The introduction of technology and digitalisation has significantly changed how we purchase goods and pay for services. Many people have switched to credit cards and mobile applications to make their payments. With a credit card app, users can easily and securely make transactions from their mobile devices without physical credit cards. But how do these transactions work?
Here, we’ll delve into the process of credit card online transactions, from the initial authorisation to the final settlement, and explore what features go into determining the best credit card app for you.
The basics of online credit card transactions
Online credit card transactions involve a series of steps that allow a customer to purchase online using their credit card. When customers make an online purchase, they enter their credit card details into a payment gateway, which securely transfers the information to the merchant’s bank. The bank then processes the transaction and approves or declines it based on the available credit and fraud detection checks.
Involved Parties in Debit and Credit Card Transactions
There are several factors involved in credit and debit card transactions. They include the following:
- Cardholder: The person who owns the credit or debit card and uses it to make purchases.
- Merchant: The business or individual that accepts credit or debit cards as payment for goods or services.
- Acquiring Bank: The bank that processes transactions on behalf of the merchant.
- Issuing Bank: The bank that issued the credit or debit card to the cardholder.
- Payment Gateway: The software processes transactions between the merchant and the acquiring bank.
- Card Networks: The companies operating payment systems, such as Visa, Mastercard, and American Express.
Technologies used in online credit card transactions
Credit card online transactions use various technologies to ensure they are secure and reliable. Some technologies involved include:
- Encryption: Encryption is encoding sensitive information to prevent unauthorized access. Encryption protects customer data during transmission in online credit card transactions.
- Tokenisation: Tokenisation replaces sensitive data with a token, which is a unique identifier. This ensures that sensitive data, such as credit card numbers, are not stored in the merchant’s system.
- 3D Secure: Online credit card transactions now have an additional layer of protection thanks to the authentication protocol known as 3D Secure. Customers must enter a password or a one-time code to confirm their identity.
Security measures in online credit card transactions
Credit card online transactions involve sensitive customer data, and security is paramount. Merchants and payment gateways implement several security measures to protect customer data. Some of these measures include.
- PCI DSS compliance: Payment gateways and merchants must follow a set of security regulations known as the Payment Card Industry Data Security Standard to protect customer data.
- SSL encryption: Secure Socket Layer (SSL) encryption is used to encrypt data during transmission. It ensures that hackers do not intercept customer data.
- Fraud detection tools: Payment gateways use fraud detection tools to identify and prevent fraudulent transactions. These tools analyse transaction data to detect suspicious patterns and behaviours.
- Spear Phishing: The threat of spear phishing attacks is real, and it’s essential to take steps to protect yourself and your organization. Some ways to do this include educating employees, using two-factor authentication, and implementing anti-phishing software. It’s also important to stay vigilant and be cautious when opening emails or messages, as even a seemingly innocent request can be a malicious attempt to steal sensitive information.
What Does Credit Card Processing Look Like in Motion?
Credit card processing involves several steps, occurring seconds when a cardholder makes a purchase. The best credit card app offers streamlined and secure transaction processing, reducing time and effort while improving efficiency and reliability. Here’s a breakdown of the process.
- Authorisation: When a cardholder makes a purchase, the merchant requests the acquiring bank to authorise the transaction. The acquiring bank then sends the request to the issuing bank to verify that the cardholder has enough credit or funds to complete the purchase.
- Authentication: To verify the cardholder’s identity, the issuing bank may require authentication, such as a PIN or a one-time password sent via SMS.
- Payment: If the transaction is allowed and authenticated, the issuing bank transfers the funds to the acquiring bank, and the acquiring bank deposits the funds into the merchant’s account.
- Settlement: The gaining bank settles the transactions with the card networks and the issuing bank and transfers the funds between the banks.
Benefits of Online Credit Card Transactions
Online credit card transactions offer several benefits over traditional payment methods, including.
- Convenience: With credit card transactions, customers can purchase from anywhere without visiting a physical store.
- Speed: Transactions are processed quickly, allowing customers to receive goods or services faster.
- Security: The best credit card apps safeguard users from fraud and illegal access with advanced security features like two-factor and biometric verification.
Online credit card transactions are processed through a series of secure programmes and sophisticated algorithms to ensure the safety and accuracy of each payment. The process involves transmitting encrypted data between the merchant, the payment gateway, and the acquiring bank to verify the card information, check for fraud, and authorise the payment. With advanced technologies and protocols, online credit card transactions have become a convenient and reliable way of making purchases over the Internet. However, be wary of transacting on sites that aren’t encrypted.