The Role of Credit Card Processors

The credit card processors are almost the unsung heroes of the entire operation, rounding up all the info and details to get your money from point A to point B. They’re the ones that keep the cash flowing smoothly between you, the merchants, and the banks, pulling the strings to make this miracle happen. Without them, you’d be stuck trying to trade chickens for groceries!

Connecting Merchants and Card Networks

Basically, credit card processors act like the rope that ties together the merchant and the card networks — Visa, Mastercard, Discover, and American Express. They occupy the middle ground between the parties and make sure your transaction is passed on correctly, keeping things running smoothly. 

They are also responsible for making sure all of this happens securely so that your data doesn’t end up roaming wild and free.

Here’s where the card processor comes in: When you swipe, tap, or insert your card, the processor ensures the information travels up the line to the banks and networks without any hiccups. Without these processors, your card swipe is a waste of time. They allow you to pay for purchases at stores, online, or over the phone without cash.

Authorizing Transactions 

Before cash changes hands, the processor checks to ensure you aren’t spending more than you have. They validate your information, watching for expired cards and suspicious activity.

The processor deals directly with the bank to validate that your account can pay for your purchase. 

Once that processor gets the all-clear from the bank, it gives the green light to complete the transaction. No funds, no sale — it’s just that simple!

How Payments Settle 

Settlement refers to the money heading to where it belongs — straight into the merchant’s bank account.

By this time, that processor has already cleaned up the loose ends. The cardholder’s bank is fixing to send funds right on over to the merchant’s bank — that’s the “acquiring bank” if you want to get technical. 

All the merchant’s bank does in a settlement is sit and wait for the money to flow in. That processor is the lead cowhand of this cattle drive, making sure every last penny is herded into the right account, no strays running loose. They may not be looking for a medal or anything, but you can’t deny they’re the ones that keep this whole shebang running smooth and fast with hardly any hiccups.

Source