In it’s most basic form without getting to detailed, here’s what happens when you (the merchant) processes a credit card through your credit card terminal.
1. Merchant process credit card through point of sale unit, stand-alone wired or wireless terminal.
2. Data is transmitted (card info, transaction amount) the the “acquiring” bank.
3. The acquiring bank requests an authorization of funds from the “card-issuing” bank (customer’s bank account).
4. If funds are approved, the acquiring bank processes the transaction and sends approval back to the merchant.
5. The merchant reviews the status of the transaction and sends confirmation to the acquiring bank for deposit.
6. The acquiring bank the requests then receives funds from the card-issuing bank.
7. The acquiring bank then deposits the funds into the merchant’s account.