Credit card payment processing: Everything you need to know

Here’s a breakdown of how credit card payment processing works step-by-step:

• The shopper enters the business's store or website and goes to pay

• They enter their details via the payment gateway (or checkout) and hit 'pay'

• The risk management system checks the transaction to ensure it’s not fraudulent

• The acquirer routes the transaction via the card schemes (Visa, Mastercard, Amex, etc.) to the customer’s bank and requests authorisation

• The payment processor receives a response from the acquirer and either processes the payment or tells the merchant it was declined

• If the payment is authorised, the money is settled into the business's bank

That’s a whole load of action, which should happen incredibly quickly. If it goes well, neither you nor your customer should notice it. But, as you can see, there are plenty of potential failure points along the way. This is especially so if you have different providers and credit card processing companies taking care of each step. Systems don’t connect properly, or they time out. The result: failed payments.

Here’s a sobering statistic for you: 25% of declined card transactions lack valid reasons. That’s why we do things differently.

Adyen was built back in 2006 by a team who’d worked in the world of finance and payments for years. They were only too familiar with the existing mess of legacy systems through which payments would trundle, get stuck, blocked, or simply lost. So they decided to build a brand new system that took care of credit card payment processing end-to-end. Not just credit card processing, but local payment methods, online banking, ewallets, the works.

The Adyen payments platform handles the whole payment process from the moment your shopper hits ‘pay’ to the point the money lands in your bank. No third-parties, no patched-in systems; the buck stops with us. This full ownership of the process means we have the visibility and the tools to monitor each transaction and make adjustments in the background to ensure it has the best possible chance of success.

So what else drives a successful credit card payment? Let’s take a look at how you can optimise credit card payment processing both online and in store.

Getting your customer to the point of payment is an achievement in itself. A great checkout will make it easy for the customer to complete the payment, helping you close the sale. Here are some ways to ensure your online credit card payment processing runs as smoothly as possible:

Make your checkout easy to use

Speed your customer through the checkout process with these conversion optimisers:

• Mobile-friendly, responsive design

• Relevant choice of payment options, from cards, to ewallets and local payment methods if you’re selling overseas

• No redirect: keep your customers on your site

• Clearly displayed security logos

Block fraudsters, not customers

Risk management is both a science and an art. Set your defences too high and you’ll block legitimate customers; set them too low, and you’ll leave your business vulnerable. The answer lies in data. The more data points your risk management solution has, the more accurate its response. With information such as IP, email address, phone number, and postal code, a risk engine can run a check across its platform, identify patterns, and stop fraud before it happens. So, the more data you can capture at the checkout, the better.

Ensure uninterrupted subscriptions

If you run a subscription service or process recurring payments, you’ll want these to go through every time. Here’s how to achieve unstoppable subscriptions:

• Keep your cards-on-file up-to-date with automatic ‘account updater’ services that ensure card details are correct even in the case of lost or expired cards

• Automatically retry transactions that failed for technical reasons within milliseconds

• Fine-tune your billing strategy to take pay-day into consideration

If you’re accepting credit cards in store, or at point of sale, you’ll want to ensure the process is quick and easy. Long queues are stressful for customers and businesses alike. Here's how to optimise your credit card payment processing in store:

Contactless

Tap to pay is standard these days. Businesses in Australia and everywhere else are jumping on the bandwagon to accept payments with a simple tap on any compatible device instead of a traditional card reader. Plus, you can take it one step further and let your customers pay via self-service kiosks.

Ewallets

Ewallets are easy to use and secure. Apple Pay and Google Pay™️ have the added benefit of helping to blur the lines between online and point of sale transactions so your customer can move seamlessly between the two. In all cases, they remove the need for customers to go digging around in their wallets.

Mobile point of sale (mPOS)

There’s a lot to be said for bringing the payment to the customer and not sending them off to join the back of a queue. Mobile point of sale (mPOS) terminals provide greater flexibility by letting you take payment from anywhere. Now, there’s a new generation of smartphone-style terminals that enable you to manage several POS functionalities from one device.

Credit card payments goes through several steps, each of which carries a charge. Here’s a quick breakdown of credit card fees:

• Processing fee: Charged by your payment provider for processing the transaction

• Card scheme fee: Charged by the card schemes for using their network

• Interchange fee: Charged by the customer’s bank

• Acquiring fee: Charged by the acquirer

These fees vary depending on the type of transaction, your location, and business model (to name but a few). It’s confusing, but it can have a significant impact on your bottom-line. Interchange fees are usually the biggest expense when it comes to credit card processing. They're also the biggest headache. The structure and fees vary for each market, as do types of cards (consumer debit, commercial debit, pre-paid, and so on). And they change all the time. Fortunately, there are ways to bring your interchange fees down:

Local acquiring

Just like mobile roaming fees, transactions are generally cheaper if processed locally. It’s better to use a local acquirer where possible because this is the only way to benefit from local regulations and incentivised fees.

Incentivised fees

Interchange fees vary from market to market. In Australia, for example, Visa and Mastercard grant lower rates to specific businesses like charities, travel agents, streaming services, and utilities.

For every transaction that passes through our system, a small amount is deducted and distributed as follows:

Exact costs will depend on factors such as transaction volume and location.

When you’re setting up your credit card payment processing, you’ll need a payment gateway, an acquirer, a risk management tool, and a payment processor. If you’re selling in physical stores as well, you’ll also need a point of sale (POS) terminal provider and in-store payments processor. If you’re operating in different regions, this set up becomes more complicated.

With Adyen, you get all of this all in one platform. One global payments processor for all your channels, regions, and payments processing. This not only streamlines your business but gives you a single view of your payments in one system. You can track your performance and get to know your customers better. You can also offer customers total flexibility since they will be getting consistent experiences no matter where, how, or when they choose to buy. It all goes to the same single platform.

Data-driven fraud defence and authorisation rate optimisation come as standard. You don’t need to be a payments whiz; these tools work automatically. We’ll dig into the data and suggest adjustments to your settings.

Whether you’re integrating via your ecommerce platform, using our drag-and-drop elements, or building your own payments experience with our API, we’ve got you covered. And there’s always a payments expert on hand to offer guidance if needed. Every customer gets a ‘first 90 days’ set-up service to make sure you’re geared for success, and you’ll always have access to ongoing support.

What are the common credit card payment processing fees in Australia?

These are the common credit payment processing fees that you can expect to pay for each transaction your customers make:

Are there any Australian-specific regulations for credit card payment processing?

Effective from 2017, The Reserve Bank of Australia has put in place an Interchange fee cap, which applies to domestic transactions for both consumer and commercial cards. Interchange fees for credit cards are not to exceed 0.88%, and no debit fee can exceed 16.5 cents (if levied as a fixed amount) or 0.22% (if levied as a percentage amount). All caps include Goods and Services Tax (GST).