Any transactions involve the payer and the payee, customer and a merchant. A person who accepts payments in his/her account is the merchant and a business that accepts payments in that account is referred to as a merchant account. This account doesn’t operate like other savings account. A merchant account is set up under an agreement between the acceptor and merchant acquiring bank for the settlement of payment card transactions.
There is a payment processing company appointed by a merchant to handle transactions from various channels like credit cards and debit cards for merchant acquiring banks. To understand it better, whenever you go to any shop to purchase something, you swipe your card debit or credit on a machine, that machine and the company it belongs to, becomes the payment processing company. To carry out credit card transactions the merchant charges some percentage of fee known as merchant fee.
With the increase in the use of mobile wallets, the merchants also look for tie-ups with reliable customers who can offer them good customer experience, trusted sources in payment systems and can secure them for future.
VALUE ADDITION TO CUSTOMER AND MERCHANT
Making payments and transfers online have made the life of people and business people easy as going digital is a step ahead with the changing times. Not only payments but also managing of finances, keeping a record etc. have become a piece of cake. It doesn’t require much paperwork and happens in just a few clicks.
How does the customer benefit?
- Digital payments are fast and comfortable.
- E-money is free from the risk of theft
- It is time and money saving
How does the merchant benefit?
- Merchants’ customer who wants to pay digitally can do so.
- Pay the staff and suppliers through digital medium.
- It is time and money saving.
- Money is free from the risk of theft.
LOOKING AT THE PROCESS
As a merchant when you talk of payment process is whether the customer is able to make successful transactions using his/her card. The payment process has been classified into three steps; authorisation, settlement and funding. Let’s look at them step by step.
Authorisation: Authorisation is the process of verifying a customer’s credit limit. Credit limit decides the capability of the person to purchase the goods and services. Also checks the validity of the card that is used to make transactions. The process of authorisation can be done through a credit card machine, e-commerce website or over a call. This step takes few seconds to carry out the authorisation process.
- It begins with the customer providing the credit card details to make a purchase. It can be over a phone, entering it on a website or at the point of sales.
- Then you pass on the information to chase the payment tech like when you swipe a card your request is forwarded.
- Chase sends the request further to your card payment brand visa or MasterCard.
- Your card payment brand forwards your request to the card issuer that is your bank.
- Whatever the request status is approved or declined, the response is sent to the payment brand.
- The payment brand sends the same to chase and chase shares the same response with you.
- On approval of the card, an authorised number is received if not then the transaction has been declined or it has requested a referral.
- In case of approval, the amount entered is held on to the card and will be cleared at the point of settlement, if declined that means the card cannot be used to carry out the transaction and for a referral there is another step of verification to confirm the identity of the cardholder.
Settlement: The payment is successful at the end of the customer but the merchant account is yet to go through the settlement at the end of the day or whatever time has been decided mutually. The settlement is the process of electronic payment management by the card processing companies to make all the transactions clear and can be funded. As a merchant, you need to present approved card transactions to Chase and submit these deposits to payment brand for clearing through the interchange.
- The merchant submits the transaction to the payment processing company. For instance, the device or machine at the counter is triggered or batched for settlement.
- The request is forwarded to the payment brand and further confirmed by the issuer’s bank.
- The payment brand receives the request and processes by paying to the Chase and to the issuer for settled transactions.
- The issuer lists the transaction to the cardholder’s account and sends a complete bill with a detailed monthly statement.
- The cardholder (customer) receives the credit card statement and pays the bill.
Funding: Funding is the process when the merchant receives the payment from Chase in his/her against the transactions processed. It is an extension of the settlement process and therefore, people use it interchangeably often.
Merchant payment is an easy processing of payment with an idea to promote digitisation. The process is yet to gain moment but it is already in process as people have switched to plastic money and minimised cash payment. As a result, merchant payments have high requests.