What is payment processing? If you want an overview of payment processing, you’re in the right place. Learn more about payment processing basics here.
Payment processing is a workflow that allows businesses to accept credit cards, debit cards, and related forms of payment.
That makes payment processing a foundational need for most modern businesses, large and small. To tap into customer preferences and capture as many sales as possible, payment processing is simply vital.
There’s much more involved in payment processing than only this basic definition, however. From the payment processing journey to related costs and fees, there’s a lot for business owners to consider. Keep reading to learn more.
Do you know that your business needs to make a change when it comes to managing card payments? Swipesum’s payment experts will take the lead in research, evaluation, and negotiation.
We’re not tied to a specific processor or platform. Our only goals are to help you find the best payment technology and reduce the fees that come with card payments. Book your free consultation today.
Payment processing gives businesses and customers convenient options to make and receive payments.
Outside of small things like counting out exact change, physical cash is very simple when it comes to actual transactions. However, it’s also very limiting to customers and businesses. Customers need cash on hand to buy something, and making physical deposits of cash takes valuable time.
Credit and debit card payments are much easier to use overall. Whether in a brick-and-mortar store or online, customers can make a purchase and move on quickly. Similarly, businesses with an efficient payment processing workflow can simply accept a card swipe or tap. Then, they’ll quickly see the funds flow into their merchant account.
How does payment processing work? It all depends on how you look at it. The customer perspective is very straightforward and quick. From the view of payment processors and other parties, it’s a multi-step process.
The processing of payments normally appears seamless to customers (and often to you or your staff as well). They swipe or tap their payment method and, just a few seconds later, can tell if their purchase is approved.
Behind the scenes, there’s a complex workflow. It’s still very efficient. However, it’s anything but simple.
We offer an in-depth review of the players in payment processing as well as the workflow itself. Here’s a condensed version:
Know that we know the players, let’s look at the process. Payment processing involves several discrete steps. However, these can be organized into a few larger categories that represent related actions:
In simple terms, authorization starts with a customer using a card at the merchant’s business. It ends with the merchant receiving a notification explaining that the card either has or doesn’t have sufficient funds.
In between, information passes from the merchant to the payment gateway, payment processor, issuing bank, and merchant bank.
If the authorization is denied, the transaction ends there. If it’s approved, the end of authorization means the transaction needs to be processed. That marks the beginning of the clearing and settlement phases.
In general, but not always, merchants group approved transactions into batches. These batches pass through the payment processor and to the card network or association.
The information is relayed by the card network or association to the issuing bank. Then, the issuing bank actually moves the funds to the merchant account at the acquiring bank.
Payment processors help to facilitate transactions between merchants and financial institutions. They send messages between parties involved in each transaction. Examples of payment processors include Stripe and Square.
Payment processing companies can be seen as a bridge between issuing and acquiring banks.
These companies request and receive approval or denial for each transaction. Additionally, they pass along transaction data to the customer’s bank. Payment processing companies also ensure the money owed to you makes it into your account.
A payment processing account is your merchant account. Merchant accounts allow your business to accept debit and credit card payments, as well as other types of non-cash payments.
Merchant accounts allow you to collect funds from customer transactions. You can then move that money into another account, like your business checking account.
A payment processing account isn’t an additional requirement for your business or a new concept we’re just now introducing. It’s simply another name for your merchant account.
Swipesum helps businesses just like yours optimize their payment processing systems. Our experts can help you find the best possible balance of high-quality service from providers, low fees, and effective tools.
We’ll research, source, negotiate, and manage your payment processing, so you can focus on the most important parts of your business. And it comes at no additional cost to you.
Ready to learn how Swipesum can help? Book your free consultation.
RECOMMENDED
HELPFUL CONTENT
Michael Seaman
Michael is the co-founder and CEO of Swipesum. A veteran of the payments industry, Michael and his brother Stephen have led Swipesum since its inception in 2016. In his free time, Michael enjoyes time with his three children.
Read moreRequest a CONSULTATION
Meet one of our payments experts to see if working together makes sense.
We will schedule a quick consultation call to go over how you're currently handling merchant services, and present a proposal at no cost.
By submitting this form you agree to receive information about Swipesum product updates via email as described in our Privacy Policy and Terms & Conditions.
