The Payment Lifecycle: A Multi-Party Play
The payment lifecycle involves several actors working together to ensure a smooth and secure transaction. Here’s a breakdown of the key players and their interactions:
- Customer:
- Initiates the purchase on your online store and enters their payment information (card number, expiration date, etc.).
- Your Online Store:
- Forwards the customer’s payment information securely to the payment gateway.
- Displays a confirmation message once the payment information is received.
- Payment Gateway:
- Encrypts the customer’s payment information.
- Routes the information to the appropriate acquiring bank based on the card network (Visa, Mastercard, etc.).
- Acts as an intermediary between your store and the issuing and acquiring banks.
- Acquiring Bank:
- Processes the authorization request from the payment gateway.
- Verifies the customer’s credit card information and available funds with the issuing bank.
- Sends an authorization response back to the payment gateway.
- Credit Card Network:
- The Credit Card Network acts as a facilitator between the issuing and acquiring banks, ensuring secure communication and routing of information.
- Issuing Bank:
- Receives the authorization request from the acquiring bank (via the payment gateway or credit card network).
- Checks the customer’s account balance and creditworthiness.
- Sends an authorization approval or decline response back to the acquiring bank.
- Merchant (You):
- Receives a notification from the payment gateway (or acquiring bank) indicating authorization approval or decline.
- Upon authorization approval:
- Fulfills the customer’s order.
- May capture funds from the customer’s account depending on your setup (immediate capture or delayed capture).
- Settlement:
- After a successful authorization and order fulfillment, the acquiring bank settles the transaction with the issuing bank. This typically involves a transfer of funds.
- You (the merchant) receive the settled funds minus any processing fees from the payment gateway and acquiring bank.
Additional Notes:
- Security: Secure Sockets Layer (SSL) encryption is used throughout the process to protect sensitive customer information.
- Fraud Prevention: Acquiring banks and credit card networks may employ various fraud prevention measures like CVV verification and address verification.
- Chargebacks: In cases of disputes or customer dissatisfaction, the customer may initiate a chargeback, which involves reversing the transaction and potentially crediting the customer’s account.
This simplified explanation highlights the key interactions between the various players in the payment lifecycle. The actual process might involve additional steps or actors depending on the specific payment method, fraud prevention strategies, and settlement procedures.
