Credit Card Processing

Credit Card Processing is a key component of most service-based billing processes. Many companies in B2C and B2SMB industries store a credit or debit card on file which are used to process recurring payments on a periodic basis. The stored cards must be stored in a PCI compliant manner. It is also common for credit cards to be declined for a variety of reasons. Declined and expired cards should be monitored carefully and proactively.

Credit Card Processing Components

Credit Card Processing

Authorize

The Authorization step in credit card processing typically occurs when the initial payment agreement is created with a new customer. Authorization can also occur if a customer changes from another payment type to a credit card, or when a customer changes the credit card used for billing. In the Authorize step, the credit card number and information provided by the customer is confirmed, typically by the vendor chosen to process credit card payments.

The authorization of a credit card transaction generally reserves the funds with a bank or credit card company. The transaction is then pending, and the credit company holds those funds for a prescribed length of time (usually 48-72 hours) before releasing the funds back to the customer’s account. When the service provider provisions, ships, or delivers a product or service, the authorization is re-run through the payment processor and converted to a transaction.

Payment Gateway

The Payment Gateway accommodates the processing of charges made to customers’ credit cards. The payment gateway is normally where credit card information is stored and processed. The payment gateway can be responsible for the majority of required PCI compliance.

Payment Processing

In a subscription environment, Payment Processing can occur daily. The payment gateway takes the charges from a billing system and interacts with banks to settle the payments, returning a success or failure. Often additional information is also passed to the payment processor which enables fraud detection systems to score the transaction and determine its viability.

Optimize Interchange

The rates charged for processing credit card transactions can vary based on the quality and completeness of the data provided for processing as well as the timeliness with which the transaction is submitted for processing. Optimizing Interchange remedies issues of speed, reliability, and data integrity as approvals, authorizations, and credits are processed.

Optimize Credit Card Success

Optimizing Credit Card Success through process and technology improvements allow a company to meet the following goals:

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    Reduce credit card processing cost

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    Reduce the risk of fraud

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    Increase security of customer PCI data

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    Update credit card information automatically

Additional optimizations can be made to reduce the accessibility of credit card data stored within various systems. One step is to tokenize credit card numbers. Tokenization requires the processor to hold a key that associates the token with valid payment information. This process decreases the risk of theft and exposure of payment information. The tokenization process must be supported by internal systems as well as the payment processor. When a credit card is submitted to the payment processor, the token is associated with the account information stored by the credit card company, instead of the credit card. The token is stored internally for ongoing or future payments.

Account Updater is a feature supported by some systems, and most credit card processors, that allows credit card numbers and expiration dates to be updated automatically when a customer is issued a new card. This feature can be extremely useful in maintaining a low level of credit card failures. In addition, the impact to customers is decreased while increasing the overall customer experience. Service can continue uninterrupted, and the need for customers to call with updated credit card information is eliminated. What’s more, account updater has the ability to support credit cards that are re-issued as a lost or stolen card.

Process Chargebacks

Customers occasionally dispute a charge, requiring their bank or credit card company to Process a Chargeback. This action will result in the removal of funds from a company’s account and then returned to the customer. Companies have an opportunity to dispute the chargeback. Fighting a chargeback can be a tedious effort. Providing proof of service/product delivery as well as confirmation that terms and conditions were met can be more trouble than it’s worth for large organizations.


Detailed: People | Process | Technology

The Finance-Billing team leads the Credit Card Processing domain. Operations and IT are also closely connected with this very focused domain.

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ATG maintains a set of 75 key business processes to support management of Customers and Revenue for Service Providers. Twelve of these processes originate, or are impacted by, the Credit Card Processing domain. Below are the key processes that touch this domain, categorized by the Organizational Unit that owns the process:


Finance – Billing Organization

Billing Setup Process – Tasks and functions associated with setting up the billing processes for given products and services.

Billing/Invoice Processing: Recurring/Periodic – Process for aggregating financial activities and adjustments for a given billing period and generating respective invoice.

Credit Card Optimization – The optimization of credit card success in order to reduce processing cost, risk, and fraud, as well as lower transaction fees.

Credit Card Processing – Methods to receive credit card payments including authorization, payment gateway, processing, interchange, and credit card success.


Operations Organization

Pro-Active Customer Notification – Operations focus (CC expiry, notification of payment received) – A proactive approach to notify customers of pertinent payment information.


I.T.

Maintenance and Oversight of Monetization Ecosystem – processes around ensuring that all touch points and connections within the ecosystem are optimized to their fullest potential.

Monitoring & Testing of Vendor Functional Releases – As ecosystem components release updates and patches, each is checked and tested to confirm all systems are working together as required by the business’ requirements.

Vendor Management of Monetization Ecosystem – oversight and communication duties of ecosystem software components and their vendors, including management of vendor road map and change logs and general relationship nurturing.

Cross-Training of Monetization Ecosystem Components – process for training organizational resources on the appropriate software systems.

Security Oversight of Monetization Ecosystem – process for maintaining and controlling access and permissions to ecosystem components.

Data Stewardship Across Monetization Ecosystem – process of assigning ownership and sources of truth for data within the organization.


All Organizations

Daily, Periodic, or Ad Hoc Reporting (Extraction, Load, Report, Dashboard) – movement of data between domains to create single source of truth for reporting and dashboarding.


Credit Card Processing software is provided by a handful of companies that ensure a secure, encrypted connection to their system, and typically have tiered fraud filtering systems as an upgrade path.

Key Vendors

Founded: 1979
HQ: New York, NY
Company Type: Public
Website: www.chasepaymentech.com
Cloud/On-Premise: Cloud

Chase Paymentech is a web-based merchant service allowing retailers to accept payments in store, online, or on the go. Paymentech also provides web-based access to transaction data, advanced web-based reporting, an online chargeback interface, and optional fraud management tools.  This offering allows the user to:

  • Reconcile payment operations using daily, weekly, or monthly financial reports
  • Manage chargeback online with 24/7 access to comprehensive transaction data
  • Reduce errors resulting in chargebacks
  • Control employee access to customer and business-related information
  • Create customized fraud filters to manage risk

Paymentech screens for high-risk transactions, electronically captures, stores, and exchanges chargeback documents, and provides direct contact numbers for card issuing banks.

Chase Paymentech tends to target companies of all sizes, including enterprises, which are in need of data management tools.

Valley Ranch Pet Clinic – veterinary care provider of services ranging from pet health to diagnosis to illness recovery
David Mayhew Photography – Colorado-based severe weather photographer
Skin Sanctuary – beauty spa offering skin treatments, derma- filing, tinting, waxing, massages, and makeup services
Irina’s Alterations – clothing alteration service based in Georgia

Founded: 1994
HQ: Foster City, CA
Company Type: Privately Held
Website: www.cybersource.com
Cloud/On-Premise: Cloud

CyberSource is a Visa, Inc. company providing an e-commerce credit card payment gateway. This company works with over 400,000 medium-to-large sized merchants worldwide to process online payments while utilizing fraud and security management. Featured solutions include:

  • Global Expansion
  • Mobile and Cross-Channel Payments
  • Streamlining PCI Management
  • Optimizing Fraud Management

CyberSource also provides implementation and maintenance support, as well as merchant and partner payment management solutions.

CyberSource tends to target enterprise companies such as manufacturers, service businesses, and education and e-government entities, as well as medium-sized businesses.

Traveloka – Indonesia’s leading online travel agency

LINE Thailand – mobile messenger service application

China Eastern – one of China’s leading airlines

Qunar – China’s largest travel search engine

Television Broadcasts Limited (TVB) – leading free-to-air TV broadcasters in Hong Kong

Founded: 1981
HQ: Newcastle, UK
Company Type: Public
Website: www.sage.com
Cloud/On-Premise: Cloud

Sage Payment Solutions is a payment solutions and payment processing company allowing customers to pay via debit/credit card, electronic check and ACH, gift card, and mobile processing.  Additional processing solutions include:

  • Payment Card Industry (PCI) certification, merchant validation/certification, and PIN transaction security
  • Electronic entry of one-time or recurring payments through a virtual terminal
  • Processing and depositing of business and consumer checks at Point-of-Sale
  • Design and customization of pre-designed gift and loyalty cards

Sage Payment Solutions also enables integration with accounting and ERP software, while providing service and support for loss prevention and charge back assistance, underwriting, and more.

Sage Payment Solutions tends to target small to medium sized businesses of every industry, from retail to healthcare.

GloryBee – food production company providing high-quality organic and natural ingredients

Power Distributing – Redbull energy drink distributor

Merit Electric – electrical company specializing in electrical construction and service

Tanamera Construction – construction company specializing in commercial, residential, and retail construction

Harpoon Brewery – Boston-based beer brewing company

Founded: 1971
HQ: Symmes Township, OH
Company Type: Public
Website: www.vantiv.com
Cloud/On-Premise: Cloud

Vantiv acquired privately held Litle & Co. in December 2012. Vantiv is comprehensive in-store and online solution for merchants and financial institutions of all sizes. In-store technologies range from stand-alone devices to integrated POS solutions for credit cards, mobile payments, and ACH and checks. Online capabilities include credit, debit, and prepaid card acceptance as well as international payments.

Vantiv has features that include:

  • Fraudulent and card data protection
  • Payment security threat protection
  • Current and historical reporting insights
  • Customer and technical support
  • Integrated payment processing

Vantiv provides application, contract, underwriting, and provisioning solutions, chargeback analysis and reporting, and at-risk merchant monitoring and support. Additional services include gift and prepaid cards processing, and merchant financing.

Vantiv tends to target enterprise merchants, financial institutions, government entities, and payment facilitators, as well as small-sized businesses in retail, restaurant, and service industries.

Rabobank N.A.  – California-based bank offering a complete range of financial products and services

USPS – Independent government agency responsible for providing postal service in the U.S.

Ingenico Group – global leader in seamless payments

Centier Bank – full-service financial institution

 

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