On one hand, the ability to pay bills and purchase products or services online has made life significantly easier for many merchants and consumers. On the other, the merchant processing solutions that make it all possible are exceptionally complex.
Whenever someone clicks “submit” to spend money electronically, for whatever purpose, a series of events is set into motion. The credit card or bank information is sent through the merchant portal to a gateway, where it is then routed to an interchange. The interchange determines which institution is the issuing body, then sends the information to that institution to verify that the money or credit is available for the purchase. The issuing institution sends the confirmation back to the interchange, which then sends the it back to the gateway, which then notifies the merchant that the payment is authorized, and the transaction is approved. Then the entire process is repeated when the merchant actually collects the payment.
Payment processing services exist for every level of transaction from business-to-consumer transactions (B2C) to business-to-business transactions (B2B) to various levels within each. For example, level three transactions (often used for governmental or large corporate B2B transactions) require that the purchaser provide far greater detail about the order, shipment, and payment than a level one transaction would require.
The process is complex so that the user experience can be simple. In fact, the majority of the different phases of merchant processing solutions (such as the portals, gateways, interchanges, and institutional interfaces) are completely automated, so while the information is routed through many labyrinthine twists and turns, the entire process usually takes less than four seconds.