Posted by admin on Sep 27, 2013


high risk merchant accounts

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.