to the cardholder. Issuing bank me reject or approve the transaction depending on the date of expiry of the card or in sufficient funds.
Settlement and funding
The next processes are settlement and funding. Here the merchant has to send a number of transactions in batches to the payment processor. The processor sends the details of all the transactions to the card associations. These associations have to contact with respective issuing banks and after the deduction of the interchange fee, the money is transferred to the merchant account.
These are the steps, which are used to make payments though credit and debit cards. Merchants need to be very careful for every transaction and should purchase such a machine that can generate sales report for all the transactions.