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 enterprise client provisions, ships, or delivers a product or service, the authorization is re-run through the payment processor and converted to a transaction.

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 is a process that enables financial transactions, commonly employed by an enterprise, to handle transactions with customers from various channels such as credit cards and debit cards or bank accounts.

In an operation that will usually take a few seconds, payment processing will both check the details received by forwarding them to the respective card's issuing bank or card association for verification, and also carry out a series of anti-fraud measures against the transaction.

Additional parameters, including the card's country of issue and its previous payment history, are also used to gauge the probability of the transaction being approved.

Once the payment processor has received confirmation that the credit card details have been verified, the information is relayed back via the payment gateway to the enterprise, who will then complete the payment transaction. If verification is denied by the card association, the payment processor will relay the information to the merchant, who will then decline the transaction.

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.

Optimizing credit card success through process and technology improvements allow a company to meet the following goals:

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.

Customers occasionally dispute a charge, requiring their bank or credit card company to process chargebacks. 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.