In our digital age, payments are a lot easier to fulfill. All you have to do is click a few buttons, and your next order will be on the way to your doorstep. For those curious about how eCommerce sales work, you might think that this is a complex process with many layers. But in reality, an online transaction is very similar to a regular brick-and-mortar experience at your favorite store. Here is how an online credit transaction works.
The power of credit cards in online shopping
Credit cards are one of the most reliable methods of paying for a product online. One has to input the payment details in their website profile or settings page, and they are free to start shopping for the items they need. Business owners might think that setting up this kind of payment channel is tedious. Although there are steps that could take up some time, the end process is worth it because of its convenience.
Customers fulfill the bulk of online transactions through their credit cards. The convenience and speed that this payment method brings make it a reliable option for buyers. Payments made via credit card are fulfilled by several networks that link together banks, stores, and an intermediary known as the payment processor. These three actors make up the structure of most online financial portals and processes.
Here’s How an online credit transaction starts
There are multiple parties involved in the processing of an online transaction. The cardholder is the origin point. At the start of their credit journey, they receive their account from a bank or financial institution. Shortly after activation, they can use it for shopping and other purposes they see fit. Cards have a set credit limit in place.
When a cardholder begins to use their account for purchases, they head to a merchant or store. Upon payment, they can present their credit card. For online transactions, the user simply has to input their card information on the dialog boxes provided on a website. The merchant then processes the payment, and their system authorizes the card before a transaction is complete.
Networks that are in charge of credit cards take care of the data exchange in this portion. The most common providers of this service are Visa and Mastercard. They serve as the gateway in between the financial institution and the store.
What happens when the customer presses the “check out” button?
After looking through a wide selection of products, the user is now ready to check out their cart. You are excited to receive the items you purchased and are now prepared to use your credit card to treat yourself. When you proceed to checkout, multiple processes happen. First, you must input your card number into the dialogue box. This is a string of numbers unique to you and your card.
The payment channel will also ask you to key in the card’s expiration date, plus the security code (the “CVV” printed at the back of the card). Once all the details are set, the payment channel will begin processing the data. This does not usually take more than a few seconds. All forms of private information are securely stored before reaching the survey of the shop.
What happens on the store’s end when you make a credit card purchase online?
The merchant will ensure that the data is correct and authenticated before sending the information to another provider. This entity is known as the payment gateway. It is in charge of authorizing credit card transactions in online settings and ensures that all exchanges are one hundred percent secure.
Besides the payment gateway, another party is essential for the merchant. The payment processor helps them deal with all the services that must be carried out between the merchant and its customers. While the transaction goes on, information is exchanged between these two before it can be considered complete.
There are chances that a bank may deny the credit card transaction. This instance can happen if there is an issue with the cardholder or connectivity problems. Error screens with a description of the problem are displayed on the computer screen or machine used to make the transaction. Financial entities also use emails to notify the cardholder.
Once approved, the data comes back to the website
If you have encountered the automatic refresh function after making an online payment, that is precisely the sign that a transaction is successful. At this time, the payment gateway will redirect the user back to the website. This means that you can either close the window or browse more products.
It is also in this stage when the merchant receives their payments from the customers. It might take several days before the amount is credited to the account of the shop owners. Factors such as the bank’s decisions, office hours, and more may affect the speed at which payment is fulfilled.
Merchants and customers will receive emails, text messages, and other forms of correspondence notifying them of the status.
Convenience and Speed
The technological platforms we have today make it a necessity to innovate how everyday processes are carried out. Paying is one of them. However, it is crucial for banks, merchants, and other providers to make things less complicated for their customers. The same philosophy applies to themselves, as managing a complex payment system can add more stress to an already taxing business management.
If you think about it, the process is not different from handing in your credit card for a cashier to swipe it at the register. While there might be less of a conventional thrill online, it still takes just a few seconds for a payment to go through the proper channels before one can wait patiently for their packages to arrive.
And as for merchants, there is no doubt that consulting with the right parties to set up a payment channel is a wise business choice. That way, revenue continues to pour in while customers are satisfied by speed, convenience, and quality. That is how an online transaction works.
How an online credit transaction works | In conclusion
By now, you should know all you need to understand stand how an online credit transaction works. If you need to get started with a Merchant Account, contact a Payment Processing Expert at Payline today.