When it comes to credit card processing, it’s beneficial for a merchant and the banks they work with to offer a seamless transaction experience to the customer. Customers expect their credit cards to work instantly, and making them wait for processing is bad for business. Merchants can use real-time processing, but it’s expensive and impractical, so many of them choose to use batch processing for their credit card transactions.
How Does Batch Processing Work?
When a customer’s card is swiped, the credit card terminal, software or gateway stores the merchant’s authorization codes in a file; this file is usually purged at the end of the day when all the information can be sent and processed in one batch. Processing these transactions simultaneously is a lot easier and less resource intensive than processing every transaction as it occurs.
When the time comes for a vendor to settle their merchant accounts, they send their authorization codes to the credit card processing company; the processor takes this information and sends it to the proper banking institution. When the bank gets this information, they release the money to the processor, and the processor forwards this money to the vendor’s bank.
This process usually doesn’t take more than 48 hours, and when it is complete, the bank bills the customer who initiated the transaction with the vendor. When it comes to the customer’s perspective, they never know that their payment hung in limbo for a couple of hours; it looks like a seamless process that took place instantly.
Vendors can process their merchant accounts at various times throughout the day, but most choose to do it only once because credit card processors charge a fee for every time a batch is closed. From a financial perspective, batch processing saves vendors a lot of money; the vendors aren’t charged multiple fees for the same service throughout the day. The vendor can send one batch, and they avoid paying for every single transaction that they make.
Batch processing is convenient and inexpensive. When a vendor uses batch processing, they know that the payment will be authorized, and they don’t have to spend time on individual processing. When all the information is stored together, it allows merchants to see all of their credit card transactions in one place, and this allows them to segment their information into specific time periods. Batch processing is convenient, it saves money and it offers more security than processing transactions in real-time.