Understanding E-Commerce Credit Card Processing
E-commerce credit card processing is the backbone of online transactions. It’s the technology and systems that enable customers to pay for their purchases using credit or debit cards. The process is initiated when a customer clicks the “checkout” button on their favorite e-commerce site, and it involves several steps to ensure a secure and efficient transaction.
When running your e-commerce, you will typically rely on a particular credit card processing solution provider, who will work as a link between you and credit card companies. But, that’s just the surface –
this process is much more complex.
How Does E-Commerce Credit Card Processing Work?
Before we explain each of the steps of
e-commerce credit card processing, let us focus on the parties involved in it. This multi-step process involves numerous institutions, including:
- Cardholder: the customer.
- Merchant: e-commerce store.
- Merchant Bank: e-commerce store’s bank.
- Payment Processor.
- Issuing Bank: customer’s bank.
- Card Association.
Knowing who is involved in the whole process, we may proceed with enlisting the steps that it involves.
E-Commerce Credit Card Processing Step-by-Step
- Data Entry: When a customer decides to make a purchase, they enter their credit card information, which typically includes the card number, expiration date, and the card’s security code (CVV/CVC).
- Authorization: The e-commerce site sends the details to a payment gateway (provided by the processor). The payment gateway acts as an intermediary between the e-commerce site and the customer’s bank. Also, It verifies the information and checks for available funds in the customer’s account. If everything checks out, the transaction is authorized, and the customer’s bank reserves the purchase amount.
- Settlement: After authorization, the transaction enters the settlement phase. This is where the e-commerce merchant requests the funds from the customer’s bank. However, it’s not as simple as it may seem. The settlement step can be further divided and involves:
- The merchant sending the authorized transactions to the processor
- The processor passing the data to the credit card association, which then contacts the issuing bank,
- The issuing bank transferring funds to the merchant bank.
The Takeaway
In conclusion,
e-commerce credit card processing is the system that drives online shopping. Also, It involves data entry, authorization, and settlement phases. Also, With the ever-evolving landscape of payment methods, including mobile and contactless
options, e-commerce businesses continually adapt to meet customer demands. Thus, it is crucial to understand how the processes work to realize what is and what isn’t possible and to know why.