From the smallest café to the largest financial institution, credit cards are an important part of every business. As a merchant, it’s important you understand how credit card processing works – and what your options are when shopping for payment providers.
Payment processing describes the steps required to move money from a successful sale into your business’s bank account – as quickly, cost-effectively, and easily as possible.
While accepting cash payments is fundamental for many businesses, accepting credit cards is a key part of expanding.
According to one study, 30 percent of all transactions were paid with cash, suggesting the majority of consumers rely1:
Any business unable to process credit card payments risks missing out on a large percentage of potential sales.
To help ensure this doesn’t happen to you, it’s important to understand what credit card processing involves – and how payment processing works behind the scenes.
Credit card processing is what allows businesses to securely accept payments made via credit, debit, gift, and even loyalty cards. This ability to capture card-based sales used to involve a one-size-fits-all approach, complete with complex configurations and long authorization delays. Today, there are more payment processing options than ever before – many of which are tailored for specific types of businesses.
For example, the online credit card processing solutions that an eCommerce merchant might explore are very different from what a brick-and-mortar retailer needs – and vice versa.
Ultimately, this variety is a plus as business owners can find the right payment solutions for their individual needs. With so many options available, it’s easy to feel overwhelmed. That’s why it’s important to pick a trustworthy partner that can guide you throughout the entire process – from selecting a POS system to learning how to process payments quickly and securely.
If you’re not sure how payment processing works, the following represents the minimum to get started. Though, depending on your specific payment environment, you may need to invest in additional tools and equipment:
Merchant accounts are a specific type of bank account that allows businesses to accept payments by debit, credit, or gift card. Ultimately, a merchant account is an agreement between a retailer, a merchant acquiring bank, and a payment provider for the processing of credit and debit card transactions.
In addition to payment processing, a POS system can help merchants manage their business operations, from tracking inventory to scheduling appointments to logging employee hours.
A payment gateway is linked to your business’s online checkout form or shopping cart. It captures and encrypts customers’ credit card data and sends this information to the payment processor for authorization.
Understanding credit card processing basics allows you to make better-informed decisions about which payment solutions are best suited for your business. For example, you can avoid unnecessary add-ons and fees by designing a payment environment that only delivers the specific features you need to securely, quickly, and easily process incoming card-based sales.
In the next section, we’ll explore the details of how payment processing works. First, we need to meet the key parties that make each transaction possible:
Now that you understand the parties involved, let’s look specifically at how credit card processing works behind the scenes. Although every payment environment is slightly different, almost every successful card-based sale goes through two main steps – authorization and settlement.
Below are the credit card processing basics of how authorization works:
If the transaction is approved, the merchant has technically made a successful sale. However, this money is not deposited into the merchant’s acquiring bank just yet. This is because the transaction must go through another step – settlement.
Here are the credit card processing basics of how payment settlement works:
We specialize in a range of payment processing solutions to help you securely capture new sales in today's ever-changing marketplace – whether you want to accept:
Below are some of the most popular POS systems that integrate seamlessly with our PCI-compliant credit card payment processing solutions.
The Clover Station Pro is our fastest, most secure, and most customer-engaging POS system yet.
The innovative technology makes it easy to:
It also comes with a smart terminal to enable customers to confirm their orders and complete payment faster.
The Clover Station is a POS solution that can manage an entire business all in one system, from accepting payments to managing employees to tracking inventory.
The Clover Station can take virtually all kinds of payments, including:
Additionally, the Clover Station is compatible with a variety of peripherals from barcode scanners to kitchen printers.
The Clover Mini is the sleekest, most flexible payment terminal around. It is a simple and entirely self-contained credit card processing solution that allows you to accept more kinds of payments, including:
As your business grows, the Clover Mini can easily scale up to full POS functionality, thanks to a range of specialized apps from the Clover App Market.
The Clover Flex is an all-in-one device with built-in capabilities to help you better serve customers, whether it's in-store or in the field.
The Clover Flex helps protect your customers, your business, and your reputation from fraud with Clover Security Plus.
Using your smartphone or tablet, the Clover Go allows you to securely and reliably accept both credit and debit cards on the go – including EMV chip cards and contactless payments such as:
Clover Go is ready right out of the box. Just pair it with your iOS or Android device, and start accepting chip cards, contactless payments, and more.
The simple act of accepting credit card payments can help boost your business. Research shows that sales can double (or even triple), with one survey finding that2:
The bottom line is that if you want your business to grow, you need to accept credit and debit cards.
If you still have questions about how payment processing works, schedule a free consultation with our team today for your:
1 “2018 Findings from the Diary of Consumer Payment Choice," Federal Reserve Bank of San Francisco, 15 November 2018
2 “Cash Isn’t Always King: Accepting Credit Cards Can Increase Your Business," Small Business Trends, 28 January 2019