The Basics of Accepting Card Payments – The 9 Key Steps to Process each Card Payment

The process behind accepting credit / debit cards for your business can be complicated, however, here we’re going to explain to you what’s involved in the process. it’s important to understand the fundamentals of what’s involved when you take a payment with a credit or debit card. A basic understanding will then allow you to properly understand the steps and costs involved behind each card payment as well as choose the right solution for your business. We go through a simple explanation of how processing card payments and how it works.

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You will need to speak to a provider of Merchant Acquiring services, such as Card Pay Accept, which is a service provided for businesses enabling you to accept credit card or debit card payments.

Then the obvious next question is – When Processing Card Payments: What does a Merchant Acquiring service provider do and why do I need one?

1. They provide a single interface to allow your business (the merchant) to accept credit, debit, business debit or corporate cards provided in the main by Visa, MasterCard, American Express or JCB
2. Your customers card is then authenticated with fraud checks
3. The issuing bank approves or declines the transaction based on funds available
4. The payment is then passed through the electronic networks to the processor. The authorisation code is delivered to the point of sale device at the merchant’s location. This all happens in a matter of seconds
5. Funds are then collected on your behalf from the card issuer and allocated to you merchant ID number
6. The scheme and issuer fees are paid on your behalf
7. They will act as an intermediary on behalf of you, the merchant, in the event of any card claims & refunds for any goods returned or services not provided
8. At the end of the day, the merchant will send out all of their transactions referred to as a batch to the processor for your funds to be deposited into your business bank account
9. These funds are then released and paid to your business bank account on the same-day to 48 hours, depending on the service you choose

In essence, the Merchant Acquirer acts on your behalf taking care of all the processes listed above with all the different card schemes provided by Visa, MasterCard etc covering the multiple steps involved with card payment processing.

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When processing card payments, the card scheme providers such as Visa, MasterCard and American Express require that a merchant use a payment processor, such as a bank, in order to accept credit and debit cards.

The credit card issuer, such as bank issues a credit or debit card to the cardholder. They primarily establish the fee structure for merchants. This can also be known as the interchange fee. This fee has numerous factors such as risk that decide what this should be such as whether the card-holder is present with a face-to-face transaction (known as secure) or where the card-holder is not present such as a telephone or online transaction (known as non-secure).

Secondly, the type of card that is used, whether it’s a consumer card or a business card. Individual rate categories are set by Visa, MasterCard and American Express and these interchange fees set by them.

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Your business known as the merchant, will need to decide how to accept credit / debit card payments that works best for your business requirements.

The options are:

• In-store with a card payment terminal sometimes known as a PDQ machine
• On the road with a mobile card payment machine linked to your smartphone
• Via telephone with a virtual terminal via an online link specific for your business
• Online via a secure payment gateway
• ePOS system with card terminals for bars, restaurants and hospitality industries

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Now you have the fundamental background on what is involved in the card payment process you can see the importance of choosing the right provider and as importantly understanding which solution(s) would be the best for your business. Hopefully by having a basic understanding on processing card payments and how it works gives you an understanding of the costs behind the scenes for each card payment taken by a business.

Studies have shown that around 70% of people prefer to pay by card (and since COVID-19 this customer demand is only increasing). Giving your customers the convenience of paying by card improves their satisfaction rates and they’ll spend more money, more often. (prnewswire.com)

One survey, sponsored by Intuit, found that 83% of small businesses that accepted credit cards saw increased sales. (smallbiztrends.com)