The online card processing process is quite complex and can be confusing for merchants. In order to grasp how a customer’s transaction reaches an ecommerce store’s merchant account, it is important to identify the major players in the cycle: the cardholder, merchant website, payment gateway (FAC), merchant bank’s processor, credit card network and the issuing bank.
The transaction process – a step-by-step guide
1. Cardholder initiates payment from merchant web store and submits credit card details
2. Merchant submits data from the sale to FAC’s gateway over a secure connection
3. FAC formats the data and passes it to the merchant bank’s processor via a secure connection
4. The merchant bank’s processor submits details to the credit card network (Visa & MasterCard interchange), which routes the transaction to the bank that issued the customer’s credit card (issuing bank)
5. Issuing bank approves or declines the transaction and passes the transaction results back to credit card interchange.
6. Interchange then sends transaction results to merchant bank’s processor and processor relays results to FAC
7. FAC updates its systems with results and sends them to the merchant showing transaction approved or declined
8. The merchant provides a real-time response to the customer
The issuing bank sends the funds to the credit card network and passes the funds to the merchant’s bank. The bank deposits or “settles” the funds into the merchant’s merchant account. Settlement is processed daily, and hits the account up to 3 days in arrears.