paymentprocessing

Payment processing refers to the set of activities that enable merchants to accept electronic payments from customers. It includes authorization, settlement, and fund transfer across payment methods such as credit and debit cards, ACH transfers, and digital wallets. The goal is to move money securely from the customer’s account to the merchant’s account while verifying the payment’s legitimacy.

Key participants include the merchant, payment gateway, payment processor, acquiring bank (acquirer), issuing bank, and card networks (for example Visa and MasterCard). The gateway connects the merchant’s checkout to the processor, which communicates with the issuer via the card networks.

Workflow: At checkout, payment details are encrypted and sent to the processor through the gateway. The processor requests authorization from the issuer through the card network. If approved, the issuer reserves funds; the transaction is settled to the merchant’s account on a future settlement date.

Fees and settlement: Merchants pay interchange fees set by card networks, plus processor and gateway fees. Settlement typically occurs daily or on a selected schedule, with funds deposited to the merchant account after deduction of fees.

Security and compliance: Payment processing relies on data security standards such as PCI DSS, tokenization, end-to-end encryption, EMV chip cards, and 3-D Secure. Fraud prevention, risk scoring, and dispute handling are also important components.

Trends: Increasing use of digital wallets, real-time payments, and omnichannel checkout. Subscriptions, international processing, and alternative payment methods continue to shape the landscape.