4 Steps In Processing Online Payments

Every business’ goal is for their customers to reach the checkout and successfully fulfill payments for their item or service of choice. By doing so, it means that an enterprise is successful in their business because they are able to generate profit.

Payment is where customers and merchants directly interact with each other. In more technical terms, it is the movement of money from the customer’s cards or account to the seller’s.

It is usually the last part of a business transaction to give the sellers suitable rewards or compensation for their service or product.

But how does the whole process of payment take place?

Processing procedures often depend on the platform and sales method of a particular company. Online businesses and eCommerce websites present their preferred and available payment options for their customers to choose from.

The whole duration of the entire transaction will depend on the payment processes and methods businesses use to acquire sales.

This article will provide a step-by-step explanation on how online payments are processed through a traditional merchant account:

1. Authorization

The process of authorization is done during the initial phase of a payment transaction. It begins when a customer pushes through with a payment in order to avail the goods or services offered by the company. The merchant will then request authorization from the bank used by the consumer.

The authorization process is crucial for businesses because it will help them determine if:

• The customer has a good standing or record of transactions on the bank
• The customer has sufficient funds to pay for their desired product or service
• The card has not been reported lost or stolen
  

It gives businesses insurance that they are dealing with a trustworthy and capable customer. Authorization usually takes a few seconds, provided that there are no issues with the payment method opted for by the customer.

2. Batching and Grouping

To lessen work and hassle, it is suggested that business owners compile and file transactions by group. Real-time data transmission and individual transactions paid one-at-a-time is impractical for a company.

A more efficient way to do this is by storing transaction data and submitting it in batches and groups.

In addition, it also has benefits for business owners as it provides more time to manually review indicators of fraud. Fraud payments is one of the most crucial factors that businesses and eCommerce websites need to avoid in online transactions.

3. Clearing

Clearing is a more technical part of every payment transaction. A straightforward explanation of the clearing process commonly involves the following steps:

• Acquirer accepts transactions from processor in bulk
• Acquirer then forwards each transaction to card networks
• Card networks distribute payments to the corresponding issuer/s
• The issuer debits the cost of the transaction from the cardholder’s account
• The issuer routes the funds back to the acquirer via the card network
  

4. Funding

The last step in the payment process is funding.

During this step, the acquirer deposits the money from the transaction into the seller’s account. This is to note that the whole payment transaction is not free.

In the final and total amount that the selling enterprise will be receiving, there will be specific fees that will be deducted. These fees are assessed by each of the parties involved during the transaction.

The entire payment process usually lasts between 24-48 hours, depending on external factors that may affect the smooth flow of the entire transaction or exchange of goods between the customer and the merchant or seller. 

These external factors may include:

• Perceived risk levels
• Specific bank policies
• The merchant’s industry
• Time and day of the transaction
  

As much as possible, payment transactions must be carried out as quickly and securely as possible. More importantly, merchants should see to it that every possible threat or hassle that customers may encounter while completing their payments, should be minimized and regulated.

On the other hand, customers should scrutinize carefully the sellers they choose to do business with. It is necessary for them to verify whether these sellers are legitimate resellers or distributors of a particular service or product in order for them to avoid being scammed online.

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