Merchant Processing – A Primer

Merchant service providers (or payment processors) facilitate the processing of consumer electronic payments. It generally involves the use of credit cards but can also apply to debit cards and direct debits to a payer’s bank account.

Merchant service providers process transactions where the card is physically present or on line. The differences between the two occur in the beginning of the sales transactions. The back end processes for physical and on-line credit card sales are the same.

The merchant service process involves several steps and transaction parties. It begins when a consumer presents a card for payment.

Brick and Mortar Stores

  • The purchaser presents the physical card to the merchant;
  • The card is swiped at the register;
  • If a debit card is used, a purchaser inputs the pin number;
  • If a credit card is used, the purchaser signs the receipt;
  • Data from the magnetic strip on the card (along with the pin number, if applicable) are transmitted to a merchant service provider for validation.

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