From Beginning To End – Every Step Of A Typical Credit Card Transaction

There are multiple entities involved in processing a credit card payment. When a customer inputs their credit card information into your website and complete their purchase, their information is run through multiple servers, verified by different groups, and a transfer of funds is authorized and put into action.

  • The Issuing Bank – This is the bank that gave a physical credit card to your customer.
  • The Network – Visa and Mastercard allow authorizations and transferring of funds. Amex and Discover work differently because they have their own network and they issue their own cards.
  • The Payment Platform – This is the platform from which your terminal accesses the network.
  • The Acquiring Bank – The financial institution that processes credit card payments on behalf of the merchant.
  • The ISO (Independent Sales Organization) – A separate entity that represents an acquiring bank. These groups are not always necessary. They must have the cooperation of an acquiring bank to authorize a transaction. An acquiring bank does not have to use an ISO.

These are the basic players who take part in processing a typical credit card transaction. To make a bit more sense of things, you’ll find a break down of this complete process below.

Your Typical Credit Card Transaction

1. Your customer buys something from your website. They then “proceed to checkout”, input their credit card information, and press “Complete Order” (or something similar). The equivalent to an in-person purchase would be the customer swiping their credit card through your POS device.

2. If it’s a web purchase, their credit card information is encrypted and sent to another server – most likely the merchant’s web server. Merchants do have the option of having customer credit card info stored on a separate server, eliminating liability for the loss or sharing of this info. The information is sent from the customer’s web browser directly to the payment gateway, instead of being stored on the merchant’s server.

3. If the credit card information goes from the customer’s web browser to the merchant’s web server, it is encrypted again and sent to another server – the payment gateway.

4. Once the customer has swiped their credit card (or for a web payment, once the customer’s information is encrypted and sent to the payment gateway) the information is converted by the payment gateway and sent to the payment processor. The payment processor has a working relationship with the merchants acquiring bank.

5. The information tied to this credit card transaction is shared from the processor to the network (Visa/Mastercard). The network then routes the transaction information to the issuing bank (the bank that gave a credit card to your customer).
*For American Express or Discover cards, they will perform the verification that funds are available and give the “Approved” or “Declined” response to the payment gateway.

6. The issuing bank receives the information, checks the balance of the customer’s account, and either approves or declines the transaction. A “decline” will be accompanied by a code that suggests why the transaction could not be processed – ie a lack of funds or missing bank link.

7. The issuing bank then holds onto this information, like a mental note of how much the customer just spent and notes that those funds will soon be taken from their account. Then they’ll limit the customer’s spending in the future to account for already approved purchases that are still pending.

8. The issuing bank sends approval or denial of the credit card transaction to the processor, who then sends this information to the payment gateway. When the payment gateway receives the response, it displays on the POS or webpage for the customer to see.

Steps one through eight take only a matter of two or three seconds!

9. The merchant ships the purchased products to the customer once receiving authorization for the payment. At the end of the day, the merchant sends a batch of approved payments to their processor from the payment gateway.

10. The processor sends the batch of approved transactions to the acquiring bank.

11. The acquiring bank sends the batch information to the issuing bank.

12. The issuing bank transfers payment to the acquiring bank.

13. The acquiring bank deposits the funds into the merchant’s designated account.

Steps nine through thirteen take on average 3 days.

Now that you’ve seen a clear break down of the many people involved in processing one credit card transaction, a fee for this processing seems pretty reasonable. However, many merchants are paying fees that are higher than the average processing fee and spending way too much on their monthly merchant account fees due to added charges and human error.

Verisave Can Significantly Reduce The Fees You Are Paying To Process Credit Card Transactions

Verisave works with your current processor to ensure your account is setup properly and optimized for your industry. We have the ability to do this because we’ve spent decades working in the credit card industry. Verisave auditing experts know the intricate steps and processes required to ensure your account is configured properly to maximize your savings.

We have worked with every acquiring bank/processor in the credit card processing industry including TSYS, First Data, Elavon, Chase Paymentech, Worldpay, and Vantiv. We know each processor’s strengths and weaknesses, allowing us to assess the best route for your business to take. We don’t require you to switch processing companies because we know the hassle associated with doing so. At Verisave, we’re confident we can locate reductions in your merchant account spending while still using your current processor. These reductions lead to an average of 25% to 35% in monthly savings on credit card processing fees.

Your first consultation is absolutely free. Send a copy of your most recent merchant account statement and we will pinpoint the specific areas where your savings can be realized and help you to understand the ways we actually bring these savings to fruition. Contact us today to start seeing savings in a matter of weeks.

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