These processors take payments from the front-end processors as well as the Federal Reserve Bank such as transferring the money from issuing to merchant bank.
In order to check for verification, the payment processing system carries out fraud checks with the transactions as well as confirms the validity of the transactions with the issuing bank of the card or with the card associations. This process is very quick and highly flexible. For the verification of the card, the country in which it was issued and the payment history related to it is a parameter for checking the appropriateness of the card.
As soon as the credit card details are approved, it will be notified to the merchant through the payment gateway and the merchant will then complete the transaction. In case of declination by the card association, the merchant will decline the transaction.
With an increase in the modern technology and the introduction of software-as-a-service (SaaS), providing checks has become easy though a regulatory compliant electronic portal as well as the processing of single and recurring payments without the storage of card data has become possible. With their cloud based features, they enhance the quality of processed transactions as well as give rise to reduced costs and increased time-to-market. Also, they enable the processing of ACH and cash related transactions.
Mentioned below are three basic steps for the processing of credit card payments: https://en.wikipedia.org/wiki/Payment_system