Innovations in Credit Card Processing

In this article, you’ll learn:

• What happens during the processing of a credit card

• The payment process for a debit card transaction

• About the new world of mobile payment processing

Card payment machines have been an everyday part of life for decades now, but the industry still continues to innovate and improve. In the earliest days of credit cards, the holder would hand their card over to a seller who would then take an image of it in triplicate, often using the card's embossed numbers to produce a stamp-like image.

Once the customer had signed the docket that was produced, and this had been checked against the one on the back of the card, the sale could proceed. The vendor kept one copy of the credit card documentation, with one being given as a receipt for the transaction to the cardholder. The third was sent off to the credit card issuer.

Of course, things have moved on rapidly since this paper system was replaced by the introduction of the credit card machine, commonly called a PDQ in Britain.

How Credit Card Processing Works

Payment processing from credit cards still operates in much the same way as it used to, even in the earliest days. The difference is how the system has sped up.

Following the introduction of PDQs for credit card processing, the need for a physical swipe of the embossed surface of the card has been done away with. This is because cards that can be processed using a PDQ machine have their data stored in the magnetic strip along the back as well as in their chip.

A PDQ reads this data, meaning that the once significant problems of poorly written card data and lost paperwork are now greatly diminished.

With a PDQ, the credit card issuer is contacted by the vendor's service provider. Once the cardholder's credit limit has been confirmed, the funds are released by the service provider to the seller and the goods or services have, in effect, been paid for.

Rather than sending physical copies of transactions to the service provider, in the form of paper dockets, a PDQ automatically checks for authorisation.

Debit Card Processing

Following the introduction of the payment terminal for credit card payments, banks realised that the near-instantaneous checks that could now be carried out meant that it would be possible to introduce debit cards.

Unlike a credit card transaction, where the payment processing is handled by the merchant's service provider and the card issuer, a debit card transaction is authorised between the service provider and the card holder's bank.

Essentially, the difference is that a credit card bill is settled at a later date by the cardholder, with charges being applied for late payments. However, a debit card transaction appears within a few hours on a card holder's balance, just like a cash withdrawal would.

Nearly all PDQs or electronic funds transfer at point of sale (EFTPOS), machines as they are known overseas, can handle both credit card and debit card transactions. SumUp offers two types of credit card machines - SumUp Air and SumUp 3G card reader.

Mobile Card Processing Services

A further innovation with the ability to accept card payments came about with the recent introduction of mobile systems. Under a mobile service, such as that offered by SumUp, sellers do not need a physical payment terminal in order to accept card transactions.

This is a big bonus for merchants who only occasionally process cards for payments and don't want to buy or rent their own PDQ.

It is also an advantageous system for sole traders who can't connect a device to a telephone line, like market stall operators, for example. Mobile card systems are also greatly used by professionals who provide services outside of conventional business premises, perhaps working in the homes of their clients.

How Mobile Credit Cards Are Processed

Basically, mobile card payments can be taken by using an app downloaded to a smart device. By swiping a card in a small payment machine, customers can still enter their PIN number and confirm the payment amount, but after that, the smart device takes over and contacts the merchant's service provider just like a conventional PDQ would, only over the internet.

With such an innovation, even receipts can be emailed to clients post-sale, so the entire process becomes paperless, a far cry from the earliest days of credit cards.

In Summary

Processing a transaction via credit card is now faster than ever before. The same quick security checks that are applied when processing a credit card are also being applied to debit cards as they are now a method of payment on PDQs. Either one can be a means of payment via a mobile card service, providing great flexibility in the choice of payment and location of sale.