Understanding the electronic credit card and bank card processing flow

Lets understand how does a credit card authorization process flow. Lets take a scenario of transaction happening at a retail merchant’s end. The following steps will give a broad overview of how a credit card or a bankcard transaction flows.

It all begins with a customer expressing their desire to pay by card for the order placed. The merchant sends the transaction details including customers name, address, identification number and details of order to a payment gateway. The gateway on receiving the information identifies the acquiring bank and sends this information to the acquiring banks payment processor.

The payment processor identifies the issuing bank based on customer’s information sent by the payment processor and accordingly sends the information to issuing bank.

The issuing bank scrutinizes the information and also runs the check on customers account balance to check if there are enough funds to honor the transaction order.

If there are enough funds to honor the transaction, the issuing bank will send an authorization code to the payment processor and will block the amount equivalent to transaction order amount in the customers account.

In case of fraudulent account or insufficient funds, the issuing bank will deny the transaction and send transaction denied code to payment processor.

The payment processor in turn sends the code to payment gateway. The payment gateway then sends the status to the merchant, where the transaction was initiated and merchant closes the transaction accordingly.

The entire flow mentioned above happens in a matter of few minutes allowing a merchant to service his customer faster.

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