The method of online payment processing

A payment processor can be a third party or an acquiring bank that is chosen by a merchant to facilitate all payments that are being made through the acquiring bank. The method of payment processing involves several steps thus all e-commerce businesses should take precaution in ensuring that all transactions are carried out in a secure and safe manner.

Step by step of payment processing

The following is a step by step guide of how online payment processing is performed.

  1. After a consumer decides to make a payment online, they have to go through a number of steps in order to confirm and send their order.
  2. The merchant receives the order and sends an authorization request to the payment processor (PayPal, FDMS etc).
  3. The payment processor then sends a request to the issuing bank/acquiring bank for authorization of the payment. There are various details of the customer that the request will authorize, these include;
    • Credit card number
    • Card expiry date
    • Card billing address
    • Total amount of order
    • Card security code (CVV)
  4. The issuing bank/acquiring bank will authorize the following details;
    • Confirm card number and expiry date
    • Check that amount of order
    • Verify billing address provided
    • Verify card security code
  5. The issuing bank will send authorization to the payment processor with either approving or declining the transaction.
  6. The payment processor will then respond to the authorization by sending a unique code to the merchant, allowing the payment to be processed.
  7. The customer is allowed to continue with the rest of the payment, reviewing and finalizing their order as it has gone through authorization.