Points to check before choosing a credit card payment processor

With the rise and rise of the Unified Payments Interface (UPI), businesses have shifted online and increased their reach among the customers of India. As of December 2022, about 382 scheduled banks are live on UPI, and customers have already carried out a record 7829.49 million digital transactions through the system. These transactions amounted to a total transactional value of ₹ 12,82,055 crore in a single month! In this article, get a lowdown of the online credit card payment process and know everything about credit card processing fees. You will also learn about how you can pick a credit card payment processor for yourself in this article. Read on! 

How does the processing of a credit card take place?
 

To know about how an online credit card transaction is processed, you must first be acquainted with certain terms that are key to understanding this process:

· POS Terminal:

A Point-of-Sale terminal is a machine that can accept credit card payments online by either waving or swiping their credit card at one such terminal.

· Issuing bank:
 

The bank or financial institution that provides a credit card to the customer is called the issuing bank.

· Acquiring bank:
 

The bank or financial institution that accepts the financial transactions of a customer is called the acquiring bank.

· Payment gateway:

The payment gateway facilitates the transaction by transmitting the transaction’s information from a payment portal (for example, an e-commerce company’s website) to a bank’s processor. It also transmits authorisation responses from the credit-card-issuing bank back to the payment portal.  

· Credit card network:

A credit card network works in conjunction with payment processors that facilitate communication between the merchant and the issuing bank. The credit card network also fixes the interchange fee and the assessment fee. 

· Payment processor:

A credit card payment processor is what connects merchants and issuing banks. Payment processors secure payment data and transmit it to other parties. 

Now that you know these terms, you can easily understand how an online credit card transaction is processed:

1.  The cardholder uses a POS terminal to make a credit card transaction by swiping the card.

2.  The card reader on the POS terminal relays the transactional information to the payment processor.

3.  The payment processor sends this information to the credit card network.

4. The credit card network relays the same information to the issuing bank.

5. The issuing bank verifies the authenticity of the transaction and the availability of funds in the customer’s account to effectuate the purchase. If everything is clear, it sends a confirmation message back to the POS terminal through the credit card network and the payment processor.

6. Once the transaction is approved, the merchant delivers the goods to the customer.

Points to check before picking a credit card payment processor

Here are a few factors that you must consider before picking a credit card payment processor:

· Processing fee
 

Every credit card payment processor charges a fee from the credit cardholder to process any credit card transaction. The merchant who uses the services offered by the payment processor must bear this fee. You must check the processing fee charged by any payment processor before opting for it.

· Security mechanisms
 

The credit card transactions facilitated by the payment processor can help with the smooth running of your business. However, you should opt for a payment processor that uses high-level security measures for all transactions. You must, therefore, also consider the security mechanisms put in place by the payment processor.

· Interoperability
 

Your payment processor must also support interoperability between various modes of payment. In the age of online money transfers, interoperability is an important feature to consider.

· Customer support

Finally, you must opt for a payment processor that offers good customer support. You should be able to resolve any query regarding any transaction at the earliest by approaching the customer service team.

The most efficient way of using your credit card is through a mobile banking app. Businesses are managed seamlessly through mobile phones these days, and mobile banking apps like the IDFC FIRST Bank mobile banking app allow you to access your credit card details conveniently and pay your credit card dues seamlessly. Know more about the app and its other stellar features.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.