Payment services basics for small businesses
New to payment services?
Get up-to-speed in no time. Here are some key terms to understand.
The consumer/owner of the card used to make a purchase.
The business accepting card payments for products or services sold to the cardholder.
The financial institution or other organization that provides card processing services to the merchant.
Card Organization or Card Network
A network (such as Visa® and Mastercard®) that acts as a conduit between the acquirer and issuer for authorizing and funding transactions.
The financial institution or other organization that issued the payment card to the cardholder.
The entity providing services to support authorization, capture and other related processing services.
What is payment processing?
A payment processor is a company, contracted by a merchant, to handle transactions from various payment methods such as credit cards, debit cards, gift cards and more.
Payment processing is a secure way to handle credit and debit card transactions across all your sales channels, from the storefront to the street to the web.
How it works:
- A cardholder swipes a card’s magnetic stripe, inserts its chip into a terminal, or uses its chip to exchange data with a card reader.
- The merchant submits the transaction to a payment processor that sends the information to a payment network to verify the card details with the issuing bank.
- The payment processor relays the information it receives from the payment network to the merchant to complete the transaction or request another form of payment.
- The merchant batches and submits the transactions to the payment processor for settlement.
- The issuing bank deposits funds into the merchant’s bank account, typically within two to four business days. Merchants that process with Bank of America Merchant Services can receive funds as soon as the next business day.2
You need a secure way to handle credit and debit card transactions across all your sales channels, from the storefront to the street to the web. Fortunately, you have options.
What is a merchant account?
A merchant account allows you to accept and process card payments, and get funded for your transactions.
Merchants that process with Bank of America Merchant Services can receive funds as soon as the next business day.2
Swipes, dips and taps
A card reader accepts payment information when a magnetic stripe is swiped, a chip is inserted (dipped) into a terminal, or data is sent from a mobile device or chip via contactless technology.
What is a contactless payment?
Customers can use credit cards, debit cards, smart phones and other mobile devices equipped with radio-frequency identification (RFID), near field communication (NFC) or Magnetic Secure Transmission (MST) to make secure payments with just a tap against a card reader.
This technology, employed in payments solutions such as Apple Pay®, as well as security software and data protection products, helps secure card data by substituting sensitive data with non-sensitive information (a token). Tokenization is driving how an increasing number of point-of-sale transactions are processed. Visa has developed a tokenization service that creates a unifying platform for mobile and digital payment. The service allows you to accept multiple payment devices – from phones to wearables and everything in between – with confidence that your customers’ personal payment card information is protected.
Common fees assessed for payment card processing services
Charged to you, by the acquirer, and paid to the issuing banks.
Charged to you by the acquirer/processor. These are fees set by the acquirer/processor in connection with its processing services delivered to merchants.
Mobile and digital wallets
Digital or cardless wallets enable your customers to shop with their phones at your store or online—quickly and conveniently—without having to access their physical credit or debit cards. Growth of digital wallet use may be slow in the years ahead: McKinsey Consulting expects digital wallets at point-of-sale to be a small slice of the pie by 2020, at which point online sales are still expected to dominate. In the interim, you may need to shift your business model to embrace the digital shopping experience fully.1
For more insights, download this whitepaper: “Strengthening relationships with the mobile consumer.”