What journey is worth taking? An age-old question, to be sure. Only one thing’s certain about a journey: If you don’t know where you’re going, you won’t recognize the finish line when it appears.

High-risk online merchants know where they’re going — even if they don’t know precisely how to get there on Day One. Spurred on by goals and ambitions, merchants lay out business plans and put up websites to peddle their goods and services.

Somewhere along the way, the merchants realize that the payment card industry holds a must-have ticket to their online success. After all, there won’t be much business without sales transactions. Online, that means accepting and processing at least debit and credit cards.

While it’s not necessary for every merchant to develop expertise in the payment card industry, they will all find it useful to understand the payments journey at a high level from start to finish.

Continue reading as we tour major steps of the payments lifecycle, starting with success tips to help merchants maneuver the major payment card industry crossroads.

Set Up for Success — And Follow Through Diligently

When establishing your business, some choices you make will set you up for success more easily than others. Options exist but they’re not all equivalent. Especially in terms of the flexibility offered for future growth — the cost of doing business — and data security.

Choosing the right payments option to support your business may be your entrée into the payment card industry as a merchant. But as a consumer, you’re no doubt familiar with both good and bad online shopping experiences.

Commit to doing better than most merchants so your business can thrive. Make it easy for customers to buy from you. Follow through with winning business processes and a keen focus on data security.

Accept that you won’t stop chargebacks entirely (they’re a fact of life for online merchants), but you can do a lot to combat CNP fraud, which causes most chargebacks. Choose a flexible but robust payments gateway that employs strong security protocols.

As we’re about to see in the discussion of payment processes, data transfer — of highly sensitive information — among all the parties participating in the payment card industry makes payments possible. (That explains why the focus on data security bears repeating.)

3 Major Payment Processes

For simplicity, this discussion assumes processing debit or credit through an individual merchant account, not a payment aggregator.

First comes the Authorization process. It’s a multi-step process that leads to a consummated sale — in a matter of seconds — if the card’s valid and has sufficient credit or funds to make the purchase.

Second comes the Settlement process of managing electronic payment transactions so they can clear and settle among participants in the payment card industry. Merchants’ acquiring banks present approved transactions to the payment brands for clearing through interchange — transactions are cleared and settled among the parties.

Third is Funding. Money moves among the banks, the processors, and the merchants in the amounts of settled transactions. Issuers receive debits to charge them for the settled transactions, and then post them to cardholders’ accounts for their monthly statements. Cardholders then pay their bills to issuing banks.

Authorization Deserves a Closer Look

Because Authorization is the payment card industry process through which sales are made (or not), it’s worth looking at the steps that must occur. Success tips are noted in italics so you can’t miss them. Along with actions noted in the links above, make these tips standard practices for your business.

  1.   The customer selects a card for payment and enters cardholder information into an ecommerce website. Information required includes the cardholder’s name, address, card number, and CVV code. The full purchase amount is appended. Make the payment process on your website easy for the customer.
  2.   The card data is sent from the merchant’s website to an acquirer/payment processor via a “gateway” provider, which routes the data through the payments system for processing as a request for authorization. Data should be encrypted every step of the way, not sent “in the clear.”
  3.   The acquirer/processor sends the data to the payment brand (Visa, Mastercard, American Express, Discover, etc.). The payment brand’s system then forwards the request to the issuing bank for approval.
  4.   The issuing bank’s system verifies that the card is valid (not expired and not reported lost or stolen) and that the account has enough purchasing power (credit/funds available) to pay for the transaction.
  5.   If the card is valid and sufficiently funded, the issuer generates an authorization number and routes it back to the card brand. (The issuing bank thus agrees to fund the purchase on behalf of the customer. Therein lies the bank’s risk, as it’s essentially a loan.) The dollar amount specified will be reserved from the cardholder’s available credit limit until settlement. If the card is not valid or the cardholder’s credit limit is insufficient, a decline response with a reason code is routed instead.
  6.   The card brand forwards the response (authorization code or decline/reason code) back to the acquirer/processor.
  7.   Which sends the response back to the merchant.
  8.   If the transaction was authorized, the merchant concludes the sale with the customer. If the issuing bank does not approve the customer’s payment card, the sale is declined.

Keep good records of all sales. Provide a digital receipt that includes the authorization number and keep a copy of the receipt in your files.

Not all consumers who begin shopping on your website actually complete a sale. Cart abandonment during the checkout process may occur if the shopper is “just browsing” or because the checkout process is cumbersome. Don’t ask for extraneous information, and make the checkout process easy for customers.


Many players in the payment card industry make online payments possible. One of the most important choices for your ecommerce business is a key player called a payments processor.

The right payments processor will help online merchants understand the complexities of payment processing from the perspective of someone who’s an expert in the payment card industry.

He’ll study your unique business model and only then recommend the right solutions for your business. Because he wants to help you achieve the success you seek.

The right processor will treat you like a business partner and stick around to ensure your payments processing runs seamlessly. Because success is a journey, not a destination.