The payment processor: The processor that routes the payment data to the card network and helps facilitate communications during a transaction.The acquiring bank: The merchant’s bank (where the money goes).The merchant: The business owner selling the product or service.The cardholder: The consumer or business making the purchase.These entities all work together, and include: So, when a credit card transaction occurs today, the payment-and accompanying payment information-is subsequently routed through numerous channels and governing bodies. Over the decades, an advanced-yet highly complicated-web has been built to facilitate and handle the processing of credit cards. The entities involved in the credit card processing ecosystem Jayme Moss, EVP Payments Operations and Strategy, Versapay In the B2B space it could significantly reduce your time to collect payment, and in the B2C space it could be the difference between closing the sale and having the dreaded shopping cart abandonment. In the past five years, the use of cash among consumers has declined in the United States, while the use of credit has increased. Īccepting payments from your customers in an efficient manner and allowing customers to self-service and pay the way they want to pay is a huge differentiator for businesses in the market. Hundreds of institutions around the world-including banks, credit unions, retailers, and finance companies-offer credit card products. Today, credit card use is ubiquitous, and it would be hard to imagine life without them. American Express issued the first plastic credit card in 1958, and revolving balances and finance charges were introduced a year later. The credit card processing system we know today goes back decades. Kyle Waltz, VP of Engineering, Versapay By accepting and processing credit cards, you not only meet the demands and expectations of your customers, but also directly impact your profitability and ability to accelerate cash flow. With businesses continuously looking to drive efficiency and accelerate cash flow, accepting credit cards is critical to increasing speed of payment. Beyond that, with businesses striving to increase accounts receivable productivity and deliver major improvements in efficiency, accepting digital payments like credit cards becomes a necessity. When businesses transact with one another, they have the same needs of speed, ease of use, security, and convenience as consumers do. Research from Gartner points to the “consumerization of the B2B commerce experience,” where “businesses that support and encourage digital commerce and digital payment will see faster growth and increasing market share compared to those that do not.” Despite the presence of hurdles not typically faced by B2C merchants-such as managing cash around accounts receivable and collecting on late payments- the B2B buying experience isn’t much different than its consumer-focused counterpart, and accounting and finance teams are increasingly seeing this. As businesses scale, so does the complexity of their accounts receivable (AR) operations. This trend is not unique to just consumer goods either-in fact, the business-to-business (B2B) world presents many similarities, along with many opportunities for further transformation. When brick-and-mortar shops were closed and handling cash took a back seat to contactless payments, debit and credit processing became synonymous with making and receiving payment for goods and services. In the business-to-consumer (B2C) world, credit cards are the payment method of choice, and the COVID-19 pandemic has only accelerated their use. People pay with credit cards because it’s simple, reliable, and fast. The popularization of credit card processing Having a lay of the land will give you a leg up in identifying and evaluating different payment processing solutions.Ĭhoosing the right credit card processor can have a significant, positive impact on business costs, and there are tactics you can implement, and advantages that certain processors provide- such as interchange optimization-that can keep your processing costs as low as possible. Having a general understanding, however, is important, as credit card processing is complex. You don’t need to have intimate knowledge of how credit card processing works to choose the right credit card processor for your business.
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