How Does Payment Processing Work?

Payment processing is a crucial series of steps enabling seamless digital transactions between merchants and customers. Through connecting merchants, merchant banks, card networks, and more, merchant services companies, like Make the Impact, make card payments possible, supporting business growth with efficient solutions.

Step 1: Establish a Merchant Services Account

The process begins with the establishment of a merchant account with a trusted payment processing partner, such as banks, payment facilitators, and merchant services providers. Payment processing services are necessary if a merchant would like to accept card payments or online ACH payments.

Step 2: Customer Presents Payment to the Merchant

Once a merchant services account is established, a customer can purchase products or services using using various digital payment methods, including credit cards, debit cards, or electronic checks. Secure options like NFC digital wallets can also accepted depending on the payment processing technology used by the merchant.

Step 3: Cardholder Data is Secured for Transmission

When a payment is being processed, cardholder data is encrypted by the credit card terminal, point of sale, or mobile device prior to being sent to the payment processor for authorization. Technology for ensuring the security of payment information includes secure payment gateways and EMV chip cards. The security of cardholder data is governed by PCI compliance standards (PCI DSS).

Step 4: Merchant Receives Transaction Approval or Decline

After cardholder data is securely transmitted from the merchant to the card issuing bank, the bank will determine if the transaction will be approved or declined. If there are sufficient funds available in the cardholder's account and fraud screening checks are passed, the transaction is approved. Otherwise, the transaction will be declined, resulting in a chargeback being sent to the merchant or the transaction will not process at all.

Step 5: Transaction is Captured and Batch is Settled

Once the account authorization is approved by the issuing bank, the transaction is approved. This means the transaction is successful. Sometimes a customer will see that there is a pending transaction in their credit card account. This means the transaction was successful and will fully process in 3-7 days. After the transaction is complete, the merchant will capture the transaction and settle their batch. This may be automatic through their gateway or terminal, or it may be manually inputted. If an authorization is declined by the issuing bank, the transaction will be voided or will never settle, therefore dropping off after a time.

Step 6: Merchant is Funded

Once the transaction is authorized successfully, captured, and batched, funds are released to the merchant. Funds are deposited the next day or in 2-3 days, depending on the processor.

At Make the Impact, we believe in empowering businesses with business solutions. We specialize in Merchant Services/Credit Card Processing, along with additional comprehensive services that are sure to elevate your business. What sets Make the Impact apart is our commitment to making a difference in the world through philanthropy; a portion of our profits are dedicated to supporting causes that have a global impact. Choose Make the Impact for payment processing that not only enhances your business operations but also contributes to positive change on a larger scale. Partner with us to make a difference today.