BYTES

The Payments Ecosystem is a complex mechanism with many moving parts. Merchants, Issuers, Acquirers, ISOs, PayFacs, all view the process through a different lens. Complicated? Yes. Bytes will break down all the most important topics into easily digestible pieces.

What’s Payments Processing?

Ever wonder what happens when your customer taps their credit card on your Point of Sale Terminal? The funds don’t magically transfer from one bank account to another. That single tap of a card spiders its way back-and-forth through an ecosystem of Financial Institutions and technology.

Payments processing is the technology that enables a seamless transaction.

Let’s break down how a transaction gets settled:

  1. Once that card is tapped, your Point of Sale terminal initiates the transaction. Data about the purchase is then transferred to your gateway
  2. The Merchant’s gateway acts as a bridge between the Point of Sale and Acquiring Bank. It captures and sends data about the purchase to your Acquirer
  3. Your Acquirer routes the purchase through the card holder’s Card Network (VISA, Mastercard, AMEX, etc.)
  4. The card network acts as a highway—it enable a quick communication between the Acquirer and Issuer (card holder’s bank). They set the rules about what is and is not a valid transaction, and provide the infrastructure to route transactions to the correct parties
  5. The card holder’s Issuer authenticates the transaction. They verify available funds and asses the fraud risks. Their response, declined or approved, is sent back up the chain—to card network, Acquirer, gateway and back to the Merchant
  6. If approved, the transaction is settled. The Acquirer credits the Merchant account (minus processing fees) and funds are moved over.

What’s more, that tap of a card only take seconds!

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