Category Archives: credit card processing

virtual terminals

An exploration of virtual terminal capabilities, highlighting their role in processing card-not-present transactions securely and efficiently

Welcome to the world of virtual terminals – where convenience meets security in processing card-not-present transactions! Imagine a seamless way for businesses and consumers to handle payments without the need for physical cards or terminals. In this blog post, we will delve into the evolution, capabilities, and advantages of virtual terminals in ensuring secure and efficient transactions. Let’s embark on a journey exploring how these digital tools are reshaping the landscape of online payments!

The evolution of virtual terminals and their current capabilities

Virtual terminals have come a long way since their inception, evolving to meet the changing needs of businesses and consumers alike. Initially designed for basic card processing, they now offer a wide range of features and capabilities. From accepting multiple payment methods to generating detailed reports, virtual terminals have become versatile tools in the world of online transactions.

The current generation of virtual terminals boasts advanced security measures to protect sensitive payment information. With encryption technologies and fraud prevention tools in place, users can rest assured that their data is safe from cyber threats. Additionally, real-time transaction processing ensures speedy payments without compromising on security.

Furthermore, modern virtual terminals are user-friendly and customizable, allowing businesses to tailor the interface to their specific requirements. With intuitive designs and seamless integrations with other software systems, using a virtual terminal has never been easier or more efficient.

How virtual terminals ensure secure processing of card-not-present transactions

Virtual terminals play a crucial role in ensuring the secure processing of card-not-present transactions. By leveraging encryption technology, virtual terminals encrypt sensitive data to protect it from unauthorized access during transmission. This encryption process converts payment information into a code that can only be deciphered by authorized parties, adding an extra layer of security.

Moreover, virtual terminals often comply with PCI DSS (Payment Card Industry Data Security Standard) requirements to safeguard customer data. They implement stringent security measures such as tokenization and fraud detection tools to prevent fraudulent activities and mitigate risks associated with online payments.

With features like address verification and CVV verification, virtual terminals verify the legitimacy of transactions before processing them, reducing the chances of fraudulent activities. Additionally, real-time reporting capabilities allow businesses to monitor transactions closely for any suspicious activity and take immediate action if needed.

The advanced security measures integrated into virtual terminals ensure that card-not-present transactions are processed securely and provide peace of mind for both businesses and consumers alike.

Advantages of using virtual terminals for businesses and consumers

Virtual terminals offer a range of advantages for both businesses and consumers in the realm of card-not-present transactions. For businesses, virtual terminal provide a convenient and efficient way to process payments without the need for physical card readers or hardware. This flexibility allows businesses to accept payments from anywhere with an internet connection.

Moreover, virtual terminals can enhance payment security by encrypting sensitive data during transactions, reducing the risk of fraud or data breaches. This added layer of protection instills trust in customers and helps safeguard their financial information.

For consumers, using virtual terminal means seamless and hassle-free online shopping experiences. With just a few clicks, they can securely make purchases from the comfort of their homes or on-the-go using their electronic devices.

The advantages of utilizing virtual terminals extend beyond convenience to encompass enhanced security measures that benefit both businesses and consumers alike.

Potential challenges and limitations of using virtual terminals

As convenient as virtual terminals are for processing card-not-present transactions, there are some challenges and limitations to consider. One common issue is the potential for technical glitches or system downtimes, which can disrupt payment processing and impact business operations. Additionally, virtual terminal may require a stable internet connection to function properly, posing a challenge in areas with unreliable connectivity.

Security concerns also come into play when using virtual terminals, as they can be vulnerable to cyber threats such as hacking or data breaches if not adequately protected. Businesses need to implement robust security measures to safeguard sensitive customer information during transactions.

Another limitation is the learning curve associated with adopting new technology. Some users may find it challenging to navigate and utilize all the features of a virtual terminal effectively without proper training or support. It’s essential for businesses to provide adequate resources and training to ensure smooth integration and operation of virtual terminals in their payment processes.

Despite these challenges, many businesses find that the benefits of using virtual terminal outweigh the potential drawbacks when it comes to efficient card-not-present transaction processing.

Future developments and advancements in virtual terminal technology

As technology continues to advance at a rapid pace, the future of virtual terminals holds exciting possibilities. One area of development is enhanced security features to combat evolving cyber threats, ensuring even greater protection for card-not-present transactions.

Another focus is on improving user experience through streamlined interfaces and intuitive functionalities, making virtual terminal more user-friendly and accessible for businesses of all sizes. Furthermore, advancements in artificial intelligence and machine learning may lead to more sophisticated fraud detection algorithms integrated into virtual terminal systems.

With the rise of mobile payments and contactless transactions, we can expect virtual terminals to adapt by offering seamless integration with various payment methods and devices. Additionally, the ongoing push towards sustainability may drive innovation in eco-friendly payment processing solutions within virtual terminal technology.

The future looks promising for virtual terminal as they continue to evolve to meet the changing needs of businesses and consumers alike.

Conclusion: The growing significance of virtual

Virtual terminals have undoubtedly become a crucial tool for businesses and consumers alike in processing card-not-present transactions securely and efficiently. As technology continues to advance, the significance of virtual terminal will only grow further, offering more innovative features and enhanced security measures. Businesses that embrace this technology can streamline their payment processes, reduce the risk of fraud, and provide a seamless experience for their customers. With ongoing developments in virtual terminal technology, it is clear that they will play an increasingly vital role in the future of digital payments. Embracing virtual terminal today can pave the way for a more secure and convenient payment landscape tomorrow.

What Is A Credit Card Processing Authorization Form

Nearly every American has at least one credit card. It’s convenient for both merchants and customers to process a transaction using a credit card. But it comes with risks. A customer can file a chargeback, which is a request to refund the amount they have spent on a product that didn’t meet the quality standards or the company’s claims. The most common reason cardholders issue a chargeback is the misuse of their stolen credit card.

For a merchant, every chargeback means a loss of revenue and a potential customer. These are especially common in subscription-based businesses that take the card details and personal information of their subscribers and charge them on a predetermined period, such as a monthly or annual basis.

That’s where a credit card authorization form comes into the picture. As the name suggests, these forms are used to pre-authorize either a recurring or a one-time future payment. But is that really necessary? Where can you find these forms and how to use them? Let’s take a look.

Credit Card Authorization Explained

For card-not-present transactions, credit card authorization is used to process payments at a merchant’s retail store or online platform. Authorization is all about transmitting the card details from your payment terminal to the card network to verify the card details and ensure that it’s a valid card.

Credit Card Authorization Process

A merchant can easily gather the card details from an authorization form and input them into the payment terminal. They can also save these cards for future purchases, i.e. if the cardholder is signing up for a membership or any subscription-based service that incurs a monthly or annual fee. Credit card authorization is done to ensure that the cardholder has sufficient balance in their accounts to cover the cost of their purchase. The cardholder fills the card with their details and then inputs it manually into the payment terminal or swipes it at the POS. If they do the latter, a signature is needed to complete the authorization.

The process is quite similar to a customer making a one-time purchase at the retail store by swiping their cards at the machine to input the data and send it for approval. To authorize their credit cards, the cardholder needs to enter these details and send them to the company that processes card payments.

Credit Card Authorization Process

The process of card authorization is pretty simple. Here’s how it is done.

Step 1: The merchant enters the cardholder’s card information into their payment terminal, which then transmits this data to the payment processor or the merchant’s acquiring bank.

Step 2: If you inserted a chip card, you are supposed to validate it using the PIN code. Or, a signature is required if the card was manually swiped at the point of sale system.

Step 3: The payment processor checks the funds in your account and the validity of your card with your card network and approves or declines the card.

Step 4: If the credit card is approved as the payment method for recurring transactions, the merchant can store it for future payments.

Although the authorization steps are the same in most cases, they may vary nation-wise. For instance, if you are using Canadian credit cards, you will be required to tap them for transactions less than $250.

If the cardholder is using an authentic card that has enough balance to cover the transaction cost and doesn’t exceed the card limit, the payment process will approve it. If you are authorizing the card online, you may need to provide all the details on the card, including the cardholder’s name, address, the three-digit code at the back of the card, and the expiry date.’

However, if your credit card fails for some reason, try using a card from another card network.

What is a Credit Card Authorization Form?

Now that you have understood the authorization process, what is the use of the authorization form? Simply put, a credit card authorization form is a formal document signed by the cardholder. It gives companies their card details and permission to deduct a specific amount on a recurring basis for a specific period.

What is a Credit Card Authorization Form

The authorization remains in effect until the cardholder terminates the subscription. The total amount a merchant will charge to this credit card depends on the kind of service they offer. It could be a fixed fee or a variable fee, which may vary depending on the services. The form requires the cardholder to input their card details and confirm that they allow the merchant to charge them a recurring payment. Here’s what the authorization form has:

  • Cardholder’s name
  • Address
  • Email or mobile number
  • Card details, including the credit card number, expiry date, CVV code, and bank account number.
  • The amount that will be deducted from their cards
  • Signature

The cardholder enters their name and the merchant’s name who they authorize to charge them at specific intervals.

When Do You Need to Use the Credit Card Authorization Form?

When a cardholder signs up for a subscription-based service, they might have to sign an authorization form, which gives merchants permission to charge the card for a fixed period. Oftentimes, cardholders skim this page and click on Agree without reading the full document. The pre-authorized payment agreement form is commonly used by businesses offering subscription-based services. Examples are a gym membership, streaming service, news subscriptions, etc.

Hotels might also ask you to sign the payment authorization form at the time of check-in. Even if you have paid the full amount during check-in, they will keep your details in the record just to cover the cost of any damage you may cause to the property. They will keep these for a few days after your checkout. Likewise, you might receive a payment authorization form when applying for passport renewal. The forms are sent over email and the government will charge your credit card through the information you have entered in the authorization form.

Lastly, for all kinds of recurring payments, the authorization form is used. That’s one way to get cardholders’ authorization to use their credit cards. The main purpose of using authorization forms is to ensure that your card-not-present transactions are handled well. This is also one way to mitigate the security risks associated with these transactions.

Protection from Chargebacks

Chargebacks have become a common occurrence in card-not-present transactions. Many times, customers sign up for a subscription service and agree to get a specific amount deducted from their bank accounts at specific periods. However, they forget the subscription and issue a chargeback when they see the payment deduction on their credit card statement. Chargeback refers to the process of getting a full refund of the amount that’s unnecessarily deducted from a customer’s card.

While this was designed to protect customers’ interests and prevent fraudulent activities, it has resulted in an increased number of friendly frauds. That’s when a customer intentionally issues a chargeback for the product that was delivered to them and it was up to the mark. In other words, there’s a possibility a customer might issue a chargeback request against a legitimate transaction. An authorization offers protection against such chargeback requests, as a customer can’t dispute a chargeback for a payment they have authorized the merchant to deduct from their card.

How Do You Get a Payment Authorization Form?

Now that you know what all information is covered in these forms, the next big question is where do you find it? You can find the ready-made template for credit card processing authorization on the internet. You can download the template and fill in the form. As mentioned above, the form contains your basic information, like your name, billing address, cardholder’s name, date of signature, etc.

Once you are done filling and signing the form, you can forward it to the merchant. Alternatively, a merchant will provide you with this form (when you get a membership or a service that involves recurring payment) in person. You need to check the box that says you authorize the merchant to deduct a fixed amount from your account. The credit card has the details regarding when you’d like to end the subscription, but you can also cancel it manually. Just call your merchant to know the process for ending the service. Once the authorization is canceled, they will no longer be authorized to charge your card.

Does Your Business Need a Credit Card Authorization Form?

Some businesses need a credit card authorization form due to the nature of their business. For those offering subscription-based services, this form is pretty useful. Once the customer has signed it, the merchant doesn’t have to validate the transaction with them every time they charge the customer’s credit card. Since the customer has already given approval for the recurring payments, a merchant can deduct payments.


The payment landscape has transformed in the last two decades. From cash-only payments to a host of payment options, customers get the convenience of paying through a suitable method. The authorization form comes in handy for customers that have subscribed to a specific service.


Credit Card Processing Outage

How To Handle A Credit Card Processing Outage?

Merchants processing credit card payments might experience a processing outage, which although a rare occurrence, can happen at the most inconvenient times. The first thing you do when the message “system error” flashes on the screen is try to figure out the cause credit card processing outage problem. It can be a technical issue or an unstable Wi-Fi connection. Whatever the cause, the fact is that you will lose significant revenues if your card processing doesn’t work.

Think about the customers visiting your store, heading to the checkout, and entering their payment details only to discover their payments cannot be processed due to a system error. Those in a hurry will abandon the cart and buy from your competitors instead. So, what exactly causes credit card processing outages, and what can be done to prevent them? Let’s learn more about processing outages and their causes.

What is a Credit Card Processing Outage?

To process credit card transactions, merchants must install the required processing hardware or set up their online payment channels to transfer their customers’ payment details to their merchant accounts. The payment is verified by your acquiring bank and is then processed. A lot of things can go wrong during payment processing.

What is a Credit Card Processing Outage

For instance, the software might fail or the hardware can malfunction. Likewise, the entire system can fail resulting in a credit card processing outage. When that happens, the payment processor won’t be able to accept credit card transactions. As a result, your customers cannot process credit card transactions on your platform until the issue is identified and resolved.

To resolve these issues, you must identify the underlying cause of the outage.

Causes of Credit Card Processing Outage

Credit card outage has many causes ranging from a widespread issue, like poor internet connection, to problems that occur on your end. These things might lead to credit card processing outages.

Causes of Credit Card Processing Outage

Internet Connectivity

It’s obvious that you need a strong internet connection to process card payments flawlessly. To transfer data card data to your payment processor, a stable internet connection is required. You might experience a temporary network issue due to heavy rain, storms, a blackout in your area, etc. Call your internet service provider or payment processor to know when the internet connection will be stable again.

You can try to reboot your router or check the problems with your Wi-Fi connection. The poor internet connection due to the power outage can either be a local issue, i.e. within your area or a nation-based problem. Either way, contact your internet service provider to get updates about the outage.

Hardware Malfunctioning

If you are processing credit card orders in your retail store using the Point of Sale system or card readers, the processing outage can be linked to a hardware malfunction. If any of the devices responsible for transmitting card data to your merchant account fails due to any reason, your transactions won’t be processed.

There could be a technical glitch with your processing hardware or the hardware might not be compatible with the software. This might happen because of outdated software. Check your payment processing software for regular updates. Make sure your hardware will connect your customers’ cards to the merchant account. Remember thay even a minor glitch in your physical hardware will result in difficulty processing your credit card transactions.

System Outage

As mentioned previously, the problem with card processing can occur either due to an issue on the customer’s or the processor’s end. If it’s because of the latter, many businesses will be affected. If the payment processor cannot execute card transactions temporarily because of a security issue or other problems, every business connected to the processor will lose connection and hence the ability to process credit card transactions.

Sadly, there’s not much you can do about the processor-level outages. If you have another merchant account for such emergencies, you can use them. If not, you will just need to wait for the processor to resolve the issue so you can resume your payment services.

Issues with Your Payment Software

Another cause of the card processing outage is the issue with your payment software. It could be outdated or experience a technical glitch, which might temporarily block all card payments. The easiest way to resolve the issue is by checking the latest updates. You must practice keeping your payment software up-to-date with the latest versions. If the issue persists or occurs frequently, you can switch your payment processor.

How Does a Processing Outage Affect Businesses?

It depends on the nature of your business and the number of credit card transactions you process every day. When an outage occurs, the payment operations shut down temporarily. But that’s not the only issue. With payment processing down, your customers will get an error message when processing card transactions. This can result in dissatisfied customers. You never know if that customer will return to your store.

Besides, no merchant would want to guide customers through the sales funnel only to return them because of the processing outage. You can announce cash-based operations for a limited time, but that will affect your bottom line badly.

If you operate globally and receive orders from customers based outside your state, your best bet is to get the processing outage fixed as soon as possible. Preparing for such emergencies ahead of time can help you continue to process credit card payments if any unfortunate event takes place. While there’s little you can do about the power outage, poor internet connection, or processor-level technical glitches, you can install backup hardware in case your primary hardware components fail.

Steps to Take During Credit Card Processing Outage

You must find the cause of the problem to figure out the most appropriate solution. Here’s what you can do if you experience a processing outage.

Talk to Your Payment Processor

If you can’t figure out the problem, talk to your payment processor. Get in touch with their support team to know what’s stopping credit card processing on your checkout page. Usually, payment processors are available to assist their clients in such emergencies. They will investigate the system, troubleshoot the problem, and tell you how soon they can fix it. Your payment processor will help get your system up and running. In the meantime, they will give you advice on how you can manage your customers with backup software or different payment methods.

Talk to Your Customers

If it’s taking longer to fix the outage than you thought, talk to your customer. You can redirect them to your mobile application where they can choose another payment method to complete their transaction or you can request them to return to your store in a specific period.

You can also send notifications to your customers once the outage has been fixed and your card processing systems are running again. You can share the outage news on your social media or other channels where you interact with your customers. The best thing you can do to compensate for the inconvenience is to offer them a special discount on their purchases.

Identify Hardware Glitches

Sometimes, rebooting your router is all it takes to restore your hardware function. But if that doesn’t work, check your software and hardware. See if you have missed any recent software updates. A common cause of processing outages is the incompatibility between your software and hardware devices. You can replace your software to ensure it syncs well with your POS, card readers, and other machines.

Make sure you buy your hardware systems from your payment processor. If your payment processor doesn’t support a card reader you are using for mobile payments, the processing will work for some time and stop eventually or it might not work altogether.

Offer Alternative Payment Methods

The best solution in case of a credit card processing outage is to offer alternative payment methods. Let your customer pay through cash or if possible, allow them to buy the product on credit. Incentivizing cash payments, such as a hefty discount on those who buy using cash can encourage your customers to buy from your store. Other than that, you can offer Google Pay, Apply Pay, PayPal, and other digital wallets. The Buy Now Pay Later scheme is also quite trending among eCommerce stores and buyers.

Invest in a Generator

If you live in an area that’s prone to poor weather and storms, consider investing in a generator. You won’t lose the network connection due to the local outages that happen because of the power outage. Research different types of generators and invest in one that caters to your unique needs.


Credit card processing outages might not be an issue for you, but technical glitches and power outages can happen at any time and might lead to lost customers and revenues. A few things like having a backup of the software and hardware, and using other payment options can help in such cases. If processing outages are a common issue for you, consider switching your payment hardware or payment service provider.



What are Variable Recurring Payments

Best Ways To Accept Credit Card Payments On Your Smartphone

Payment technology has evolved rapidly in the last few years, making it easy for merchants to accept credit/debit card payments. For those who want the convenience of accepting card payments at any time and anywhere, a mobile card reader is a necessity. These are small, portable devices that get connected to your smartphones and turn them into card readers.

While there are many ways of accepting credit card payments, this one is an ideal choice for those planning to expand their business to a broader market. In this post, we will walk you through the step-by-step guide for setting up ways to accept credit card payments on your smartphone.

How Credit Card Processing Works?

How Credit Card Processing Works?

Regardless of the method you choose to accept card payments, the steps involved in executing these transactions are the same in all cases. Here’s how card transactions are processed.

  • The customer will either swipe the credit card at your point-of-sale system or input their card details manually on your checkout page online.
  • The merchant’s payment gateway verifies the information and sends it to the payment processor for further validation. The payment processor or your acquiring bank will communicate the details with the customer’s issuing bank to ensure they have sufficient balance to process the transaction.
  • Once the issuing bank approves the transaction, the requested amount is debited from the customer’s account and credited to the merchant’s bank account.

Still, there are different ways to accept credit/debit card transactions. The difference lies in how you input the card details. To help you understand the ways to accept mobile card payments, we are going to explore other methods of accepting cards first. Let’s take a look.

Different Ways to Accept Card Payments

Different Ways to Accept Card Payments

For those who do not use mobile card readers for credit card transactions, there are other methods to execute these transactions. We’ve listed them below.

In-store Payment Processing

You have seen POS (point-of-sale) units at restaurants, grocery stores, and other retail stores. These are commonly used to accept in-store card payments through the credit card terminal. You can use them to process cash and credit card transactions flawlessly. They swipe the card at the POS or manually enter the PIN to authorize the transaction. They might also use QR scanning to complete the transaction. Once the payment is processed, the merchant issues a receipt and marks the transaction as successful.

Online Payments

eCommerce businesses need to integrate a payment service provider with their online stores to facilitate seamless payment processing. You can either use the built-in payment services of the eCommerce marketplace or integrate a third-party payment gateway, like PayPal, into your website. That can be a little tedious. Not only the setup part, but it seems inconvenient to the customers as they are directed to a third-party payment gateway to process the payment.

Mobile Payment Processing

Finally, you can integrate a card reader with your smartphone to accept credit card payments on the go. This requires no other major equipment. Square is a popular mobile payment processor that comes with a small card reader, which can be connected to your phone through the headphone jack.

A merchant has to install the app on their Android or iOS device, enter the customer’s total, and swipe their credit card to complete the transaction. It works like the POS system at your retail store, except it doesn’t require hardware other than a smartphone. Let’s check out the steps for accepting credit card payments on your smartphone.

Steps To Accept Credit Card Payments On Your Smartphone

Steps To Accept Credit Card Payments On Your Smartphone

Step 1: Sign up for a Merchant Account

Each transaction is verified by your payment processor, the card network, and the issuing bank before the merchant receives the payment. For that, you need a merchant account through which all credit and debit card transactions can be processed. If you don’t already have one, consider signing up for a merchant account with a payment processor.

Step 2: Select Transaction Method

You can choose from different methods for accepting payments through your smartphone. Here are your options.

  • A Virtual Terminal: With a virtual terminal, the customer has to enter their credit card details manually on the smartphone. That, however, is inconvenient and not a safe way to process card payments. It’s a good choice for merchants that rarely accept credit card payments or are using it as a backup.
  • Use a Mobile Reader: This is the only additional hardware piece you need to process credit card transactions on a smartphone. You can either plug it into the mobile or connect it through Bluetooth. The only condition is that your device must be connected to the card reader in order to accept credit card transactions. Moreover, you must have an internet connection unless your payment app works in offline mode.
  • QR Code or a Payment Link: Other methods for accepting mobile credit card payments are through QR codes and payment links. You don’t need a card reader if you are accepting payments through either of these methods. For that, you need to send your customers a QR code or a payment link through which they can transfer the payment to your account. This method is comparatively costlier and less secure than a card reader since it’s counted in card-not-present transactions.

Step 3: Payment Processing

You can swipe or tap the card if you are using a card reader. For those using a virtual terminal, you need to manually enter the card details in the given fields within the payment app. If you have enabled the QR code, show it to your customer so they can scan the code to get to your payment page. If you are using links, send the link to your customer.

An Overview of Mobile Card Readers

You can transform your smartphone into a card reader through a portable, plug-in mobile card reader. They can be attached to your smartphone through a compatible port. There are three types of card readers you can try. Magstripe, for instance, requires customers to swipe the card. It reads the card’s magnetic stripe. It’s not a secure card reader, though. You can use EMV readers, which collect your card information through EMV chips.

The chips are inserted into the card reader, which then collects your credit card information. The most commonly used and one of the safest forms of card reader is NFC. Google Pay, Apple Pay, and other digital wallets are examples of NFC card readers. It’s a contactless payment option, which enables customers to transfer the payment securely to the merchant.

Benefits of Mobile Card Payments

Mobile card readers are a convenient and secure payment option for freelancers and small businesses. For people who accept payments on the go, it’s easier to carry a smartphone instead of a heavy POS terminal around. Let’s check out a few common benefits of mobile card payments.

Convenience: The first one is obvious. You do not need to carry any heavy-duty POS terminal to accept credit card payments. It’s convenient for both merchants and customers. It facilitates transactions on the go, i.e. anytime and anywhere.

Cheaper: A mobile card reader is cheaper than a POS terminal, which costs a few hundred dollars in setup. Some payment processors offer card readers for free. You just need to choose a payment processor, sign up for a merchant account with them, choose a convenient payment processing method, and download the app.

Seamless Integration: It’s also known for its seamless integration option. A mobile card reader is hardware that can be plugged into your smartphone through any compatible port. Besides that, you need to download the payment application and you are good to go. It’s much better than those heavy-duty terminals, which need a complex setup. There’s little to no installation required with card readers. You can start accepting payments once you have the reader attached to your device and the software downloaded on your phone.

The cost of installing a POS system can range anywhere between $500 and $5000. Small businesses that do not have the capital to install such an expensive unit for payment processing can rely on mobile card readers. You can even skip the card readers by using QR scanning or payment links.

Is It Secure?

Mobile payments are secure, but QR scanning and payment links are not the safest options. These are considered card-not-present transactions, which carry an increased risk of fraudulent activities. Someone could steal a card and misuse it to process a transaction. Fortunately, that can be prevented with an address verification system and other security protocols.

Bottom Line

Accepting card payments through mobile is just a three-step process. Open a merchant account with the payment processor, get the card reader, and install the app for accepting payments. It offers a host of benefits. You can save significantly on the terminal installation cost. Besides, you offer convenience to your customers to transfer payment online. It’s also convenient for the merchant to accept card payments. To make it easier, you can work with a payment service provider who will help you choose a reliable payment processor and the best software for accepting card payments through mobile.

What is Batch Processing?

Batch Processing | Definition, Examples, and Other Tips

Merchants accepting credit card payments most likely have heard about batch processing. Credit card involves two common types of transactions—batch processing and real-time payments. Both might sound similar but have notable differences that every merchant should know before choosing the payment model. The biggest difference between the two is that batch processing doesn’t require user interaction.

It’s a set of payments processed at once, usually at the end of the business day or on a date determined by the card processing company. Real-time transactions are reflected instantly after they are initiated by a customer. If you are confused about choosing the most suitable payment model for your business, this post is for you.

We’ve explored batch and real-time payment processing in detail. Let’s understand each payment solution so you can have a better idea of which payment method is the most suitable for your business.

What is Batch Processing?

 Batch Processing

Batch processing is the process of sending a set of transactions to the bank for settlement either at the end of the day or on a specific date set forth by the card processor. It separates card authorization and settlement.

In real-time transactions, the payment is settled as soon as the issuing bank authorizes the transaction. The amount is deducted from the customer’s bank and is reflected in the merchant’s bank account immediately or within a few hours. That’s not how batch processing works.

Batch processing allows merchants to authorize card payments and settle them in batches (with other transactions). While the transaction is verified, it’s not submitted to the bank immediately for clearance.

Instead, the amount is held until the transaction is sent in batches to the acquiring bank. This is a more flexible approach to accepting payments, as it gives merchants a chance to adjust the transaction before submitting it to the bank for settlement. The money is deducted from the customer’s account when the bank clears the transaction.

How Does Batch Processing Work?

Let’s understand the two crucial elements of batch processing.

  • Authorization: When a customer uses a credit/debit card at the POS or online store, the payment gateway or the point-of-sale unit sends the card details to the relevant card network for verification. The card network verifies the card data and checks whether the account has sufficient balance to process the requested transaction. Once the card is authorized, the amount is held temporarily (until it’s sent for settlement). The money won’t be deducted from the customers’ accounts, but they can’t use it either.
  • Settlement: The settlement may take place within a few hours of the card authorization or in a few business days, depending on your batch processing policy. This is the final step of a transaction, as the amount is deducted from the customer’s account and credited to the merchant’s account once the transaction is settled.

Let’s take a restaurant’s payment system, for example. Let’s say you’ve made the payment for your food after dining at a restaurant and left a tip for the waiter on the table. The waiter will swipe your credit card at their POS system to authorize the transaction, but won’t process it until later. At the end of the day, they will enter the tip amount and send the transaction for settlement. This way they can adjust other transactions.

They usually do it once the business hours are over. Before leaving, the waiters enter all the tip amount they’ve collected on that date into the POS and send the batch payment for settlement. The most obvious reason businesses would consider batch processing is when they want to make changes to the transaction, i.e. add tips.

How long this process takes depends on when you process batch payments and how often you process these transactions. Some merchants process batch payments 2-3 times a day, while others wait till the end of the day to process all transactions in one sitting.

The merchant gets money within 72 hours of the payment settlement. Although the transaction is comparatively slower than real-time payments and requires an additional manual step, it gets credited into your account within a reasonable timeframe.

Why Should You Choose Batch Processing?

The two most common reasons merchants consider batch processing are the lower transaction fee and the ability to modify the payments. Let’s discuss each in brief.

Modify the Final Transaction

In the example mentioned above, the restaurant can add tips to the POS before submitting the transaction for settlement. This makes batch processing a convenient solution for restaurants, bars, and businesses in all industries where employees generate tips from customers.

Cheaper than Real-time Transactions

You may have noticed that businesses that do not accept tips or need to make changes to the final transaction also process payments in batches. That’s because it helps them lower the credit card processing fee. It saves you the individual fee for processing each transaction separately.

It is cheaper to group the transactions together and process them in one go instead of accepting each payment in real-time. However, the rates can be higher for batch processing. It’s best to discuss the cost of such payment solutions with your card network and acquiring bank before implementing it. Usually, banks charge a specific fee for batch processing. It is calculated based on how frequently you process the payments instead of the volume of transactions. That’s why most banks conduct batch processing once a day.

Are There Any Disadvantages?

Like other payment methods, batch processing comes with its share of drawbacks. Here are some come challenges of batch payment settlement.

Takes Time to Process Payments

If waiting for a few days for the payment to be reflected in your bank account doesn’t sound like an ideal way to do business, then batch processing is not for you. As mentioned above, batch processing can take anywhere between 42 and 72 hours to be credited to the merchant’s account.

Unlike real-time transactions, it doesn’t give you the option to check your account balance immediately to see if the transaction is cleared from the customer’s end. Instant payments are a much better and more reliable choice for businesses that want payment within seconds.

Besides, there’s no manual work involved in real-time transactions. Batch payments, on the other hand, require merchants to manually fill the payment details into the POS, group the transaction, and send them for settlement to their banks at the end of the day. This can be a lot of work for businesses that accept hundreds of card payments in a day.

Not Convenient for Your Customers

Most customers have the habit of checking their bank accounts to see if the amount has been deducted or not. While you may confirm the transaction is authorized, it will take time to notify your customers that the transaction is settled and the amount has been deducted from their accounts. This can be a nuisance for some customers.

The Fee is Not Minimal

Most businesses consider batch processing because of the nominal fee they pay to the card networks, instead of paying for each transaction separately. However, batch processing doesn’t necessarily incur a lesser processing fee than real-time payments.

As mentioned above, the fee you are charged depends on the number of batches you process every day. The more the batches, the higher the fee you pay. So, eventually, it doesn’t have any cost benefits. For businesses that do not receive tips, this payment model doesn’t make sense.

Cash Flow Problems

Since payments are not settled instantaneously, there’s always a risk of poor cash flow, which might impact your regular business operations. It’s important to have a proper batch processing schedule in place. Your employees must know when to process batch payments so that you don’t face poor cash flow issues.

How Is It Different from Real-Time Payments?

Both methods share some common features, but choosing one over the other will make a big difference in how you accept and process payments. Real-time payments do not separate authorization and settlement processes. Both are conducted at the same time, i.e. when the customer initiates the transaction.

The amount is immediately deducted from their account and transferred to the merchant’s account. A real-time payment can take a few hours or be processed instantaneously, depending on what day it is and the card network. It doesn’t give merchants the flexibility of adjusting the final payment later.

While the system is pretty convenient for both merchants and customers, it is more expensive than batch processing in the long run. Since you are charged a processing fee for individual transactions, you will end up spending significantly in fees. Batch processing groups the payment into one and incurs a single, one-time fee.


By now, you must know whether batch processing is an ideal payment solution for your business or whether is it better to stick to real-time payments. It’s best to make a decision based on your transaction volume, the industry you operate in, and the most convenient payment system for your customers

Credit Card Security Risks

Credit Card Security Risks That Small Businesses Should Be Aware Of

If you have been running a small business, you most likely have already installed retail POS or a payment gateway to accept card payments. An integral part of your customer experience with your eCommerce store is payment flexibility. Allowing them to pay through a convenient method is key to achieving their satisfaction. People don’t carry cash these days, making a virtual terminal or a card machine a necessity for all businesses. In this post, we have outlined a few common credit card security risks every business owner should be familiar with.

As convenient as card payments are for customers, they carry a significant risk for store owners. The cards can get stolen and misused by a malicious actor. Or, there’s a risk someone might use a fake card. Knowing these risks and taking preventive measures will help protect your business from card security issues. Whether you are accepting in-person payments or card-not-present transactions, watching out for the risk factors is crucial to prevent risky transactions.

5 Common Types of Credit Card Security Risks

Common Types of Credit Card Security Risks

With so many card transactions processed daily, there’s an increased risk of fraudulent transactions. The risk is significantly higher for businesses reporting a large volume of transactions or selling luxury goods.

Identifying such transactions is key to mitigating the risks associated with card-related fraud. Training your employees on using the latest payment software apps or card machines and verifying the authenticity of the transaction is important to ensure safe card payments.

Untrained Staff

Many credit card security issues arise because of untrained staff. The first thing a business owner should do when hiring a new employee is training them about different payment methods. They should understand the difference between an authorized and unauthorized card transaction, the security risks associated with credit card payments, and the hardware & software that process card transactions.

Many security breaches occur because of the employee’s negligence or a small mistake from your employees’ end that results in a data leak. For instance, if your employee did not update the software as recommended or stored the card information securely, someone could get unauthorized access to customers’ cards, causing a security breach. Your employees must be trained and equipped with the necessary tools to execute card transactions securely.

Not Storing Card Details Properly

Nowadays, storing credit card details for future transactions has become a common practice. It streamlines payments for both customers and merchants. However, not storing the data properly can result in a security breach. Not only does it expose this information to hackers, but there is a risk of an insider attack. The worst part is that data breaches from improperly stored card details can lead to legal actions against your business.

The best solution to this is storing the customers’ card details following PCI DSS compliance. Having a software solution where the card of repeat customers is stored securely is essential to prevent data leaks. Remember, a security breach that occurs due you the business’ inability to store customers’ confidential data can lead to heavy penalties. You might also lose the right to accept card payments altogether.

Credit Card Fraud

Because of the increased security of EMV chip cards, hackers are shifting their focus to card-not-present transactions (CNP). Without the actual card being presented at the store, it’s difficult for the store owner to verify the legitimacy of the transaction.

There’s also a high risk of friendly fraud. A customer can buy goods/services from your store and might issue a chargeback against your business. It’s either a mistake from the customers’ end or they do it intentionally just to target a full refund.

Outdated Software

Companies using outdated payment software are more likely to suffer a security breach than those who update their software applications regularly. The new updates are launched frequently to remove bugs from the previous version and provide businesses with a safe and robust security solution. An attacker targets businesses using outdated versions of tech and security tools, as it’s easy to get access to vulnerable systems.

POS Skimming

Businesses accepting card payments through point-of-sale software are at risk of POS skimming. It’s a malicious technique where a tech-savvy hacker can replace your POS with a clone tool that looks like your POS machine but is malicious software that sends customers’ card details to the hacker.

A fraudster can install an application on your system or replace it altogether with a duplicate version, putting your business at an increased risk of security breaches. A criminal can pose as a bank representative or a security agent and replace your payment system with a fake processing system that transmits all the data you put in the system to them.

These are a few common credit card risks that are reported in large numbers across the US. credit card security risks and breaches can occur in different forms. Knowing the risk factors and taking steps to mitigate the risk is crucial to ensuring your business and customers’ safety. Below we’ve discussed some preventive steps you can take to avoid credit card risks. Let’s take a look.

Tips for Preventing Credit Card Security Risks

Tips for Preventing Credit Card Security Risks

Implement Address Verification System

An address verification system is an additional layer of protection in card payments. You may have encountered a website asking you to submit your street number and zip code during the checkout. Well, that is the address verification part that matches your entered address with the address in your bank’s records. A fraudster can steal your card number and CVV, but it’s less likely that they steal your address too. Implementing AVS will ensure that each card transaction is secure and processed by the actual cardholder.

Upgrade to an Anti-Malware Software

Updating your software regularly or every time a new update rolls out will protect your business from security breaches due to updated software. Many anti-malware software applications work in the backend to identify suspicious transactions. Remember, phishing has become a common practice among attackers. They can easily trick one of your employees into clicking on the malicious link and exposing the business’ confidential data. A few steps to prevent such attacks are:

  • Update your passwords to complex 8-digit passwords and change them frequently to prevent brute-force attacks.
  • Maintain access permission for your employees. They should not get more privileges than they need for their jobs.
  • Use separate devices for your personal and business accounts.
  • Use anti-phishing, anti-malware, and anti-virus programs to reduce the risk of cyber threats. Adding firewall protection can also help detect and filter out unusual traffic on your network.

Report Fraud Instantly

You may try all possible preventive measures to mitigate the risk of fraud, but nothing really guarantees 100% fraud prevention. If you believe the fraud has occurred, it’s important to notify the authorities immediately before the fraudster causes any serious damage to your business. You need to contact the acquiring bank, payment processor, and other parties involved in your card transactions. If required, seek legal help immediately.

Comply with PCI Standards

The Payment Card Industry has established many security standards for business owners accepting credit/debit card payments. These regulations instruct businesses on how to store and transmit card data safely. Following the compliance will not just mitigate the risk of credit card fraud, but it lowers your risk of facing penalties, chargeback, and other issues.

Watch Out for Unusual Behavior

It’s not always possible to detect fraudulent activities with your card threat prevention tools. Sometimes, customer behavior can suggest something unusual. For example, buying too many luxury items from your retail store, rushing during the checkout, and not giving their billing address are a few signs of cyber threats.

These activities do not necessarily mean a customer is attempting fraud, but there’s a possibility. It’s best to collect all details on the card and your customer’s personal details like their address and phone number, before accepting the transaction.

Protection from Card Skimming

Do not give fraudsters a window to replace your card machine with a clone. Make sure the card is always in the customer’s sight and the transaction is processed securely. Leaving your POS system unattended during business hours can lead to security breaches. That’s because hackers can easily tamper with the card terminals if there’s no one watching.

Always monitor your card machines for signs of tampering. If you notice a loose screw, any new sticker on the payment processing device, and other such changes to your hardware or software, notify the bank and legal authorities immediately.

Bottom Line

Every payment method carries some level of risk. While there are preventive measures that can mitigate these risks to a great extent, they don’t completely prevent the possibility of credit card fraud.

The payment landscape will be completely different in 10 years from now and so will the cyber threats. It’s important to keep your employees up-to-date with the changes in the payment landscape. Knowing the latest updates in payment software and card transactions can help reduce the risk of cyber threats.

Smart Payment Routing

What is Smart Payment Routing and How Can It Benefit Your Business?

We’ve witnessed a growing demand for credit card transactions in the last few years. In the last quarter of 2022, the number of credit card users jumped to 166 million. With the increasing number of transactions taking place through Visa, Mastercard, Discover, and American Express, there’s a growing need for the optimization of transactions. A declined card is not an uncommon issue today. A card could be declined for many reasons. This article will discuss how smart payment routing can help in many ways including the case where a card is declined.

For instance, the address verification protocol has made it mandatory for cardholders to enter their street number and zip code when processing payments through cards. If this information is incorrect, the payment is declined. There are more such security measures, developed specifically to prevent fraudsters from using stolen cards. While they enhance the security of payments, they can be inconvenient for customers and merchants. There’s a risk your customers might abandon their cart if they are unable to use credit cards because of a stringent verification policy. That’s where smart routing payment comes into play.

The best way to ensure successful transactions through cards is by implementing smart payment routing. Here’s what you should know about it.

What Exactly Is Smart Payment Routing?

benefits of smart payment routing

Smart payment routing refers to the process of optimizing card transactions for an increased success rate and lower processing fees. Simply put, smart payment routing gives you access to multiple payment gateways and banks. The system is useful for merchants working with clients on a global level and those considering quick expansion. Smart payment routing takes several factors, like the payment type, amount, and location, into consideration to reduce the risk of declined payments.

The technology searches for the best channel based on the nature and size of the transaction. Not only does it improve the success rate of card transactions, but it lowers the transaction fee. The system figures out which acquiring bank, card issuer, and payment gateway can approve the transaction at a lower cost. That’s how it improves the transaction outcome for the cardholder. The main purpose of this system is to reduce unnecessary payment rejection.

How Does It Work?

Suppose a customer is buying something from your store using an international credit card. The smart payment routing will assess the card and the amount of transaction, and connect it to the payment processors that charge the lowest fee on the international transaction. This saves the merchant a few extra dollars on overseas transaction fees. You might wonder how the system knows where to forward the transaction. It has a predetermined set of parameters, and the routing takes place based on these.

  • Currency
  • Geolocation
  • Size of the transaction
  • Card issuer
  • Authentication process

Smart routing can be used for multiple payment gateways or for a single gateway, but different MIDs (Merchant Identification Numbers). If you have multiple MIDs for your businesses in different locations, but a single payment gateway for each, the smart routing will filter the payments based on the geolocations. For example, all payments processed in California can be routed to your MID 1, while those processed in Pennsylvania can be filtered into another merchant account (both through the same payment gateways).

Direct Routing Vs Smart Routing

Before the smart routing technology was launched, merchants had to rely on direct routing. This traditional approach involves a single payment processor that verifies all transactions and accepts/rejects them based on its pre-set protocols.

Working with a single payment processor or an acquiring bank is good for those who want consistent fees for all transactions, but it comes with its share of drawbacks. The biggest one is that the payment processor might decline the transaction based on specific parameters, leading to customer dissatisfaction and several rejected payments for the merchant. Or, the transaction might not be processed simply because of the unavailability of the bank. The outage is the most common issue in direct routing. And without a backup option, there was no way to process transactions until the technical issue is fixed and the payment processor starts operating.

That’s why merchants are considering this latest, more advanced, and optimised form of payment processing. Smart payment routing is comparatively better, faster, and an effective option for processing card transactions. Working with different payment gateways facilitate successful transactions, as the system connects the transaction with the most suitable and cost-effective processor.

Benefits of Smart Payment Routing

payment routing


Here’s how the system is beneficial for the merchant and cardholders:

  • Convenience: Nothing seems more frustrating than a failed transaction. Customers want a hassle-free and quick payment channel that verifies their transactions and processes the payment instantly. With smart payment routing, they enjoy the convenience of speedy and successful transactions.
  • Increased Revenue for Merchants: Around 69.57% of customers are likely to abandon carts due to the checkout process. If their payment declined, they won’t think twice before switching websites. Smart routing prevents unnecessary rejection of a legitimate transaction, thus preventing revenue loss from an increased cart abandonment rate.
  • Less Transaction Fee: One of the functions of smart routing is choosing a reliable and cost-effective payment processor for each transaction. This is quite helpful for merchants accepting international card payments. By reducing your transaction fee, the technology increases your revenue.
  • Higher Authorization Rate: Every business wants a higher approval rate for each transaction, as the more transactions approved, the more money it will bring into your business. Smart routing offers great support for declined transactions. It is an AI-based tool that reroutes the transaction to another bank if the transaction from a specific bank fails.
  • Collect Insights: Smart payment routing doesn’t just bring more money in, but it improves your conversions by providing you with detailed payment analytics. Merchants can evaluate these analytics to learn more about their existing payment structure and make necessary improvements to provide customers with a better shopping experience. Insights like, whether your subscription plans are working and which payment processor has the lowest declined transaction rate, can make it easy for you to identify where you need to improve.

Cons of Smart Routing System

Despite its low-cost payment processing and improved successful transaction rate, the smart routing system is associated with certain drawbacks you should be aware of.

  • Unstable Processing Fee: In direct routing, there is a stable processing fee, as each transaction costs you the same amount. The same, however, is not the case with smart payment routing. The system connects your transaction to different payment providers based on its pre-set parameters, making it difficult to predict the transaction cost.

Confusing: Having a single payment processor handle all your transactions is much better than working with different processors. Since each processor has varying reporting formats, fee structures, and payment approval protocols, it might get challenging to learn about each and adapt to their working criteria.

Overall, the system proves beneficial for nearly every merchant. When you combine all its pros, you will know how smart payment routing can improve a company’s bottom line.

Evolution of the Smart Payment Routing

Not every business opts for payment routing when starting their company. Most businesses start with a single payment processor/acquiring bank. These have uncomplicated reporting formats and are comparatively easier to work with than multiple processors.

However, they have an increased risk of transaction failure. If there are any technical issues, the transaction will be straight away declined, leaving people with no option but to abandon the cart. Besides that, they only accept payments domestically.

As the business grows and accepts transactions from more people based in national and international countries, the risk of the transaction failing grows. This growing need requires multiple banks and payment processors. They can choose banks located in the same region or international countries, each processing transactions based on customers’ geolocation. While the method may seem reliable, it’s often unresponsive and has a high failure rate.

At last, businesses expanding at an exponential rate and don’t want to limit their options can choose smart payment routing. The payment method is comparatively much better than the above two and is powered by Artificial Intelligence, making it a highly effective choice for businesses of all sizes and natures. The method is pretty complex as establishing connections with hundreds of banks located in various parts of the world can seem challenging. As mentioned above, these are based on powerful algorithms, which are designed to process large amounts of information in real time.

If you are concerned about security, you can rest easy knowing that smart payment routing is safe. Just like a normal payment processor would verify the transaction’s authenticity, smart payment routing checks each transaction, verifies the cardholder’s details, and approves the payments only if the transaction seems valid.

Bottom Line

The entire concept of smart payment routing is based on the idea of identifying the most reliable, cost-effective, and fastest payment processor to authorise the transaction. This results in reduced transaction failure rate and increased customer satisfaction. It’s a win-win! The customer gets to make the payment on the first attempt (mostly), while the merchant enjoys increased revenue and fewer abandoned carts.

Acquiring Bank Vs Issuing Bank

Difference Between Acquiring Bank Vs Issuing Bank

Credit and debit card transactions might look simple in the eyes of a paying customer or an employee at a cash register. But there’s a lot that goes into the backend to successfully complete the transaction. The two major players that streamline card transactions are—an acquiring bank and the issuing bank. Of course, the same bank is capable of executing both actions, but when it comes to card transactions, both have different roles.

If your business accepts card payments, it’s important that you are familiar with these terms, the purpose of these banks, and how they process card transactions. This will help you take steps to lower the risk of chargebacks and payment issues due to other reasons. If any problem occurs in card transactions, you will know who to approach. Let’s take a look and understand the difference between acquiring bank vs issuing bank.

What is an Acquiring Bank?

The acquirer or an acquiring bank represents the merchant. They process all payments on behalf of the merchant and maintain their business account. Businesses get their merchant account from an acquiring bank.

The term acquirer may refer to the payment processor that conducts the actual transaction or the bank that maintains the business’ merchant account and works with a payment processing company to process card transactions. When a shopper buys something from a retail store and pays through credit or debit cards, the acquiring bank sends a request to the cardholder’s bank to authorize the transaction. That’s the issuing bank.

The communication takes place over credit card networks. In addition to the normal payment processing, an acquiring bank handles chargebacks, return and refund requests, and other payment issues involving cards. The bank, then, transfers the merchant’s collection after deducting refunds, chargeback fees, maintenance fees, and other expenses.

What is an Issuing Bank?

An issuing bank issues credit and debit cards. They provide customers with popular cards that work within the country and globally. If you need a new card, you can visit Capital One and explore all your options. They are affiliated with different credit card companies. Based on your goals, you can get a Visa, MasterCard, American Express, Discover, and more.

Whatever you choose, Capital One will be the issuing bank here. The card company can also be the issuing bank. For instance, Discover and American Express are two of the major card companies and are also the issuing banks of these credit cards.

Difference Between Acquiring Bank Vs Issuing Bank

Issuing banks are the middlemen that connect customers with card networks. The issuing company earns from the interest that their customer pays on card payments. For credit cards, customers are supposed to pay a fixed percentage of interest after the 0% APR introductory period ends.

When a merchant’s acquiring bank initiates a request for the transaction, the issuing bank looks into it, verifies the details, and pays the requested amount to the merchant on the customer’s behalf after deducting the fees or any charges.

Now that you know what acquiring and issuing banks are supposed to do, let’s take a look at the key differences between the two.

Acquiring Bank Vs Issuing Bank

As mentioned earlier, an acquiring bank can be the issuing bank for a different transaction. Usually, banks can play the role of an acquirer and an issuer for different customers. It can hold a merchant’s account while issuing credit/debit cards to its customers. Both are key players when it comes to debit or credit card transactions.

So, how do they differ? Let’s break down their roles and responsibilities to understand their function in card transactions.


Issuing Bank Acquiring Bank
Represents cardholders Represents merchants
Partners with credit card companies to issue a credit/debit card to a customer. Processes payments on the merchant’s behalf

These descriptions define what issuing and acquiring banks are, but they are not complete. There’s more to these banks and their roles in ensuring that card transactions are processed smoothly. Let’s learn more about these two banks, their roles, and their risks.

Card Transaction Process: Acquiring Bank Vs Issuing Bank

By now, you must be familiar with the terms acquirer, issuer, merchant, cardholder, and card network. Let’s see the role each party plays in the card transaction.

Card Transaction Process - Acquiring Bank Vs Issuing Bank

Authorization Request

The process starts with the cardholder making payments through their credit/debit cards either online or at the point-of-sale system at the retail store. Once the transaction is initiated, the POS system reads the card details and sends the encrypted data to the acquiring bank. The whole communication takes place through a secure credit card network.


The acquiring bank transmits this information to the issuing bank through the same channel to get approval for the card transaction. Once they receive the details, they will either approve or decline the request. Issuers decline a transaction request when the cardholder’s account doesn’t have enough funds to process the requested transaction or the bank detects something suspicious in the transaction. The merchant’s acquiring bank gets a pop-up message about the approval/declined transaction.


Once the request has been approved, the merchant thanks the customer for doing business with them, but the transaction is still not complete. To settle the transaction, the issuing bank has to pay the balance to the acquiring bank on the customer’s behalf. Once that is done, the transaction is processed successfully and marked as settled.

Note: The transaction marked settled can be reversed if the cardholder requests a refund.


If a customer identifies the transaction as unauthorized, they can file a chargeback. The chargebacks can also be filed if the customer is unsatisfied with the product or services delivered by the merchant. If they believe they have received the flawed product or the merchant has failed to deliver what they promised, they can file a chargeback.

In such a case, the issuing bank will review the chargeback request and inform the merchant of the same. The merchant can either accept the chargeback or dispute it. If the merchant accepts it, the transaction is reversed, and the amount that was debited from the customer’s account is credited back. If the merchant fights back, they will provide the required evidence to the issuing bank. The bank reviews the evidence and determines whether to reverse the chargeback or not. The case is then forwarded to the credit card network.

The biggest concern for the merchant here is the constant response expected from them. The merchant sends a rebuttal letter with proper documentation supporting their claim. If the issuing bank declined the request, but the merchant believes their claim is valid, they can reach out to the card network. The party that loses the arbitration case will be held responsible for paying a high fee with the sales amount in question.

Issuing Bank Risks

A card network doesn’t conduct each transaction individually. The issuing bank verifies each transaction and processes them on its behalf. The biggest responsibility of an issuing bank is to scan the applicant’s background and evaluate their credibility before issuing them a credit card.

Once they have issued a card to the customer, they need to monitor the balance in the account and transactions processed from the customer’s end to ensure that they have sufficient funds and a good credit report. The issuing banks generate income from interest. They give unsecured loans to the borrowers and charge them a fixed interest rate until the dues are paid in full.

The issuing bank bears the risk of default payments. There’s a chance a customer is unable to pay their debt or the credit card bills and defaults completely on the payment. The issuing bank will be responsible for such issues.

Acquiring Bank Risks

The acquiring bank is authorized to open merchant accounts for businesses and process credit/debit card transactions on the merchant’s behalf. In a credit card transaction, the acquiring bank’s responsibility is to receive the payment sent by the issuing bank from the cardholder’s account and then transfer it to the merchant’s account after deducting any fee if applicable. The acquiring bank can be the processor or act as an intermediary between the processor, merchant, and the card network.

The acquirer is also exposed to risk. The biggest risk is a security breach. Usually, the data transferred between the acquiring bank and the card network is encrypted. But if it gets leaked, the acquiring bank is held responsible for the data breach. That’s why following PCI-DSS compliance is a must to avoid the data breach risk.

In addition, the acquiring banks bear the liability of unpaid chargebacks and refunds if the business is unable to pay. They also need to evaluate the merchant’s risk factor of defaulting before they accept their merchant account application. The acquiring bank won’t open a merchant account if the individual applying for it or the business they are running is deemed high-risk.

Bottom Line

The hundreds of thousands of transactions conducted through credit/debit cards are managed by acquiring and issuing banks. These parties work in tandem to route the transaction to the card network and ensure efficient and accurate management of card payments.



small business merchant services

What is Small Business Merchant Services and How Does it Work?

Small business merchant services is a type of service that allows small businesses to process credit and debit card payments. This type of service is typically provided by banks, payment processors, and other financial institutions.

How does small business merchant services work?

Typically, the small business will need to open an account with a payment processor. The payment processor will then provide the business with a payment terminal or a credit card reader. The business can then use this device to process payments from customers.

The payment processor will take a small fee for each transaction that is processed. This fee is typically a percentage of the total transaction amount, and it may also include a small per-transaction fee.

What are the benefits of small business merchant services?

There are a number of benefits that can be enjoyed by businesses that process payments using small business merchant services. Some of the key benefits include:

Increased sales: By making it easy for customers to pay with credit or debit cards, you can increase your sales volume. 

Improved customer service: Offering customers the ability to pay with credit or debit cards can improve customer satisfaction and loyalty.

Greater convenience: Credit and debit cards are widely accepted, so your customers will not have to carry a lot of cash with them.

Reduced processing time: Payments can be processed quickly, which can save you time and money.

Reduced risk of fraud: Credit and debit cards are less likely to be used for fraudulent purposes than cash.

Is small business merchant services right for me?

That depends on your business. Small business merchant services are a good option for businesses that process a lot of credit or debit card payments. If you do not process many credit or debit card payments, you may be better off using a different type of payment processing service.

If you are interested in using small business merchant services, be sure to shop around and compare the different options that are available. There are a number of providers of this type of service, so you should be able to find one that offers the features and pricing that you need.

Small business merchant services can be a great way for your business to process credit and debit card payments. By using this type of service, you can improve your customer service, increase your sales volume, and reduce the risk of fraud. Be sure to shop around and compare the different providers of small business merchant services to find one that meets your needs.

merchant services for small businesses

What are merchant services for small businesses and how does it work?

Merchant services allow businesses to accept payments from customers through a variety of methods, such as credit cards and debit cards. The service also allows businesses to track payments and manage their finances. There are a few different types of merchant services available, so it is important for businesses to find the one that best suits their needs.

There are a few factors to consider when choosing a merchant service provider. The first is the cost of the service. Businesses should compare the rates offered by different providers to find the best deal. Another important factor is the type of payments that the service accepts. Some providers only accept credit cards, while others also accept debit cards and other forms of payment.

Businesses should also consider the processing time for payments. Some providers process payments immediately, while others take a few days to process payments. Finally, businesses should ensure that the provider has a good reputation and is reliable. Providers can be checked out through review websites or by contacting existing customers.

Merchant services are an important part of any business. By choosing the right provider, businesses can ensure that they are able to accept payments from customers in a variety of ways. This makes it easier for customers to pay and helps to improve the overall efficiency of the business.

How does merchant services work for Small Businesses?

There are a few different types of merchant service providers, each with their own benefits and drawbacks. The first thing to consider is the cost of the service. Businesses should compare rates between providers to find the best deal.

Merchant services also allow businesses to accept different forms of payment. Some providers only accept credit cards, while others accept a variety of forms, such as debit cards and PayPal.

Processing time is also an important consideration. Some providers process payments immediately, while others take a few days.

What are advantages of Merchant Services for Small Businesses?

Merchant services are an important part of any business. They allow businesses to accept payments from customers in a variety of ways, which makes it easier for customers to pay. This improves the overall efficiency of the business.

Merchant services can also help businesses track their finances and manage their expenses. This can be especially helpful for businesses that are just starting out.

What are the disadvantages of merchant services for small businesses?

The cost of merchant services is one of the biggest disadvantages for small businesses. Businesses should compare rates between providers to find the best deal.

Another disadvantage is the processing time for payments. Some providers process payments immediately, while others take a few days.