Imagine your local store is doing great, bustling with customers daily. Now, you’re ready to grow by going online, reaching even more people. But with this exciting step also comes a big task: setting up your online shop right, especially when it comes to handling payments.

The first thing you need to get a handle on? Credit card processing. Even though it may sound complex, it’s just about guaranteeing your customers can pay you securely and without a hassle.

That’s why, understanding credit card processing is crucial – after all, it’s how you’ll keep your online sales running without problems, just like in your physical store.

Understanding the Basics of Credit Card Processing

When you finally decide to take this big step and take your regular store online, you’re entering the unknown. This may be a bit scary, but it doesn’t mean you should “abort the mission.” Instead, try to understand how it all works.

In other words, to make your great plan work out, you need to understand how credit card processing works. After all, that is one of the absolute essential elements of online sales that makes it possible for your customers to pay you from anywhere, anytime.

Who Is Involved in Credit Card Processing?

Let’s go step by step through the credit card processing basics. Firstly, let’s take a closer look at who is involved in this process:

1. Merchants That’s you! Whether you’re selling regular products or offering services, you’re the one accepting payments from customers.
2. Payment Gateways Think of these as the online version of a physical card reader. They basically take customers’ payment information and initiate the transaction.
3. Processors These key players in credit card processing handle all the nitty-gritty. In short, they take the transaction from the gateway, check if the customer has enough funds, and then move the money further.
4. Banks There are two main “entities” here – the customer’s bank (aka issuing bank) and your bank (aka acquiring bank). The customer’s bank checks if the transaction is legit and sends the money to your bank.

What Happens When Your Customer Makes a Purchase Online?

Now, let’s go through four processes that take place when a customer buys something from your online store.

STEP #1: A customer enters their credit card information, which goes through the payment gateway.

STEP #2: The processor takes this information, checks with the customer’s bank to verify if this transaction isn’t a fraud, and then moves the money.

STEP #3: If all checks out, the transaction gets approved. The funds get transferred from the customer’s bank to your bank.

STEP #4: That’s basically it. The sale is complete, and the customer gets their purchase confirmation.

Without a doubt, credit card processing might seem like a lot to wrap your head around – especially if you’re not keen on learning about the technical details or trying to decode the financial jargon. Luckily, when everything is set up properly by experts, the whole credit card processing happens on its own.

Richard