Credit card payments are a cornerstone of modern transactions, especially in the restaurant industry. Understanding how they work can streamline your restaurant operations and enhance customer satisfaction. This guide will break down key terms such as merchants, acquiring banks, payment processors, credit card networks, and issuing banks. By comprehending these elements, you’ll be able to understand the entire payment process—from authorization to settlement—and learn how to implement an efficient credit card payment system in your restaurant. Let’s dive into the details!

How does Credit Card Processing work?

Once you understand these terms related to payment processing then you will be able to understand the whole process. 

Merchant 

That is you! You will be providing your customers with food and services and accepting payments from them in return for this. 

Acquiring Merchants bank

The merchant’s bank that is the acquiring bank plays a very important role in payment processing. Its primary responsibility is to receive the payment requests from the merchants. These requests will be transferred through the payment channels. 

Payment Processor

The company that will provide you with a terminal to accept credit card payments is called a payment processor. The terminal or device sends the details to the credit card network and after this is done the payment authorization goes back to the acquiring bank. 

Credit Card Network

Companies like Visa or Master card control the network for processing cards and they also charge an interchange fee. 

Issuing Bank 

The bank that issues credit cards to the customers is called an issuing bank. It receives authorization requests from the network and then decides to approve or reject the request. 

How do credit card payments work?

Authorization

The customer initiates the payment by swiping, inserting, or tapping their credit card on the POS terminal or card terminal. The card terminal then captures the card information and sends a transaction authorization request to the merchant’s acquiring bank account. The acquiring bank account then forwards the request to the cardholder’s issuing bank through the card network. The issuing bank checks the cardholder’s account for available credit and fraud indicators then sends an approval or decline message back through the same terminal of the POS system. 

Authentication

Customers will be asked to provide a PIN or sign the receipt for authentication. 

Clearing and settlement

At the end of the day, the restaurant submits all the authorized transactions in a batch to their acquiring bank. The acquiring bank then sends these transactions to the respective card networks, which then forward them to the issuing banks for fund transfer. The issuing banks transfer the funds to the acquiring bank, minus interchange fees. The acquiring bank then deposits the funds into the restaurant’s account, completing the transaction.

How to accept Credit Card payments in your Restaurant?

EasyEat’s POS terminal

EasyEat provides terminals that can accept any type of payment. Be it Card-based or contactless payments like NFC you can ask your customers to not worry about the payment method. For credit card payments, there’s a Magnetic strip reader that can accept payment by swiping, and there’s an EMV reader that can read the EMV chip present on cards. This versatility makes it easy to accept any type of card. 

Set up a merchant account

You should get a business bank account to accept payments in that account. Look for a service provider that offers fraud protection and flexible payment methods like online payments. 

Now you’re all set to ask your customers to take their credit cards out and start swiping!

In summary, credit card processing involves several key players: the merchant (you), the acquiring bank, the payment processor, the credit card network, and the issuing bank. The process includes authorization, authentication, and clearing and settlement. To accept credit card payments seamlessly, invest in a reliable POS system like EasyEat’s, which supports various payment methods, and set up a merchant account. This setup ensures secure, efficient transactions, enhancing customer satisfaction and boosting your restaurant’s revenue. Now, you’re ready to start accepting credit card payments with ease!