How Card Transactions And Settlements Flow

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Card Transaction & Settlement Flow

The following participate in processing card transactions for high risk merchant accounts:

  • Merchant Bank Account. This is simply the account where the money settled from the sales are deposited.  It is generally the business bank account of the company.
  • Acquiring Bank. The bank where the merchant account is established. The acquiring bank holds the ultimate liability for all merchants processing in its portfolio.
  • Processor. These are the entities that handle authorization and settlement of card transactions.
  • Issuing Bank. The financial institution that issues the customer’s card.
  • Card Interchange System. Interchange is the system established by the card brands which allows acquiring banks to submit card transactions to the card issuing bank for settlement on behalf of their merchant clients.
  • Gateway. The gateway is a secure connection your company’s website or virtual terminal and the financial entities that handle the processing and settlement of credit card transactions.  Large merchants can connect directly to a payment processor and avoid the gateway “middleman”.  Direct connections are usually available only to merchants processing over a million dollars per month.

Card processing steps

  1. A credit card transaction is submitted to the high risk payment gateway.  The gateway automatically passes the transaction over a secure connection to the Processor.  Large merchants can directly connect to a processor and eliminate the need for a gateway.
  2. Processor passes the transaction to the Credit Card Interchange System.
  3. Card Interchange System routes the transaction to the appropriate Card Issuer.
  4. Card Issuer approves or declines the transaction based on available funds.  If the transaction is approved, it is sent through the Card Interchange System.
  5. Card Interchange System relays the transaction results to the Processor.
  6. The Processor relays the transaction results to the Gateway/.
  7. The gateway stores the transaction results and sends them to the merchant.

Steps 1-7 are completed in 1-3 seconds.

Settlement Process

The batch of transactions is sent to the processor for settlement and final processing. The batch settlement flows as follows:

  • High risk gateway
  • Acquiring bank’s processor
  • Card interchange system
  • Card issuer (transaction verified and funds are released)
  • Funds are sent to acquiring bank, then to the merchant’s
  • Processor sends results to the Gateway where transactions can be viewed or downloaded by the merchant.  If there is a direct connection to the Processor, no gateway is required.  Reporting is provided to the merchant directly by the Processor.


Understanding how your transactions are processed and settled to your high risk merchant account is necessary to properly manage your business.  Card processing systems all have the same elements, regardless of the bank or payment processor you use.

Awareness of how payments are processed gives you the knowledge necessary to use your processing accounts to your greatest advantage.

Are you a high risk merchant that needs a payment processing account?

Contact today.


SasS and Cloud Computing Payment Processing

Cloud computing will increase approximately $41 billion this year to more than $240 billion by 2020. Nearly all parts of the cloud are projected to grow during the next nine years, but none will see the same levels of rapid expansion as the SaaS market. The SaaS market will reach $21.2 billion in 2011, but will then surge to $132.5 billion by 2020.

Recurring Billing

Cloud computing and SaaS service providers use a recurring payment or subscription billing model. Consumers pay for services used on a recurring basis.  Most payment plans are monthly, although, billing can be provided for any time interval.

One of the greatest challenges for cloud computing companies is maintaining updated billing information without the need to contact customers.  Manual intervention to obtain updated payment information is expensive.  And every contact with the customer to update billing information is a risk because customers may opt to cancel the service rather than to provide updated information.

Account Updater Vital to SaaS and Cloud Computing Cash Flow

 Account updater transforms up to 75% of declined card transactions into authorized payments, all without manual intervention.  Account updater significantly increases revenues, stabilizes cash flow and reduces expenses for SaaS billing, recurring payments, and subscription billing.

During every recurring billing cycle, a significant percentage of transactions are declined.  The most common reasons for card declines are:

  • Cards reissued due to security breaches.  Javelin Research reports 28% of all consumers received a replacement debit or credit card last year.
  • Cards being upgraded.
  • Expired expiration dates

Account updater eliminates the time and expense of dealing with declined card transactions.  When a card is declined, the processor automatically retrieves the updated card information from the issuing bank.  The previously declined cards are re-submitted with the updated information.

Merchants report that up to 75% of the declined transactions are transformed to approved payments through the use of account updater.  Revenues are rescued and recurring payment income is protected, all without the need for manual intervention.

Account updater eliminates the need to contact the customer by phone or email to request updated card information.  It is an important part of extending the long-term value of your customers.


Account updater services protect your recurring billing revenues. Cash flow from recurring payments continues without interruption.  Convenient for your customers.  And profitable for you.  

Do you want to increase your revenues from recurring billing transactions?  

For more information on account updater services, contact


High Risk Merchant Accounts Types

Banks classify certain types of business as high risk merchant accounts. Statistically, high risk merchants have a greater likelihood of chargebacks and fraud, increasing the chance of financial losses for acquiring banks.

Companies in any industry with fast growing processing volume or high average tickets are also considered high risk merchants.

Other factors that determine a high risk merchant classification are: marketing and sales methods, product fulfillment or delivery times; targeted markets or geographic location of buyers; and recurring billing or membership sites.

High Volume High Risk Merchant Accounts

Rapidly expanding companies require payment processing to power growth. Many companies establish more than one account to diversify payment processing and mitigate risk.

Multiple merchant accounts can be load balanced on a single payment processing gateway, which simplifies account management and reconciliation.

Offshore merchant accounts combined with domestic processing offer international ecommerce companies a cost-efficient way to accept payments world-wide.

Digital Content, Downloads and Virtual Goods

Companies selling digital content downloads, streaming media, and virtual goods are among the fastest growing segments of ecommerce. Social networks, online games, MMOG, music, video, new media, software, and interactive entertainment benefit from multiple payment options on a single platform allowing digital merchants to maximize sales and minimize risk.

Travel Merchants

Over 50% of all travel reservations are now made online. Travel and hospitality is the world’s largest industry, with the World Travel and Tourism Council (WTTC), predicting revenues in excess of US$15 trillion by 2017. All segments of the travel industry can establish a high risk merchant account, including: transportation, hotel reservations; timeshare, membership clubs, vacation certificates; newsletters; travel agencies; tour operators and packages.

Infomercials and Direct Response

Fast growth is to be expected when an effective infomercial is aired or a direct response advertising campaign is launched. Successful products generate millions of dollars in revenues.  Secure processing is the river through which cash flows.  Offer both card and echeck payment to get more sales.

Hosting, ISP, Cloud Computing, SaaS, and Internet Services

Web hosts, domain registration, email, cloud computing and other internet based businesses have a recurring billing payment model.  Recurring payments lets merchants accept payments monthly, weekly, daily or on-demand basis.  Transaction updating is a great processing feature to protect your cash flow.  While easily extending the lifetime value of customers to you.

Multilevel Marketing / MLM / Direct Sales

Multilevel marketing or direct sales companies have business global operations. Domestic and offshore merchant accounts meet the requirements for international distributor networks.

Online Dating

Yes, perfect dates do pay.  Merchants in the online dating industry need a way to quickly accept payments.  And extend the membership for as long as possible.   Contact us today.

Adult Entertainment

The adult entertainment industry has long understood the importance of managing payment processing to minimize risk and maximize sales.  Domestic and international banks provide excellent payment solutions for the adult industry.

Herbal Supplements, Vitamins, Pharmacies

Vitamins, herbal supplement, and pharmacies are good fits for high risk payment processing. Male enhancement, weight-loss, hair-growth and life style improvement products are fast growing businesses.  Diversification of payment processing is the key to long-term success.

Online Games, Social Networks, Virtual Worlds

Online games and MMOG need high volume offshore merchant accounts to accommodate high volume processing volumes. Special offshore merchant accounts are available designed to meet the needs of online games and MMOG players, including sales of virtual assets, subscriptions, pay-per-play or time intervals and other innovative payment processing options.

VOIP and Telecom

VOIP and specialized telecom services are growing at unprecedented rates world-wide. Calling plans, cell phones, prepaid services, phone cards, wireless, GPS tracking, data communication services of all types benefit from offshore merchant accounts.

Most companies use a subscription billing model that drives processing volumes higher month-on-month.

High Ticket Product

Businesses selling electronics, jewelry, furniture and other high ticket items are classified as high risk because of potential risk of chargebacks.  Secure merchant accounts are available that offer special advantages to merchants selling higher ticket items.


Coin dealers, art galleries, antique shops, and business selling unique products are considered high risk merchant accounts. These types of companies have rare or unusual products which are often high ticket items. Businesses in this category benefit from the expertise necessary to place high risk merchant accounts with the appropriate acquiring banks.

Charities and Non Profits

Charities and non-profit organizations can be considered high risk merchant accounts because there is no product or service being sold. In addition, fraudsters using false identities will sometimes make a “charitable” contribution to see if a stolen card has available credit.

Charities and non-profits flexible processing volumes to take advantage of increased giving during particular seasons or after catastrophic events.

Subscriptions, Memberships and Recurring

Businesses selling subscriptions or memberships are classified as high risk merchant accounts. Consumers can initiate chargebacks from the end of the billing period rather than from time of purchase. Therefore, acquiring banks have longer term contingent liabilities.

Subscription and recurring billing models grow very quickly month-on-month and merchants need processing volume to accommodate the growth. Specialized services to manage subscription, membership and recurring billing add value to your payment processing account.

Tickets High Risk Merchant Accounts

Tickets sales are considered high risk because the ticket is for a future event. Consumers may decide not to attend an event or not be able to attend creating a high risk of chargebacks. Acquiring banks classify ticket agents and brokers as high risk merchant accounts because of the potential liabilities associated with these types of businesses. Special features are available to protect the payment processing of ticket brokers.


High risk merchants have special payment processing requirements.  If you are a business classified as high risk, it’s important to work with a merchant account provider that has the expertise necessary to get your account approved quickly and easily.  

Are you a high risk merchant in need of payment processing solutions for your business?

Contact today.


Alternative Payments Increase Profits

Within the next three years, 30% of all Americans will an alternative payment method when making purchases online rather than cards. In the US, echecks are the most common alternative payment option offered by internet merchants.

Many countries internationally do not traditionally use cards when purchasing online.  Bank transfers are commonly used throughout Europe and other parts of the world.

The rapid rise of alternative payment solutions for online merchants is easy to understand. The more payment options a merchant offers at checkout, the more sales will result.

Providing consumers way to purchase regardless of the way they want to pay is simply good business. Smart merchants offer to accept almost any payment method that a customer wants to use.

Alternative Payments Increase Profits, Reduce Risk

Aside from getting orders from customers that don’t have cards, alternative payments are less expensive than card processing.   For instance, it is less expensive for an online merchant to accept payment for direct debit from a checking account than it is to accept a credit card payment.

Alternative payments are also not subject to chargebacks in the same way as card payments.  For instance, a consumer paying by electronic check can dispute the transaction only for 60 days whereas one paying with credit card can dispute the transaction 180 days.

Internationally, local bank transfers virtually eliminate the risk of chargebacks.  It is almost impossible for a buyer to deny purchase was made after the transaction is authorized.  In terms of guaranteed funds, local bank transfers function like cash transactions.

Benefits to Merchant Account Providers

For those organizations providing merchant processing, not offering alternative payment options limits the number of new merchants that are interested in their services.   Considering that card processing is almost completely commodity driven these days, providers make much greater profits from alternative payments than cards.  

Adding alternative payment processing solutions is an important way to differentiate you from your competition. Offering your portfolio of merchants multiple ways to make money with alternative payments increases their revenues.  While increasing your  income and maintaining long-term portfolio profitability.

Growth in Alternative Payments

According to UK payment:processor Worldpay, alternative payments account for 22% of global payment transactions.  The alternative payment market is expected to grow 13% by 2015.  Within eCommerce, alternative payments will exceed card payments.


The more ways buyers can purchase from you, the more sales you will make.  When you offer alternatives to card payments you:

  • Get orders from customers who prefer to use an alternative payment method instead of a card
  • Get orders from customers who do not have cards or are maxed out on cards

Adding alternative payment methods at checkout is the fastest and easiest way to increase your profits.  Add echecks for your US customers and local bank transfers for your international customers and watch your sales grow.

Are you interested in giving your customers additional ways to buy from you ?