When a customer uses a credit card to purchase goods or services, just how does the money get transferred from the customer to the merchant to complete the sale? Batch processing is the technical term and is explain in detail here.
There are three main steps in credit card processing:
- The authorization
- The capture
- The settlement
When a customer’s credit card is swiped or keyed into the credit card terminal the first thing that happens is a request for authorization is transmitted. The communication comes from the merchant account and is sent to the bank that the customer’s credit card was issued from. The authorization will check that customer's account to make sure they have the funds necessary to complete the transaction. If they do, a hold is placed on the funds and an approval is sent back to the merchant account.
This process continues with all the other transactions over the business day. At the end of the day the business needs to collect on all the authorization holds that have been placed for the day’s credit card sales. At this point the business needs to capture and settle the authorization holds. This is the job of the batch process.
Batch processing can be setup to occur automatically or it can be a manual process. This depends on the specific requirements of the businesses. The batch process can be run more than once a day, if need be, however there is typically a charge associated with the batch process so you will want to factor that into your decision if you would like to run it more than once at the end of the business day. The batch processing component first contacts the banks where the authorization holds have been placed. It then captures the funds on hold and then transmits the funds to the merchant account. Once all the funds have been captured the funds are then deposited or settled to the bank account on file with the merchant account. The batch process takes between 24 to 48 hours to complete at which time the business will see a deposit in the account matching the total reported by the batch process.
It is very important for the business to examine the bank account to ensure the total deposited matches the amount reported by the batch process. If there is a discrepancy you will want to contact your processor immediately to determine where the error has occurred.