A payment processor is an intermediary that facilitates the transfer of payments between card issuers, acquirers, and merchants. It does this by securely transmitting transaction and card data, including card information, online to credit card networks, acquirers, and card issuers.
The processor also transfers money from the issuing bank to a merchant account, which is used to accept credit cards and other digital payments. This merchant account is bundled with the processor, or it can be accessed by a business as a separate entity.
Credit card processing
Credit card processing is a type of payment processor
that allows businesses to accept credit, debit, and prepaid cards at their point-of-sale (POS) terminals or credit card readers. It also provides a secure, encrypted connection for cardholders and merchants to communicate during the payment transaction.
When a customer uses their card to make a purchase, the business that sells the goods or services verifies the credit card information with the issuing bank and sends it to the merchant’s payment processor for authorization. Once approval is received, the credit card data is sent to the appropriate card networks for settlement and deposit into the merchant’s bank account.
The interchange fee is a non-negotiable charge that the acquiring bank charges on every transaction made with a customer’s card. This fee is typically a percentage of the sale price and varies by industry, card type, transaction amount, and other factors.
Another fee is a markup, which the processor charges to cover the cost of processing payments. The processor can make this up by a small percentage of the total transaction or by charging a fixed amount.
Acquiring banks can also charge a fee when a consumer disputes a transaction, called a chargeback. This can be a substantial cost to a merchant.
There are also various other fees associated with credit card processing, including an anti-fraud fee. Many processors include this in their monthly service fees.
The cost of a credit card processing service should be transparent and clear. Ask questions about the rates and fees you will pay, as well as what they will cover.
Processors rely on fees to cover their costs, so it is important to shop around for the best rate available. A low-cost, high-quality processor can help you meet your customer’s expectations for a fast, secure credit card payment experience and keep your business running smoothly.
When selecting a credit card processing company, make sure the company offers live customer support and an easy-to-use interface that lets you manage your account from anywhere. Your processor should also have a solid uptime history and have solutions to help you stay operational during a network outage.
An ACH payment is an electronic transfer of funds between bank accounts. It is the most common electronic payment method in the United States and is managed by NACHA, the National Automated Clearing House Association.
ACH processing is used to pay bills, taxes, and other government payments and it's a convenient alternative to cash, checks, and credit cards. It's also an excellent way to accept recurring payments and subscriptions.
There are two types of ACH transactions: ACH credits and ACH debits. ACH credits are when the payer sends money to the receiver and ACH debits are when the receiver pulls the money from their own bank account.
The ACH network processes a large volume of ACH transfers in batches. These batches can take up to three business days to process, depending on how the ACH schedule is set up.
During the ACH transaction process, all of the information sent is encrypted using "commercially reasonable" encryption technology. This ensures that customers' banking information doesn't fall into the wrong hands and protects them from fraudulent transactions.
When choosing an ACH payment processor, make sure they have the systems in place to prevent fraud and monitor transactions for irregularities. These are essential if you have a high volume of ACH transactions, as you want to protect your business from fraudulent and scam transactions that could potentially cost you a lot of money.
Aside from preventing fraud, ACH payment processing is also an excellent way to streamline your accounting process. Unlike credit and debit card transactions, which can be cumbersome to track and balance manually, ACH transfers automatically update the bank account and are more consistent with your accounting records.
In addition, ACH processing is much faster than other forms of payment. For example, when a customer sets up an autopay option with their credit card provider, their payment will be processed immediately, compared to the time it takes for a check or paper invoice to be received by your business.
Businesses can use ACH to provide more flexible payment options and increase the number of customers they serve. This helps to reduce your costs, improve your customer experience, and drive increased revenue.
EMV chip card processing
A payment processor is a third-party company that accepts payments from customers and transmits them to a bank or other financial institution. This type of company can also provide merchant services to businesses. It uses a variety of methods to process payments and provides merchants with secure online portals for e-commerce transactions.
In the United States, the credit card industry has shifted to EMV chip cards (also called chip-and-PIN or chip-and-signature cards), which are safer than traditional magstripe cards. These chips are embedded in the card's magnetic stripe and protect against cloning and counterfeiting.
Consumers can use their EMV chip cards to make purchases at point-of-sale terminals. The customer dips or inserts their card in the terminal's slot and then follows on-screen instructions that verify the transaction.
After the verification step, the card's data is transmitted over a secure connection to a bank or other financial institution to complete the transaction. The bank may verify the transaction through a cardholder authentication method, such as a PIN or signature, before returning the approval or decline code to the EMV terminal.
This process can be completed over a wireless network or offline, depending on the POS system’s capabilities and the requirements of the credit card issuer. The EMVCo specification specifies two methods that allow offline transactions to work with chip cards: Static Data Authentication (SDA) and Dynamic Data Authentication (DDA).
Because the transaction data is stored on a chip, it cannot be accessed unless the card's microchip is read. This is a major advantage over magstripe cards, which have sensitive information on the card's magnetic stripe.
The fraud reduction from EMV technology is a big reason for its widespread adoption. According to MasterCard, fraudulent activity dropped by up to 40 percent when merchants upgraded to EMV.
One downside to EMV adoption is that it’s a lot more expensive for businesses to implement. It’s important to consider these costs when deciding whether to upgrade to an EMV-compatible POS system and comply with the card chip reader compliance standards.
As a business owner, you can avoid these costs by upgrading to a compatible POS system that supports EMV chip card technology and meets the credit card chip reader compliance standards. However, if your business fails to comply with these standards and suffers from credit card fraud, you can be held liable for the cost of the fraudulent charge. This is known as the liability shift.
A virtual terminal is a type of payment processor that allows businesses to process credit card payments online without requiring a physical card reader. This is a great option for small business owners who want to make their storefronts more accessible, while still offering the ability to accept payments from customers who don't live close by.
These terminals work by allowing your sales staff to enter customer information and credit card details on a secure online page. They can do this from any device with internet access.
Once a customer submits their information, they'll receive a confirmation email with the transaction amount and an option to print or save a receipt. The funds will be deposited in your bank account within 24-48 hours.
Virtual terminals are an excellent option for small business owners who want to make it easy for their employees to process credit card payments. They can be accessed from any device with an internet connection and offer multiple logins for staff to use.
Some virtual terminals also offer recurring billing, which helps to improve cash flow and reduce bookkeeping hassles. Recurring payments allow you to set up a payment schedule that works best for your customer, and the payment terminal automatically processes the transactions.
This can be especially helpful if you sell products or services that need to be invoiced on a regular basis, such as landscaping contractors that perform weekly lawn care or professional accountants that need to invoice their clients on a monthly basis. Recurring payments can save your business time and money by ensuring that payments are always received on time, while also helping to improve your customer's experience and retention levels.
A good virtual terminal will be PCI compliant to ensure the safety of your customer’s sensitive information and should include automated chargeback protection. This can help your business avoid high rates of fraud and chargebacks. It's also important to choose a provider that provides cutting-edge tokenization and encryption technology. This will ensure that your customers' data remains safe and will give you peace of mind that your business is protected from cybercriminals.