The Credit Card Payment Flow: What You Need To Know

Do you have a credit card and would like to know about the online credit card payment or processing system in brief? Then, you are in the right place.

From swiping your credit card at the merchant (mall/supermarket/eCommerce websites) to receiving the transaction message, many processes take place.

It involves different parties, each doing their tasks to ensure that the entire process is fast, hassle-free, and seamless and gets completed in seconds.

Here are some interesting insights on the online credit card payment or the processing that takes place involving various parties. Have a look:

How online credit card payment/processing works – A quick guide

• A credit cardholder uses his/her credit card to make a payment at a point of sale (POS) or an eCommerce website. The POS is nothing but a card reader. Your card will be swiped in it to fetch your information. On eCommerce websites, there are no POS machines. There is a payment gateway like CCAvenue, PayUIndia, RazorPay and more to collect payments. They manage complex data routing on the merchant’s behalf and authorize eCommerce transactions.
• The next step is – the payment gateway or the POS the pass the transaction information via a safe connection to the payment processor.
• The payment processor is responsible for the collection and transmission to the next stages. It sends the payment information to the credit card network with which the card is linked. Some of the most popular credit card systems in India and around the world are MasterCard, American Express and Visa.
• The credit card network then passes the information to the bank of the cardholder. It is also called the credit card issuing bank.
• After receiving the payment request, the issuing bank verifies the funds’ availability in the account of the cardholder to approve the same. It also checks if the payment request is legal or not. Once it’s confirmed that the payment request is not fraudulent, it sends a message. The message may be either approved or declined and transmitted back to the credit card network.
• The credit card network then transmits the authorization response to the payment processor. In turn, the payment processor forwards the same to the card reader (POS) or the payment gateway.
• All the legal and approved credit card payments or authorizations are then submitted to by the merchant in a batch. It is done via its payment processor to the merchant bank or the acquiring bank for settlement.
• Once the acquiring or the merchant bank receives the daily card payments from the retailer, it raises a request to the credit card issuing bank for the batch settlement.
• The credit card provider in India or the issuing bank makes a settlement payment on the following day to the merchant bank.
• Once the merchant bank receives the money, it deducts a certain amount towards acquirer fee and interchange fee and others from the actual account. The remaining amount gets deposited to the account of the merchant on the next day or the same day. This process is known as the settlement and generally takes 2-3 business days to be completed.

You are now aware of the online credit card payment and processing system involved in a credit card payment. The overall payment system may look complex on the paper, but it takes just a fraction of seconds for all the steps to be completed.

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