Cashless transactions with a swipe of a card, shopping without the hassle of handling cash and withdrawing large sums of money from different accounts, from the same machine. All of the above is only possible with the advent and the popularity of credit card processors.
These credit card processors can be understood better, as being the third party that carries on the communication between the merchant that is being paid and the card user’s bank. Credit card processors are in charge of facilitating a secure transaction, securing the payment data, and making sure that all transactions that occur, follow the rules set out by the Payment Card Industry Data Security Standard (PCI DSS).
But how do the credit card processors have the advantage and earn their profit, if they are to manage and do multiple tasks and act as an intermediator between the merchant and the bank?
These credit card processors collect a specific amount of money from merchants for providing their services and the fee can either be fixed or it can be some sort of a percentage mark-up on top of the interchange fees they pass on to the merchant at cost.
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The fees to be paid though is a small cost for the benefits that are provided by these processors. The processors are handy and compact, they allow users to buy items without the hassle of the cash that will, in turn, attract even more customers, they help in automatically keeping a track of all the transactions that take place by providing detailed receipts, and they are trustworthy enough, making sure that all transactions occur securely and that none of the customers data is stored with the merchant, as it may be misused.
Not only are these processors trustworthy, but they are also quick and help save a lot of time that would, in turn, be used to handle cash. More often than not customers have to swipe their card, and wait for an average of ten seconds before the processors’ software contacts the user’s bank database, checks the amount in the users’ account, deducts the amount from the main balance and sends an acknowledgment of either acceptance or decline, depending on the user’s account, on the merchant’s processor’s screen.
This process of seamless and fast transactions, not only make it easier for the customers but they are also quick for the retailer. Once the merchant bank receives daily card payments from the retailer, it calls for a request to the credit card issuing bank, for batch-wise settlement. The credit card provider then makes a settlement payment to the merchant bank on the following day. Once the merchant bank receives the amount it will deduct a certain amount towards interchange fee, from the main total amount and it will deposit the remaining to the merchant’s account on the same day or on the following day.
This process is called a settlement and usually takes 2-3 business days.
The retailer now has a clear log of all her transactions and once a transaction is done, she will have the guarantee that the amount will be deposited with a fee deduction into her account.
One of the biggest challenges that this medium of payment has faced is the issue of security. With the advent in the use of credit cards and credit card processors, the need for a 24/7 friendly customer support system has also increased. A support system that can help customers with any breach of their privacy such as stolen credit cards, fraud transactions and other security issues, is a very important aspect for the usage and progression of credit card processors.
In the few recent years’ studies have shown that there has been a significant rise in the use of credit cards in the country. Sweden, as of 2018 is set to become one of the world’s first cashless countries. In India, due to the lack of education and awareness, going cashless is not yet an option for the whole population but in the few years with the growth in the economy and the development in the social sector, use of credit cards is set to expand, which will directly spike the use of credit card processor.