How It Works Diagram at authorize.net.

Let’s say you are a $100 credit card purchase. The moment the customer hits the buy button on the ecommerce merchant’s website, you are zooming across cyberspace on a multi-stop journey, during which you will shed, typically, nearly three dollars as companies that you interact with assess varying fees for their service. (Actual fees vary based upon a number of variables, including merchant type, card type and risk factors.)

Your first destination is the payment gateway (-.10¢), which routes you to the appropriate processor (-.08¢). The processor immediately submits you to what is known as the credit card interchange (-.09¢). After you’ve cleared the interchange, your next leg takes you to the issuing bank (-1.93¢), which verifies the available funds in the customer’s credit card account. Whether you are approved or declined, you now begin the journey back to the customer. However, if you’re approved, you and your authorization results are soon to part after speeding by each stop you made on the way. Your detour is through your merchant account at the acquiring bank (-.65¢) to, ultimately, the merchant’s bank account, where you will be deposited; that is, the $97.15 of you that remains.

David Schwartz is director of marketing at a leading payment gateway, Authorize.Net. He says, “This is by far the most complex industry I have ever been associated with. I always tell new employees to give themselves six to nine months to become comfortable with the lingo and to understand how the payment processing system works.

practicalecommerce.com