How does Online Credit Card Processing Work

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Online Credit Card Processing
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In this Presentation lets take a detailed view on all
the aspects related to online credit card processing,
Some of the Payment gateway providers who have made
the process extremely simple and some interesting facts
related to it.
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What happens when you swipe your Credit card ?
Though things seem to happen in a few seconds – and you
sign the receipt, there is a series of activities happening lightening
fast behind the scenes.
Be it Online or over a swipe machine, any credit card
processing is started by the Credit card payment processor
reading the credit card information from the magnetic tape ( or via.
the credit card number entered online ) and passing it on to the
Issuing bank ( or the Credit card association ) for a series of
verification’s like the Name, Credit limit, checking anti fraud
measures etc. Once all the checks return positive, the Payment
processor gives a GO to the merchant to initiate and complete the
transaction. In the cycle of Credit Card processing, this initial stage
is very critical and this is what decides to proceed with thefacebook.com/gentleninja.org

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Once the Payment processor finishes off with
the verification the Credit card processing enters the
second phase and the information is passed on to the
acquiring bank ( An acquiring bank is a financial
institution that takes care of getting the money for the
product purchased from the merchant by the buyer ). The
acquiring bank takes the credit card processing
authorization to the next stage and gets yet another
confirmation from the Credit card issuing bank. Once that
results return positive, the acquiring bank tells the Card
issuing bank to reserve the proposed amount of credit
from the buyer for the merchant.

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History :
The first form of modern day credit card
was started by Diners club . In 1950, Ralph
Schneider and Frank McNamara ( the founders
of Diners Club ) issued a common card for
people to pay their restaurant bills across any
outlet effortlessly by recording their Diners club
card number. Post which Diners club would pay
back the restaurant owners the money.
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Once the Card issuing bank gets the request
from the acquiring bank, it checks for the credit limit for the
submitted card and authorizes the reserve to be sent to the
acquiring bank( for the merchant ). This phase of the credit
card processing cycle is commonly called as batching.
Credit-card issuing banks receive many such
requests everyday ( many-times even in millions ), and to
make the process smooth, the CC issuing banks keeps all
these requests in batches and sends the batches to the
respective acquiring banks at the end of the day. These
batches are just packets of information about the credit owed
by the issuing bank to the acquiring bank – and they are not
money yet. facebook.com/gentleninja.org

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Once the acquiring bank receives the batches, it sends
the batch information to the Credit card association for clearance.
The Credit card association verifies the details from its end and
debits the Card issuing bank and credits the acquiring bank for the
bathes supplied. This is the phase of credit card processing in
which the acquiring bank gives the merchant his money. In this
process the acquiring bank deducts the fees from the money given
( which is agreed upon mutually by the merchant and the acquiring
bank prior to their business relationship ).

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The money debited from the credit card
issuing bank is put as a loan upon the credit card holder. The
money is collected with interest from the credit card holder in
bulk or in installments based on the plan the customer has
signed up with the issuing bank. With this phase the online
credit card processing cycle comes to an end – unless
there is a charge back initiated by the card holder.

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What is a Charge back ?
In cases when the Credit – Card holder is not
satisfied with the money he has paid for a particular
transaction, he asks his issuing bank to cancel the loan put
on him for the transaction. In this case the online credit card
processing cycle enters a new phase called the Charge
Back. When a credit card holder asks the issuing bank for a
charge back, the issuing bank sends a special note to the
acquiring bank to return the money debited from its end (
along with the reason submitted by the card holder ). The
acquiring bank in turn forwards that particular transaction
details to the merchant who is entitled to fight back if he feels
the charge back is un-fair or he can accept the charge back
and his acquiring bank will pay back the money to the issuing

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Top 3 Online credit card processing bodies that can
make your life easy :
PayPal :
PayPal is not only an online credit card
processing body but also an e-Wallet by itself ( you can
store the money received in your PayPal account ). PayPal
has a good reach in most of the countries in the world and
you can receive Credit Card payments from anyone in any
country. Paypal has made online credit card processing very
smooth and easy. facebook.com/gentleninja.org

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Stripe : One of the most recent trending online credit card
processing bodies is Stripe. Stripe is widely used and known for its
flexibility and the user friendly developer API they have which
makes integrating the service in any website a breeze.
Authorize.net : Authorize.net is another online credit card
processing body that is exclusive for the internet. They provide a
suit of services for merchants to effortlessly process credit card
payments online in a very secure manner.
Apart from the above list of online credit card
processing bodies each bank also provides Payment Gateways
to be used directly by merchants. By going directly with the bank to
build your payment gateway, you can save a lot on transaction
fees that needs to be given to the 3rd party online credit card
processing bodies like PayPal, Sage Pay, Stripe, WorldPay,
Authorize,.net etc. facebook.com/gentleninja.org

How does Online Credit Card Processing Work

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How does Online Credit Card Processing Work