Payment Processing

Payment 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.

Payment Processing Components

Payment 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:

  • 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.

Finance-Billing-People-IconOps-People-IconIT-People-Icon

Key Vendors

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

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

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

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

 

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