How do payments happen through Merchant Accounts?

The best part about running a business is generating sales. It is a time when you make a profit and complete the operations cycle. Now, the way you conduct sales decides the customer's experience. This involves the checkout process. It is the final stage that lets the customers complete the buying process. It is essential to ensure that it goes smoothly. For this, you should accept payment through different channels.

The modes generally include cash, banking cards, and Mobile Banking apps. These mediums do not process themselves. This is when a Merchant Account helps. It is the intermediary between you and the customers. Their primary purpose is to accept payments both online and offline. During the sale, it works behind the scenes to withdraw funds from the buyer's account and credit them to your Business Account. Here is a detailed process:

Customer initiates transaction

You need first to initiate the payment. Customers do this after going through the buying procedure. Depending on the shopping mode, they reach out to the checkout counter either online or offline. The former is convenient as the payment gateway integrates different payment channels. The widely used system is a point-of-sale machine in the latter's case.

Processing through payment gateways

Besides the account, you also require a mechanism that facilitates transactions. This is where a payment gateway is valuable. It is a channel that sees if the cardholder has enough funds for the transaction. If you receive payment through Credit Card or online portal, you require this tool. The best point-of-sales terminals include payment gateways that read cardholder's data, coordinate with the card company, and ensure transaction fulfilment.

Debit from buyer's account

When the transaction gets approved once processed, the amount gets deducted from the buyer's account. If applicable to the customer's account, this may also include a transaction fee. The charges differ based on the payment type and the payment network. For instance, transaction fees vary for Visa and Mastercard.

Credit in Business Account

After debit from the buyer's account, the amount automatically gets credited to your Merchant Account. Consecutively, it is transferred to your Business Account. This transfer happens in batches. Depending on the bank and the transaction type, it might take a few hours or even days.

Dispute settlement

Although the sales process ends, it is not entirely over. If the customer is happy, you gain a loyal buyer. Meanwhile, there may be disputes which should be addressed soon. Hence, you need to verify the transaction and refund if required.

Arjit Chalmela is a finance student who loves to write in his free time. He has spent considerable time researching the foreign exchange rate.