Have you ever bought something electronically? Did you make a purchase on a website? If you have ever engaged in an electronic transaction, it is likely that you have interacted with a payment processing system. Payment processors allow the movement of funds from the buyer to the seller in electronic commerce transactions. How do they work? What are the different methods for payment processing? Here is a brief introduction to the process of making payments online.
First, how do payment processors work? A payment processor is a third-party payment management system that allows businesses to receive and arrange payments for goods and services offered in electronic transactions. For example, if you make a purchase on a large website like Amazon, your money will be managed and deposited with Amazon through a payment processing company. If you pay with a credit card at a grocery store, your money goes through payment processing. In this way, stores can focus on their customers and retail and can leave money management to a third party.
What are the different methods for payment processing? If you ever use a debit or credit card, you’re interacting with one of the largest forms of payment processing. Online services like PayPal and Square are other methods. These systems allow you to pay using a direct link to your bank accounts. Credit card payment apps that allow you to use your smartphone to receive payments are becoming more and more popular. Now stores that previously only accepted cash can open their sales to customers who want to pay with cards. Payment processing systems have opened up a whole new method of transacting that wasn’t possible 20 years ago.
Payment processing systems keep businesses running. They allow large companies to outsource their payments so they can focus on customers and services. Credit card companies and online payment processors, in turn, profit from their services by taking a small percentage of the total transaction for their role in managing it. Our society used to be cash and ride only. We now have a wide variety of options when it comes to payment options for our transactions. If you head to a local farmer’s market, you’ll be surprised at how many vendors now accept cards and other types of electronic payment processors. In fact, so many businesses now accept payment processors, whether they’re hot dog vendors or big box retailers, that it seems odd for a business not to accept cards or online payments.