What does Payment Processing Mean, and How does it Work?

• According to Visa, Tap-To-Pay transactions grew by 30% over the past years.
• Nearly 50% of US shoppers say they won’t shop at a store that doesn’t offer a cashless way to shop.

Every business, whether offline or online, needs a payment processor and payment processing services to cater to the changing behavior of consumers. Besides ensuring the transactions are carried out seamlessly, it also improves customer experience and business reputation.

Since payment processing directly impacts your revenue, making informed decisions is crucial, especially selecting the right payment processors. After all, the payment processor you choose affects everything from your potential to collect online payments, to your customer service, to your business’s bottom line.

Choosing the one payment processor that’s a good fit for your business may sound an uphill task. But, considering the main things like fee structure, PCI compliance, and excellent customer support, it’s simple as ABC.

Before we dive deep into understanding the nitty-gritty of choosing the right payment processors, it’s important to have a quick rundown of where it all started – “Payment Processing Services.”

In simple terms, payment processing is providing a person, indirectly or directly, different means to charge or debit bank accounts through the use of any payment mechanism.

Payment processing is not just about credit or debit cards, it’s much more than that. Though debit and credit cards are the most popular payment method at this time, more options to accept payments are cementing their footstep in the hierarchy, like contactless, mobile and online payments.

Payment Processing Services

Therefore, offering consumers more efficient ways to pay for goods is a key objective for all modern business owners.

To start, let’s first review what and how payment processing work, including terms that specifically relate to your business.

Introduction to Payment Processing:

To a naked eye, the payment processing might seem as simple as a credit or debit card tap, swipe or a dip, merely taking a few seconds. However, there’s more than that. It involves several steps and players, like:

• Customers
• Merchant/Business
• A payment processor
• Payment gateway
• Bank, credit or debit company
• Business bank or merchant accounts

Who are the Main Players in Processing Payments?

To simply put, in debit or credit card processing, whether online, through phone sales, or even in person, there are three main players:

On one side is you, the business owner or merchant, while on the other is your customer. And, in between lies the technology that bridges the two of you.

#Player 1: You, The Merchant

To accept credit and debit card transactions from online customers, you need to partner with some key players. As a business owner, you’ll likely need a merchant bank (also termed as the acquirer) that accepts payments on your behalf and deposits them into the provided merchant account.

#Player 2: Your Customer

For your customer to pay for the services and goods used, they need a credit or a debit card. The bank that approves them for the card payments and credits them the cash to pay you is known as an issuing bank.

#Player 3: The Technology

Between lies the two technologies that allow you and your customer to make a transaction.

First is the payment gateway, a software that links your website shopping cart to the processing network. Next comes the payment processors (or merchant service), which does all the leg work like moving the transaction through the processing network, working with the bank, sending a billing statement, doing debit or credit card processing, etc.

The final outcome is a customer who successfully makes a purchase without cash – along with a business that completes a sale.

Some Key Payment Processing Stats On How US Customers Will Be Paying For Goods and Services Moving Forward

Before you can decide which payment processing method is right for you, it’s better to know what market stats say about it.

Detailed Read on...