What is the back-end payment process when using a credit card online?

Answer 1

The seller has what's called a credit card merchant account. That is a relationship with MasterCard and Visa (and/or American Express, etc.) that enables them to clear credit card transactions through a bank. The credit card company and the bank offering the merchant account both charge the seller fees, generally in the form of percentages of each transaction.

1. The first step to a successful Internet Credit Card transaction is the submission of the merchant's order form. This involves obtaining sensitive data from the consumer such as the consumer's credit card information, shipping address and other details important to the transaction.
2. The consumer enters payment information either into a form secured by the Secure Socket Layer (SSL) protocol or into an application, such as internet Explorer or Netscape Navigator. With the secured form, the payment information is protected by SSL as it is sent to the merchant.
3. A number of fraud-protection measures are put into action at the onset of the transaction to ensure utmost security. The payment software incorporated in the Web server then sends the encrypted transaction to the acquiring processor for authorization. This authorization is a request to hold funds for the purchase.
4. The acquiring processor either authorizes a certain amount of money (and issues an authorization code) or declines the transaction. An authorization reduces the available credit limit but does not actually put a charge on the customer's bill or move money to the merchant.
5. If the transaction is authorized, a "capture" is the next step. The capture takes the information from the successful authorization and charges the authorized amount of money to the consumer's credit card. In line with bank card (Visa/MasterCard) association rules, the merchant is not allowed to capture transactions until the ordered service has been delivered and consumer granted an access say to a website.
6. If the consumer cancels the order before it is captured, a "void" is generated; if the consumer returns goods after the transaction has been captured, a "credit" is generated.
7. The final step is to "settle" the transaction between the merchant and the acquiring processor usually done at the point of delivery of service and activation of consumer account. Captures and credits usually accumulate into a "batch" and are settled as a group. When a batch is submitted, the merchant's payment-enabled Web server connects with the acquiring processor to finalize the transactions and transfer monies to the merchant bank account.