Bank payment processing

What is bank payment processing?

Nowadays, even a small business can grow and increase its sales quickly with smooth online payment processing. Modern technologies, including bank payment processing, allow businesses to accept payments globally.

It is important to choose the right processor to set up efficient and convenient payment acceptance. But first, let's understand what a processor is and how it works.

How does it work?

Bank payment processing greatly simplifies paying for purchases online. Transaction processing occurs almost instantly, which is convenient for both the business and the client. The only thing needed is a proper network connection.

Bank card processing deals with the details of a cardholder when paying for various goods or purchasing services. In this case, the funds are debited from the client's card account, and after that, they are credited to the merchant account of a company providing services. This technology helps to process, verify, accept, or decline digital transactions using special hardware and software.

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Online payment processing is executed via a number of digital gateways. If the transaction meets the requirements of each one, it moves on to the next one. The last gateway is the merchant's bank, where the money is deposited.

The structure of this process can be divided into 4 steps:

1. 1.

   Initiating an online purchase

   The customer enters credit card details, then this information is processed by the payment processor.

2. 2.

   Encrypting the transfer information

   The payment gateway encrypts customer data to prevent data theft and protect it from fraudsters.

3. 3.

   Confirming the transfer details

   The encrypted customer data goes to the payment processor to check the possibility of the transaction. If the request is valid, the data is sent to the company or the issuing bank.

4. 4.

   Approval by the issuer

   The bank that issued the card confirms the possibility of the transaction, and the merchant bank receives notification.

Usually, if there are no “red flags” detected by a gateway or a processor, authorisation is quick.

Key parties in payment processing

There are several parties involved in this process. We’ll describe them below.

Payment processor

A payment processor is a company that processes digital transactions made via credit and debit cards (e.g. Visa, Mastercard, AmEx) or alternative methods (e.g. Alipay, WeChat).

Payment gateway

While processing centres analyse and transmit the payment data, payment gateways verify the correctness and security of all information and then accept or reject the transaction.

Issuing bank

This party is represented by a bank that issued the plastic card and controls all the operations on it.

Merchant account in payment processing

A merchant account is a bank account registered for a legal entity. It can be done with the help of a merchant services provider. It allows for accepting online payments from the clients. Funds debited from the purchaser's card go through the processing centre and then move to a company’s merchant account and, within 1-2 days, are transferred to the company's bank.

How are bank cards processed?

Plastic cards can be processed either directly by banks or by certain processing centres. The second option is preferable since it is more affordable and allows you to diversify your range of services.

A payment gateway with the ability to transfer encrypted data is required to process a transaction. This is necessary to protect the personal data of the bank's clients.

Ensuring security is the main condition in digital payments acceptance. Processing centers can also provide additional services to fully control the situation. These include:

• providing the bank clients or store’s customers with up-to-date information about the current status of all incoming and outgoing transactions and their parameters;
• tracking completed transactions;
• providing access to the history of credits to the account and spending;
• the ability to cancel transactions and create templates for automatic transfer of funds to pay for certain services, mobile communications, utility bills, etc.

The capabilities of processing centres are constantly increasing due to the use of powerful software and hardware systems.

What types of payments can be processed?

A payment method is a way customers utilise to pay for goods or services online. The most used methods are bank cards, e-wallets, mobile transactions, and instant transfers. There also are dozens of other global and regional methods of receiving/sending money from a purchaser to a seller. In plain words, all these methods are the tools that every e-commerce market participant should have to communicate with each other.

Payment processing solution by Corefy

Corefy has developed a fintech solution with customisable features for accepting online transactions. Our platform allows merchants to accept payments and make payouts through different providers. We help our clients conveniently and securely accept and make online transactions and monitor all data in a single platform.