What are the key parts of credit card processing?
The parties involved in credit card processing are working in the blink of an eye to ensure that the following actions occur to complete a seamless customer transaction. Big ticket, home furnishings purchases are unique from cash and carry products such as a cup of coffee. Therefore, it is critical if you are a furniture, bedding, or appliance retailer, to work with solution providers that understand the nuances of your sales process.
Authorization: Credit card details have been submitted by the cardholder, either in-person or online. This kicks the process off. The customer’s personally identifying information (PII), the amount of the transaction, and bank routing are encrypted and processed through the chain of credit card and banking institutions.
Pre-authorization: A pre-authorization is a common practice for home furnishings and design services where customers may be previewing options in their homes prior to finalizing the sale. A pre-authorization will hold the customer’s funds for a designated time period until the pre-authorization expires. If the sale moves forward, the merchant can capture the funds and complete the order.
Approval: In the ideal outcome, the credit card is validated, and the cardholder has adequate funds or a line of credit open for this transaction to be approved.
Decline: A cardholder’s bank may decline a transaction for any number of reasons ranging from insufficient funds or a temporary hold to a security precaution. This process protects the merchant from risk or fraud.
Settlement: This is where the merchant actually receives the funds from the customer’s bank into their own bank account, completing the cycle. This part of the process does not occur in real time. The approval process serves as a guarantee of funds that occurs quickly and allows the customer to leave with a confirmed purchase, even though the actual fund transfer can take a few days. The merchant acquiring account holds the funds until final settlement.
Tokenization: Tokenization enables merchants to securely store encrypted card data for their customers. In home furnishings, taking a deposit at the initial point of sale is a common practice. Having a token on file enables you to complete the payment in full once the fulfillment is ready for scheduling without needing the card to be presented again. It can also be used to conveniently issue a refund. This process is more secure than reading card data over the phone and requires a CVV security code for validation.