Debit Card Processing is a Complex Process

If you look at the diagram of the debit card processing process, it may at first seem as a confusing maze of many different processes and multi-layered parts. But a closer look will show that there a few basic parts of the process, while other parts, although they can augment the process, can be considered non-essential. This description lays out the basics of payment processing. It also helps you appreciate the charges and risks involved in accepting payments as a merchant. Although debit or credit card processing is fully automated, and can be completed in seconds, the essential steps include:

Collecting the data
This is now done entire almost entirely by card readers. If you are making purchases online, you are still required to manually enter the data, as computers do not yet include scanners that are able to read your cards.

The data must then be authenticated, and it sent to the issuer to be verified. If verification is successful, that is if all then data sent is identical to that retained on the files of the issuer, the process can proceed, or if it is not the purchase is declined.

If verification is successful, the amount of available credit or funds to be debited is then checked against the sum of the purchase, or requested amount to be debit and a request is then sent to the bank to reserve the funds. If everything checks out the funds are requested and the request transaction is completed. However the process is still not complete, as only the requests have been completed.

After the requests have been made and the funds transferred, because there are other players involved, it may take a few days for the funds to be removed. The merchant account that processes the transaction is credited, usually within four business days. The time will also depend on the type of the account, the bank that issued the card, and the customer agreement. This is the reason, why charges to your debit or credit card do not always appear immediately on your account.

The processors and other parties are continually innovating and upgrading the process, so that even though it may take it few seconds, the results can be seen almost immediately, and should not take hours or even days. Consumers are then sent monthly details of all recorded transactions.

The upgrades must be done very carefully, as it includes eliminating steps that are considered unnecessary. It will also involve removing some of the parties who extract some profit from the process, and it also requires that caps must be imposed on processing costs. If costs of processing payments are increased, it must be decided, where and how the costs should be absorbed, as there may additional debates as to whether the costs must be passed on to the consumers, or the merchants in the form of higher fees.