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Buyers' Guide to
Online Payment Acceptance
Chapter 3: How Online
Transactions Are Processed
The
process a transaction goes through is actually
quite complicated, however it only takes a few
seconds. Here's an inside look at how credit card
transactions are processed using a Real-Time
credit card processing solution:
1. The customer elects to move to the check out
with the items they placed into their shopping
cart or selected from the order form on a
merchant's Website.
2. The customer then selects "credit
card" as their method of payment.
3. Their browser connects to the Website host's
secure server, and brings up the secure payment
form.
4. The customer enters in his or her credit card
information on the secure payment form, and
authorizes the transaction by clicking a
"Complete Order" type button.
5. The transaction information flows to the
Website host's secure server using SSL
encryption.
6. The secure server connects to the merchant's
processing bank either via a Secure Payment
Gateway (a third party who provides the
connection to the processing bank via land line),
or directly (some processors have their own
proprietary Secure Payment Gateway and therefore
do not require a third party to provide this
service).
7. The processor polls the card network, such as
Visa or MasterCard, directly, and the validity of
the card, and availability of funds is confirmed.
8. If the transaction's approved, an
authorization code is returned to the processor,
or to the Secure Payment Gateway from the
processor.
9. The authorization is encrypted by the Payment
Gateway or processor and transmitted in encrypted
form to the Web server of the merchant, which
triggers fulfillment of the order.
10. The merchant's Web server then sends the
customer's browser a confirmation receipt.
11. The amount due is moved from the card
holder's bank to the merchant's processing bank.
The merchant's processing bank will then move the
money to the merchant's local bank within 2 to 3
business days.
Here
is a diagram of how Real-Time Credit Card
Processing works:
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