Business needs can vary drastically, but one thing remains consistent: payment processing is a must. Yet, as consumers, we may not often stop to think about the intricacy of payment processing.
Click a button, swipe a card, or transfer funds, and you’re well on your way. That’s not always true on the business backend, where payment processing can be a complex necessity that requires a well-designed, secure, and efficient fintech solution.
For many businesses, plug-and-play solutions like Stripe or PayPal, represent reliable processing solutions for straight-forward transactions. However, as transactions and financial management needs become more complex, businesses may need an additional layer of support or more advanced integrations to complete, manage, and track transactions and related activities. .
Customized integrations help startups, SMBs, or enterprise businesses by bridging the gap between their existing payment processing solution and their business needs. How does payment processing work?
How does payment processing work?
Before talking about how payment processing works, we need to identify the primary players: merchant accounts, payment processors, and payment gateways.
A merchant account is a commercial bank account that acts as the middle man between your customers and your business bank account. It is used only to accept customer or client payments, specifically those made via credit or debit card.
When your company receives payment, the funds go directly to your merchant account. You can then transfer those funds to your traditional business bank account to manage expenses, like utilities, rent, etc. In addition, merchant accounts may accept online payments or payments made through a card processing terminal.
While a merchant account stores the money, a payment processor oversees, facilitates, and transmits relevant data to the customer and your merchant account. Payment processors log activity and relay that activity to both your customer’s bank and your account. It also ensures a transaction’s integrity by verifying that the provided information (e.g., CVV, expiration dates, cardholder info, etc.) is correct.
Payment gateways are essentially virtual point-of-sale systems. For example, if a customer completes a transaction in person, they may swipe their card through a POS system or credit card reader.
If, however, they complete a transaction via online checkout, they use a payment gateway. The payment gateway captures the information, and that data is sent to the payment processor.
When each payment player performs as intended, a customer will enter their information at check out. The payment gateway will capture and send that information to the payment processor.
The processor will then perform an integrity check on the information. If everything is accurate, the transaction is complete. Once the payment is processed, the funds will enter into the merchant account, where they will remain until the merchant makes or schedules a withdrawal or transfer.
Custom Payment Processing Solutions vs Off-the-Shelf Payment Processing Software
Customized for easy integration
Enhanced security and compliance
Support for multiple payment processing solutions
Scalable to meet evolving business needs
Centralized payment processing
Your business can’t operate without a reliable payment processing solution, but that doesn’t mean you need to put the future of your business in the hands of a third-party solution. Investing in a custom payment processing solution will empower your business to manage transactions and funds in a way that supports the needs of not only customers but your business as a whole.
At DADEN Software, we strive to provide clients with the custom software they need to elevate their business above the competition while also implementing applications that will simplify everyday tasks for customers and employees alike.
Contact us today to to schedule a free innovation session so we can work together to design a payment solution that helps your business grow and evolve.