Though it seems like a simple process, the working method of payment software is a complex task that requires various parts to work in harmony together. As an organization owner, you might be unaware of the entire process that runs behind when you accept a payment.

However, you need to understand the entire mechanism, as it will assist you in dealing with many potential issues. Thus, to know this, first comprehend the payment processing industry. How does payment processing software work? What are the fundamental components and prerequisites for this software? So, without further delay, let us begin with the components exploration of this payment software.

1. Components of payment software

If you wish to accept payments, you will require three primary pieces of software. As all these work in harmony, missing one of them might lead to system failure.

2. Merchant account

You can call it a back that allows your organization to accept payments. Without it, your customer cannot send you money. You can receive this account from any reputable payment processing company, a bank, or an independent contractor. But you do not obtain direct access to the account. The funds you receive in your merchant account will get automatically transferred to your given bank account.

3. Payment processor

The payment processor handles the transactions process by your customer and bank. Payment processors deal with matters like security, card limits, available funds, credit card validity, and so on. In addition, one of the crucial responsibilities of a payment processor is verifying whether the card information is accurate or not to safeguard you from fraudsters. They also look after accidental transactions, errors, and incorrect charges. Thus, you can consider a payment processor as a mediator between the bank and the merchant.

4. Payment gateway

Payment gateway is a significant component of payment processing software as it is a mediator between the payment processor and the website. These gateways assist your merchant account with credit/debit card issuers. In simple words, they supervise the technical side of the transaction to make sure you can successfully accept your customers’ payments.

5. Working process of payment software

After reading the above components, you can see that all these are inseparable from each other. The successful working process of payment software depends on them. So, now it is time to learn about the entire process of payment processing software.

• At first, the customer selects an item or service and completes the checkout process by proceeding to the payment page. On that page, consumers will locate multiple payment options with various alternatives. Then, the customer selects to pay using a debit or credit card by entering the details on the payment page.

• After entering the details, all this information goes to the payment gateway depending on your integration (server-to-server integration, hosted payment page, or client-side encryption). Again, the payment gateway transfers the data to the payment processor.

• Next, the payment processor shares the transaction details to the credit or debit card network by checking the customer’s card details.

• After verifying the information, the card network demands approval to release the funds with the consumer’s issuing bank. It is a crucial step, as it will inspect whether your bank account has sufficient funds to complete the transaction or not.

• Then, the issuing bank releases a response to the card network that demonstrates whether or not the transaction is not approved. If the payment gets approved, the acquirer will accept the payment from the issuing bank and hold the capital into your account.

• After a couple of days, the amount will settle in your merchant account by the payment processor.

• Finally, the merchant might exhibit a payment confirmation page or invite the customer to choose another payment method.

In other words, payment software is an indispensable part of organizations. The entire process is significant and efficient as it will safeguard you and your customers from fraudulent activities.