The cardholder presents their card payment to the point of sale. The customer card details would be sent to acquiring a bank.
Processor or Card Network
The acquring bank network or processor forwards the card details to the credit card network. Some of the card networks are Visa, MasterCard, Discover, American Express etc.
The issuing bank receives the payment request from the credit card network. Then it validates the credit card number, Checks available funds, matches the billing address and validates CVV number.
Batch file Process
Once the merchant receives the authorization, the bank will place a hold in the amount of the purchase on the cardholder’s account. The merchant’s POS terminal will collect all approved authorizations to be processed in a “batch” at the end of the business day.
Clearing and Settlement
The acquiring processor routes the batched information to the card network for amount clearance and settlement. The issuing bank posts the transaction details to the cardholder’s account. The cardholder receives the statement and pays the bill.