There are two stages in payment processing: authorization (approving the sale) and settlement (getting the money into your account).
Here’s what involved with each one:
1. Approving the sale with authorization.
When a customer buys an item from your website using a credit or debit card, the information goes through a payment gateway, which encrypts the data to keep it private.
It is then sent to the payment processor, which sends a request to the issuing bank asking for money to pay for your items. The bank can grant or deny the request, depending on the availability of funds (for debit cards) or if the customer’s credit limit was reached.
Amazingly, this whole process takes just 1-2 seconds to complete.
2. Settling the sale and getting the money to your account.
Once the transaction is approved, the card issuer sends money to the merchant, who deposits the money into your bank account.
Once the money hits your bank account, you can access the funds.
Sometimes, banks don’t allow you to access all the funds right away, in case you need to refund a customer later on.
The entire settlement process can take a few days.
