Credit card processing involves multiple parties, each playing a crucial role in facilitating the transaction:

• Customer: The individual making the purchase with their credit card.
• Merchant: The business or entity selling goods or services and receiving payment from the customer.
• Acquiring Bank (Merchant Bank): The financial institution that provides the merchant with the technology and services required to accept credit card payments. This bank processes the transactions on behalf of the merchant and deposits the funds into the merchant’s account.
• Issuing Bank: The bank or financial institution that issued the credit card to the customer. This bank is responsible for approving or declining transactions based on the available credit or funds in the customer’s account. When a transaction is approved, the issuing bank transfers funds to the acquiring bank to complete the purchase.

Here’s a simplified overview of how credit card processing typically works:

• When a customer makes a purchase using a credit card, the merchant’s point-of-sale terminal or payment gateway sends the transaction information (such as the card number, transaction amount, and merchant details) to the acquiring bank.
• The acquiring bank forwards this information to the credit card network (such as Visa, Mastercard, American Express, or Discover).
• The credit card network routes the transaction data to the issuing bank for authorization.
• The issuing bank assesses the transaction’s risk and verifies the customer’s account details, ensuring that there are sufficient funds or credit available to cover the purchase.
• If the transaction is approved, the issuing bank sends an authorization code to the acquiring bank via the credit card network.
• The acquiring bank then relays the authorization code to the merchant, indicating that the transaction is approved.
• The merchant completes the sale, and the customer receives their goods or services.
• At the end of the day or another specified settlement period, the acquiring bank initiates the transfer of funds from the issuing bank to the merchant’s account, completing the payment process.

Throughout this process, various fees may be applied, including interchange fees charged by the credit card networks and processing fees charged by the acquiring bank for their services.