What is Payment Processing?

Payment processing, the merchant’s bank interfaces with the customer’s bank to generate payments from customers other than cash and checks.

Payment processing allows businesses to complete credit and debit card transactions with a swipe, dip, or tap. Using payment processing services, merchants can speed up the flow of money from issuing banks to their accounts in a matter of seconds. Payment Gateways secure the flow of data between issuing banks and merchants. Customer and business both benefit since the transaction is completed without cash or a check.

Merchant Accounts: What are they?

Merchant accounts serve as a holding area for payments processed by credit cards and debit cards. Post-payment, funds are transferred from the card-issuing bank to merchant accounts, which are then credited to businesses’ bank accounts.

Bank accounts for businesses and merchants are different in their functions. Bank accounts for businesses handle operational expenses like rent, while merchant accounts handle credit card payments.

Upon successful processing and approval of cardholder transactions, the funds are transferred to a merchant account. Payments are usually sent to a business’s bank account via payment gateway transfer within 24 hours to three days of being made from a merchant account. Point Of Sale (POS) systems and payment processors can be combined with merchant accounts to offer merchants a way to store funds.

The best way for small businesses to begin processing payments is by partnering with a payments aggregator (payment facilitator) like EASEBUZZ as a sub-merchant to start processing payments.

Shopper: Who are they in the Payment Processing

Shopper are people who purchase goods or services from merchants.

An order is typically placed via the website of a merchant when a shopper buys online. A secure or cart page will be used for entering payment information (either credit/debit cards, UPI, QR, Payment links, or other methods), afterward, the information is encoded by the web browser and sent to the merchant’s server or to a third-party payment gateway used by the merchant.

The merchant will fulfill the order for the shopper as soon as the payment has been authorized (Credit Card Authorization).

What is the process of processing payments?

The process of using a credit or debit card to make a purchase may seem simple at first, but there is much more to it than that. Several electronic actions must take place for the transaction to be completed. It is incredibly complex to process, verify, accept, or decline a credit card transaction, but it only takes seconds.

Payment processors carry out essential steps after merchants request authorization for transactions:

  • Card Associations are connected to issuing banks through the payment processor.
  • In accordance with certain criteria, the bank issues the check either accepting or rejecting it.
  • Afterwards, the issuing bank notifies the merchant bank and the merchant if their application has been approved or rejected.

In order to complete the authorization process, merchants are required to send the authorization request to the payment processor, which then transmits the details to the payment associations. Settlement and funding is the process of depositing the payment into the merchant’s account. Card associations receive information about transactions from issuing banks; they then proceed to perform the following activities:

  • Cardholders are charged for the transaction by the issuing bank.
  • Merchant banks receive the relevant amount less interchange fees from the issuing banks.
  • Payment is made to the merchant’s account by the merchant’s bank.

What is the Security of Debit and Credit Card Processing?

Payments by credit and debit card are risky. A data breach can have enormous costs for you and your customers. Fortunately, there are ways to protect this data. The PCI Security Standards Organization requires businesses that accept or process payment cards to follow the Payment Card Industry Data Security Standard (PCI-DSS). PCI-compliant credit card processors are vital to the success of your business. Protecting your customers’ data is of utmost importance.

Additionally, businesses that process in-person transactions should consider POS systems that accept chip cards with EMV technology, which provides an additional layer of security against fraud. Payment processors can provide EMV-compliant terminals with embedded cards as part of the new fraud protection standard.

Which Payment processor is right for you?

Payment services are integral to businesses that accept credit and debit cards, since they must receive money that doesn’t arrive traditionally as paper currency. Other than the pricing plans, certain factors should be considered when choosing a payment processor in India.

Choosing a payment processor involves deciding on the following factors:

  • Services that are enhanced for customers
  • Solutions for Managing fraud risk
  • Growth-oriented tools for businesses
  • A flexible transactional process

Besides the points listed above, it is important to note that not every payment service provider processes every transition. CNP payment processors are online payment gateways, equivalent to the point of sale. Some processors specialize in online processing, taking card-not-present (CNP) transactions, while others specialize in in-store transactions.

Types of Payment Processing Software:

Payment Gateways that can be branded – vendors design payment gateways based on the business requirements and then businesses rebrand them. The vendor will provide all the assistance for such a type of payment gateway, which is customized for a specific business.

Advantages of Branded Payment Gateway:

  • You can save years of time and effort if you go with brand-label software. It would take years to develop a payment solution that worked for your business.
  • A brand label lets you get a custom payment solution within a few days, without having to dive into the development, obtaining licenses, or auditing.
  • Software development is expensive. You will have to spend more money if you build your own software solution from scratch.
  • Brand label solutions are much more reliable, cheaper, and provide integration and installation as well. Most solutions integrate with existing IT systems.
  • Your business will benefit from one less headache.

Pay with Ease with Easebuzz Brand Label – A leading payment services provider in India, Easebuzz also offers a brand labelling services that allows businesses to customize their existing products.

Brand label solutions from Easebuzz include the following capabilities:

  • Parameters related to Fraud & RISKS
  • Minimizing chargebacks and settling claims quickly
  • Services segregated by level
  • Using the bank’s brand name in the service/payment page
  • A portal that is fully owned by the company
  • Depending on the request, there can be multiple users

Payment processing solutions offered by third parties

Online payment processing is typically enabled through commercial bank accounts.

Using a third-party service for processing transactions can save businesses time and money, as creating a merchant account is a time-consuming process.

The integration of third-party gateways is easy and businesses can customize their solutions to meet their specific needs.

It is important to carefully assess the technical capabilities and long-term benefits of the solution, regardless of the business model.

Author

The author writes about fintech, banking, and future of SAAS services. He works as an SEO analyst at Easebuzz, so if you're looking for an account that tracks India's fintech scene, you should check out his Easebuzz blog.

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