Online transactions seem to happen within mere seconds. However, a lot happens behind the scenes to ensure that the payments go through swiftly, accurately, and securely. These involve multiple processes, including the payment gateway, the acquirer, issuer, card network, etc.
All of this happens at lightning-fast speed, with next to no delays or errors in the transaction. A robust processing system from payment gateway providers helps businesses handle the transactions as efficiently as possible and gives customers a smooth and seamless experience.
How Does Payment Processing Work?
The first step involved in payment processing is authorisation:
- The customer submits their card details on the system, then routed to the merchant’s payment processing system for payment authorisation.
- Transaction information is then submitted to the appropriate card association by the payment processing gateway, which gets routed to the issuing bank.
- An authorisation request then gets made to the issuing bank by submitting the CVV and expiration date of the card.
- The issuing bank either approves or declines the transaction request depending on fund or credit availability.
- The approval or declined status is sent back to the card association, the merchant’s bank, and finally back to the merchant.
Once this step is complete, the settlement and funding process takes place:
- Batches of authorised transactions are sent to the payment processor by the merchant.
- The payment processor then passes on this information to the card associations, which communicate the required debits to the issuing banks within the network.
- The bank charges the cardholder’s account for the requested amount.
- Once the account is debited, the funds are transferred from the customer’s issuing bank to the merchant’s bank account.
Now that you know how a payment system works let’s look at the benefits of end-to-end payment processing.
Accept Credit Card and Debit Cards
Payment system integration enables businesses and service providers to process credit and debit card payments with no human intervention making the entire process smoother and seamless for the customer.
Enables Businesses to Offer Alternative Payment Options
Payment system gateways allow customers to make payments using various payment methods like digital wallets, UPI, prepaid cards, etc., apart from regular credit and debit cards.
Allows Integrated Payments with a Business’ System
End-to-end payment processing systems enable businesses to integrate payments with business workflows like billing, customer relationship management, accounting, etc. They essentially allow different business systems to communicate, thereby increasing a business’s overall efficiency.
Increased Cash Flow
An integrated payment processing solution helps a business keep track of the amount of money flowing in and out of the system at the end of each business day resulting in better inventory management and more informed operational decisions.
Reduced Human Error
Eliminating the need for human intervention during a payment transaction process helps decrease the scope of errors by promoting a seamless flow of data from the point of transaction to the ledger. This prevents any errors in entry and makes accounts more accurate.
Saves time
Time is money, and end-to-end payment processing helps a significant of time as there is no need to manually enter credit card data or information related to other electronic modes of payments into the accounting software.
It is essentially a cost-saving benefit that a payment system offers as all transaction-related data automatically flows into the system without requiring human intervention.
An end-to-end payment processing system is crucial for a modern-day business to function efficiently. It is cost-effective, saves time, and increases the overall efficacy of a business by reducing human intervention and the scope of errors.
So, if you are thinking of taking your business to the next level, then you need to have an end-to-end payment processing system in place to ensure that your business always stays one step ahead of the curve.
