![]() In the case of other forms of payment, it could simply be the buyer’s regular bankĪccount (in the case of checks, for example). In the case of a credit card transaction, it is the bank that issued the credit card. Sometimes it is the same entity as the merchant account. It is going to get the money once it is paid and transfer it to the merchant. This is the bank that holds funds for the merchant and is responsible for communicating with the card networks. Besides a standard bank account, they may need a special account to accept credit card payments. Sellers or merchants often need specialized accounts for accepting certain kinds of payment, particularly credit cards. To accept payments, the merchant needs to set up a merchant account with an acquiring bank for accepting payment and a payment processor that accepts different forms of payment for processing. The seller or merchant indicates the forms of payment the business can accept. They provide one of the forms of payment accepted by the seller or merchant. The payer/purchaser starts the process by initiating a transaction. The factors to consider besides the payer and the payee are the type of transaction, the flow of approvals and the movement of the actual money, the other players involved, regulation and compliance to the law, and criminal activity and fraud. ![]() This complex sequence is intended to protect all parties and make sure that funds are properly transferred for real and valid transactions and to identify and block fraudulent transactions. Every payment transaction involves at least three players and most involve more: as many as five or six other entities can be involved. If disputes happen too frequently, merchants even risk losing their ability to accept credit cards.īoth these viewpoints only look at a slice of a complex system of payment processes. If there is a dispute about the payment that results in a reversal, merchants not only have to return the money, but they often pay a penalty fee and also lose the goods. If items are returned, then the merchant may lose some of the transaction fees that were charged along the way. For merchants it is critical because of the costs of processing, including accepting certain forms of payment (and the associated fees), and additional costs if customers return items or complain. ![]() Much more rarely, there will be fraud - someone has stolen card information to make fraudulent purchases and the card has been flagged as no longer acceptable.įrom the consumer point of view, this is irritating, handled by the bank, and in most cases they won’t lose any money and the only inconvenience is a delay in performing the transaction. Even in those cases, most of the time the reason is simply a card being declined for insufficient funds and a switch to another card or to cash is all that is needed. Sometimes it could be because a transaction is declined or a seller wants either a different form of payment or additional identification. In a very few cases, a problem occurs, preventing a transaction from completing. ![]() The most common scenario in the United States is payment via a card, either credit or debit. In return for the payment the payer receives their goods or services. In most instances, a payment is a simple transaction that is one half of a trade of money for a good or service. For a glossary of payment processing terms you can refer to if we use a term you do not know, click here. ![]()
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