Skip to main content

What is Payment Processing?



Fervent growth of financial technology has greatly improved the payment processing methods. Process of financial transaction i.e. transfer of funds from one account to another can be facilitated in several ways. Before discussing about the payment processing industry, the software and the associated technology, it is imperative to understand the fundamental concept of payment processing.

What is Payment Processing?

Any financial transaction involves a total of three parties or players.

1. Customer, the one who pays
2. Payment processor that provides the technology
3. Merchant,  the one who receives the payment

Payment processing is the management of fund transfer between two players. Companies that provide this facility or the technology are called as payment processors. An important function of these companies is making the transactions secure to curb frauds. Now-a-days there are multiple ways of completing a payment, via credit/debit card, eCheck payment over an ACH network, digital payments, NFC (near field communication) among others. A payment facilitator usually comes in between the two players who are exchanging funds.

Popular Payment Processing Methods:

1. Credit/Debit Card Payments: One of the most common methods of payments, these payments need a merchant account to facilitate the transfer of funds. A processing fee is levied upon the merchant by the credit/debit card processing companies. Sensitive information is sent over an encrypted network and payments are verified by the service provider before being approved.

2. eCheck Payments via ACH Network: eChecks are a great mode of payments, they are the digital version of conventional checks. Processing of eCheck takes place via an ACH (Automated Clearing House) system that authenticates the eCheck and completes the payment process.

3. Digital Wallet/Online Payments: Digital wallets are becoming popular as a payment method. These payments need regular debit card processors as the wallets are ultimately linked to a debit/credit card.

What is a Merchant Account & Payment Gateway?

A merchant account is a mandatory requirement for accepting card payments. Once set-up, these accounts can be used to facilitate card present and card-not-present transactions. The details of card are input on a secure webpage/portal which is referred to as a ‘payment gateway.’ However, there are certain PSPs (payment service providers) that help small businesses to process card payments without setting up merchant accounts. These PSPs usually aggregate several businesses together and charge a flat rate fee.

Businesses are evolving rapidly and as new technologies develop, payment processing is set to become simpler, faster and more secure. Tailor made solutions are next in line and fin-tech like blockchain and cryptocurrency are brewing up a digital revolution.

Labels:
Location: United States

Comments

Post a Comment

Popular posts from this blog

Offshore Merchant Account: Why Your Business Need it?

Credit card payments have improved the prominence of many online businesses. If you have an eCommerce site, it will certainly do the same for you too. But then you will require to make certain that the offshore merchant account system you select is protected and secured for any kind of payment transfers. Getting an offshore merchant account would be a prudent thing to do. There are offshore merchant account providers in the market these days who can assist you with this. A business may not be able to run without having a merchant account as it allows the business owners to hassle-free credit card transactions. An offshore merchant account allows you to get away from paying high taxes. It gives you the chance for international trading, whereby offering multicurrency accounts.  Moreover, it also improves the potential of the company. By having installed, you can anticipate acquiring higher sales every month. Also, it decreases the tax liabilities of your business. With this, you
26 comments
Read more

Why Businesses These Days Swear By Online Payment Processing?

If you own a small organization, you must be accepting payments via checks or cash. Though this seems easy and working for you at the moment, the rapid growth of credit card processing will surely affect it later. This is because every business is turning towards online payment processing services and accepting cash or check is reaching the edge of extinction. Well, there’s nothing to feel worried about, as online payments offer a number of advantages to the business as well as its customers. Nowadays, consumers feel more comfortable paying online. Therefore, websites that still don’t allow customers to use credit or debit cards are going out of step. Speed up the process There is no denying the fact that online payment processing is faster and better than manual payment. This is because there is no need to wait for the check to arrive or keeping any eye on it to see whether it’s clear. Right from submitting the payment to updating the bank account takes just a few seconds
8 comments
Read more

How To Choose The Best Payment Processor?

  Choosing the best payment processor for your business can be tricky considering it involves so many factors and variables. As a business owner, one might be perplexed as to which model fits their business best and minimizes losses in terms of chargebacks and friendly frauds. However, there are several guidelines and tips out there to solve this mystery and chalk out a clear checklist to determine the payment processing services one needs. If you are a startup or small business, laying down the foundation of your e-commerce business and setting up a payment processing system to receive money from the customers becomes imperative. It becomes difficult to find a reliable payment processing service sometimes, it is mainly because:     1. Your business is classified as high-risk.     2. You are a newcomer or an unknown brand or business.     3. If payments take a long time to process.     4. If there are more ‘card-not-present’ transactions. A trustworthy payment processor provides you s
6 comments
Read more