Almost every business has an online presence due to increased demand. Therefore, you need to invest in robust management tools and other solutions to help you expand your business. The most important thing you need to consider is how you collect payments from your customers. It’s imperative for you and your customers to give them flexible payment options for hassle-free buying.
That’s when one of the B2B merchant services, i.e., payment processing, comes in handy for online businesses. Therefore, this article will guide you on payment processing and how it works. Read below to learn!
What Is Payment Processing?
In simple terms, the online transaction between your business and your customer/client is “payment processing.” This transaction is managed by an online payment tool responsible for processing, verifying, and accepting money into your business account.
Before discussing the details about how payment processing works, let’s look at some important terms to help you understand the process in a much better way.
Customer/client – A customer or client of your business pays you online via a card to purchase your products or services. They will input their personal and confidential card details.
Merchant – In payment processing, you are the merchant. In other words, you receive money from the customer and provide them with your goods/services in return.
Merchant account – Whatever payment processing solution you use, you will be provided with a merchant account where the sales proceeds will be held for a while before transferring to your business’s account. It is a requirement.
Payment processor – A payment processor or provider can process different online payments like debit cards, credit cards, ACH, and digital wallets to handle your online transactions. It should make sure that the transactions and payment details are secure through the payment gateway, and it transfers the funds into your merchant account successfully.
How Does Payment Processing Work?
Although there are plenty of payment processors available, you must consider the one that best suits your needs and your client’s/customer’s needs.
It’s essential to have the right payment provider to keep your internal operations efficient and the customer-business relationship.
Now, let’s take a look at how payment processing work.
For example, you have a clothing brand, and you sell clothing items on your website. A customer visits your website, adds a shirt to their cart, and proceeds to checkout.
Before making a payment, they choose one of the payment methods available, for instance, a credit card. They fill out their credit card details and personal information.
Once they make a payment, their payment details are processed through the payment gateway to ensure the sensitive data is encrypted and secure until it reaches the payment processor.
The transaction details are sent to the issuing bank (credit card company of the customer) for authorization, i.e., to ensure they have enough credit to make the purchase.
After the payment is authorized, the processor is informed, and the funds are then transferred from the customer’s bank account to the merchant’s bank account.
This way, you can get the funds easily into your bank account later, and your customers’ experience with your business will be seamless. Hence, you will be able to grow your business, build a great rapport, and generate more returning customers.
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