When a customer purchases an item with a credit card, a two step process begins.
First, the merchant or the website requests an authorization from the customer's credit
card account to ensure that the card is valid and the customer has enough available
balance for the purchase. The customer's bank sends an authorization number back to the
merchant or the website and the order is "captured."
Next the merchandise is sent, and the merchant informs the bank where they have a
merchant account. The bank deposits funds to the merchant's account while the customer's
account is debited for the amount of the purchase. At that time, the customers' bank takes
out the required fees and the transaction is complete.
Credit cards are an important part of enabling Internet commerce. The easiest process
to integrate into an existing business is an off-line authorization and settlement
process. For more advanced web merchants who are processing more than 100 transactions per
month, real time credit card authorization becomes economical. With a link to a Processing
Service Provider such as Signio / PaymentNet, the website generates an authorization
request when the customer places the order. If the merchant is selling hard goods which
have to be shipped to the customer, then order is saved securely for later settlement.
Once the goods are shipped, the merchant can settle the order, and the transaction is
completed. If the merchant is selling downloadable media, software, or site memberships
for example, then the order can be authorized and settled in real time, without any
intervention by the merchant.
