Paying for the purchases is not the same as earlier. Many people now don’t carry cash. Instead, the card is the new money. Everyone knows the benefits of using a credit card but, understanding how it works much more enjoyable. How, the money in one bank account gets transferred to another, without any manual intervention. It’s fun to know the back-end processing of the card. Although the process people generally see, it looks simple, but the whole set of steps involved in this is not simple.
Majorly four parties are involved: owner of card, seller, recipient agency, and issuer agency. A card owner doesn’t need an explanation; a seller simply is the person who sells, but here, a person who has a business account. The receiver agency is the bank where the seller has his account. Issuer agency is one that issues cards to people.
The step one
The owner presents the card to the shopkeeper, and the shopkeeper using the POS sends the information about the card to the receiving agency. Then with the receipt of data, the receiver agency transfers data to the issuer agency for checking. The issuer agency sends the details to the mediator (the card-issuing firm). The network provider checks the details and sends the response to the receiver bank. This data reaches the business’s end and is kept in batches, waiting for further steps.
Settlement: Next step
After the authorization step, the business sends the group of them for processing. The processor then reconciles and sends the funds to the bank, after reducing the processing fees. For understanding the processing fees visit
Now with this, the role of business in the process is complete. The receiver agency then sends the amount to the merchant’s account using the clearinghouse. The network then adjusts the transaction between both the agencies. An issuer agency pays the sum to the receiver agency. Finally, with this, the operation completes, and the owner becomes liable to pay it.
Being a faster payment option, the card owner’s liability is immediate. But the business gets the funds the next day, or a few days later, this depends on the network. One thing to focus on is that forgetting the funds quick; one must file the group before the cut off time each day. All of this happens at the back every time the card is swiped; one doesn’t think of it much. But knowing the process is adding to knowledge.