Please tell me again how ecommerce credit card processing works

the four major credit cardsIf you are confused about how ecommerce credit card processing works on websites, you are not alone.  It’s complicated!

First, here are the entities involved:

  • Website with ecommerce functionality and payment gateway extension
  • Payment gateway (such as Authorize.net, PayPal and Stripe)
  • Merchant bank’s processor (such as First Data, Global Payments and Heartland Payment Systems)
  • Credit card network
  • Issuing bank (bank that issued the credit card)
  • Merchant’s bank

Now, here is the process:

  • The customer buys something online and enters credit card information for payment.
  • The payment gateway coordinates two-way routing of the data on behalf of the merchant.
  • The payment gateway passes the transaction information to the merchant bank’s processor.
  • The merchant bank’s processor submits the transaction to the credit card network.
  • The credit card network routes the transaction to the bank that issued the credit card.
  • The issuing bank approves or declines the transaction based on the customer’s available funds and passes the transaction results back to the credit card network.
  • The credit card network relays the transaction results to the merchant bank’s processor.
  • The merchant bank’s processor relays the transaction results to the payment gateway.
  • The payment gateway sends the results to the website for the customer and merchant to see.
  • The issuing bank sends the appropriate funds to the credit card network, which passes the funds to the merchant’s bank.
2016-10-17T10:29:44+00:00 May 26th, 2015|Business Advice, Industry News, Product News|