Who is a Credit Card Processor and What Are Their Benefits?

A Statista Report indicates that globally, 188 billion purchases were made using Visa payment cards. This does not include credit card companies. It doesn't make a difference if you run a brick-and-mortar or online business. It is essential to understand how credit card processing works. This is especially true today when debit and credit cards represent the most common form of payment. Continue reading to discover what credit card processing is, how it works and why it's important for your company.

Credit card processing describes the process of completing credit card transactions. It involves several steps. Transactions can be completed online, over the phone or by mail in today's digital age. Credit card processing involves numerous entities. Credit card processing involves many entities, including the consumer, merchants and payment gateways.

Who Are The Key Players In Credit Card Processing?

  • Customer The customer who is making a purchase.
  • Merchant – Any person or organization that sells a product or service to customers making a purchase.
  • Payment interface – This is a technology that connects the merchant to a processor. This involves integration with card-present and card-not-present payment environments.
  • Payment processor – This is the entity that helps the merchant, credit-card network, and the cardholder's Bank to communicate. Merchants and credit card processors should adhere to the Payment Card Industry Data Security Standard.
  • Card network – This is also known as credit card network (or credit card brand), which is the customer's credit card brand. These networks are responsible for setting interchange fees and assessments.

Let's now talk about what a credit card processor is. This is important to allow customers to quickly and easily check out.

Credit Card Processing

There are three key steps for credit card processing services. These are authorization, authentication and settlement.


This is the first part of the transaction.

  • The customer gives the merchant credit card information whether they are in a store, online or over the telephone. This can be done by entering the information at a website, scanning it at a POS or point-of-sale terminal or giving the details over the phone.
  • The merchant then sends the request for payment authorization (RFP) to the payment processor.
  • The payment processor sends an email request to the card organization.
  • The card association will request this from the issuing banks.


This is the second stage, and it occurs after the physical transactions have been completed. The issuing Bank must validate that the transaction was valid.

  • The credit card association will request authorization for payment from the customer's issuing banks.
  • The issuing Bank will verify that the cardholder account has already been approved for the transaction. Next, the Bank will verify the identifying information.
  • Next, the issuing Bank will send its approval/denial letter to the card association or merchant bank.
  • The issuing Bank will hold the purchase amount on the cardholder's balance.


This is the final step in credit card processing. Here the merchant receives the funds via the Bank. Depending on the card network, the settlement phase could take several days.

  • The merchant's POS sends the requested payment authorizations to a third party.
  • The batch authorizations are sent to the card associations by the payment processor.
  • The card association will send the information to the issuing banking institution.
  • For authorized payments, the issuing Bank charges the cardholders' account.
  • The issuing Bank also subtracts interchange fees for the card association.