The electronic payment processing industry is growing up at a tremendous pace. The use of the credit card has become very common for both online and offline purposes. Many people are looking to get hands-on this industry by starting their own business in various segments of the credit card processing process. To be successful, it is important to have some knowledge about various processes in the system.
The credit card processing industry is all about accepting payments for products, services or even donations through credit cards. You can use a simple online machine to accept the payment from your customer who wants to pay using their credit card. After you receive an approval from your bank, you are allowed to make the transaction with the details of the credit card.
The credit card processing industry has different stages, which are involved in the process of making a transaction. The whole process involves multiple steps including authorization, capture, clearing and settlement processes. You can see how these stages work by considering an example that you want to buy groceries worth $100 from a supermarket located near your home.
The first step in the credit card processing industry is authorization which takes place while you are getting your groceries from the supermarket. Since, you have requested for goods worth $100 which falls within the limit of authorized amount for your card, an approval will be made at this stage. This whole process takes place in a span of few seconds.
The next step is the capture process which comes after you have made your purchases. You will be asked to pay for your groceries at this stage. Since, you have already got an approval in the prior stage, the captured amount will not come under question. The card details of $100 are recorded in a database by your retailer.
The next step happens a few days later when the retailer settles all the charges against your credit card. At this stage, you will be paid for the amount that was captured from you a few days back. This will happen along with other charges including handling fees and other costs which were involved in getting information about your card at the first place.
The final step in the credit card processing industry is known as settlement process. Here, the retailer will record the total amount he owes you and also his other expenses that came along with providing goods or services to you. This whole process takes place between different parties involved in making a transaction such as banks, retailers and your bank (the bank where you maintain your account). The settlement process usually takes place at the end of each month and is responsible for processing all the financial transactions which take place during that period.
The credit card processing industry has changed a lot since its beginning. You can now pay using your credit cards or other electronic payment methods such as online money transfer, Paypal, etc. with the help of internet banking facilities offered by various banks. This has helped to increase the convenience level for both buyers and retailers.
Credit card processing is one of the most important industries in today’s world where people are becoming more dependent on plastic money instead of paper money. The market has exploded after its beginning which can be seen from the fact that there are now millions of credit card processing companies in the market. This has given rise to several segments within this industry which is thriving at a high rate.
In the beginning, credit card processing was restricted to giving out approvals for transactions after checking with customers’ credit history or an account with them through telephone calls or simple mail messages. People who didn’t have an account with the bank or failed to pay their dues were not allowed to use the services of credit card processing companies.
However, this trend has changed completely now. The industry now focuses on getting approval for purchase requests within minutes even without any contact between buyer and seller. One can understand the importance of these organizations if he considers the fact that today more than 2 billion credit cards are used around the world for making financial transactions.
The US alone has seen more than 20 million people using credit card processing services which accounts for almost one-third of its population. This market has given rise to several companies which deal with every possible stage of the industry such as authorization of charges, capture of charges, settlement of charges, etc. This has helped to boost the growth of this industry on a global level.
The credit card processing market is still new and needs some improvements to attract more customers towards it. Thus many old laws which were made for telephone or mail transactions are not valid any more because currently all processes are done online.
This industry is also facing some side effects along with its benefits which are equally important to consider before making a decision of joining it. The most important of all these has been given by retailers who have complained that they are being charged very high fees for using credit card processing services offered by various organizations.