The credit card payment process

More and more people are using a credit card for work

The more people work from home or are on the move, the more often they pay by credit card. For small online orders, postal deliveries or renting a car. More and more employers are looking for a good credit card solution so that employees can pay by credit card.
How easy is it to pay by credit card? And what fees should employers charge? To understand where the charges come from, it is important to know how paying by credit card works.
You work away from home and need to send an important item of mail for a customer. You arrange a courier online and choose a payment method. Paying with your private card is not convenient, a bank transfer takes too long.
All you need is a corporate credit card from your employer. This way, the payment is nothing: you enter the card number and the security code. And your order is ready.

How can your employer organise a credit card?

Credit cards are issued by banks or specialised credit institutes. These work with the best-known credit card brands, such as Visa, Mastercard and American Express, for this purpose.
Just ordering a credit card is not always easy for your employer. The bank often needs to get your personal identification for this. In addition, your employer must agree with the credit institute on the amount of credit.
Fortunately, there are an increasing number of providers such as SimpledCard, which have a faster solution. This allows your employer to issue business payment cards itself so that employees can pay by credit card.
The finance department can then easily put a budget on the various cards in advance and does not need to organise a credit for this.
In addition, settling claims becomes much easier. Because you enter the bill or receipt yourself after paying with the card. This allows your colleagues in the administration to enter the expense quickly.
Completely free of charge, these cards are not. To understand the costs associated with card payments, you need to know the underlying payment process.

The process of paying by credit card

First of all, it is good to see which parties are involved in a payment:
❯  First, the credit card companies - Visa, Mastercard and American Express
❯  Then there is the acquiring processor, the party that has entered into the contract with the website provider, to enable credit card payments.
❯  It works with the acquiring bank: the bank where the website provider banks.
❯  Finally, there is the issuing bank and issuing processor, the bank and party that issued your credit card and authorised the transaction.

These parties work together in an automated process. From the moment your credit card is read to the moment the order is confirmed.

Paying by credit card step by step

The payment process starts the moment your credit card is read by the website, or payment terminal. The payment terminal sends a request for approval of the payment to the acquiring processor. The latter has insight into the data of the acquiring bank, the provider's bank.
The message is forwarded to the credit card company, which in turn submits the payment request to the issuing processor. This checks with the bank the credit card details and whether you are allowed to pay.
If the payment is approved, this message goes through the credit card company and the acquiring processor to the payment terminal. Where the provider gets the green light and the payment is completed. All this in seconds!

What costs arise?

Basically, when you make a payment, you don't see any direct charges. If you place an order of 20 euros, the account will also show 20 euros.
An exception is if you use your credit card to withdraw money abroad, some ATMs charge a transaction fee. You will then see these on the screen. Nevertheless, charges also arise with normal payments.

Costs fall on both your employer and the provider of the (web-)shop. Withdrawing money at an ATM with a credit card costs the most. The bank charges these costs. In addition, your employer pays a fixed annual amount for the use of credit cards. And possibly also bears the interest on the amount that was paid off late.

The shop also pays fees to settle a payment. This can easily be several tenths of per cent of the transaction price. European regulations have imposed a 0.3 per cent cap on this since 2015, though.
The shop gets charged by their bank, acquiring processor and credit card company for being able to offer credit card payments.

Technological development should allow payment processes to become more effective and thus cheaper. In recent years, an increasing number of fintech companies have emerged to focus on this. Online banks are often more favourable as traditional institutions because they have less fixed costs for branches and employees.

A smart solution to pay by credit card

So, for your employer, business payments remain a cost. Still, it may be interesting for the finance department to look for a solution. Especially if it can also ensure faster administrative processing.
Modern business card systems have a digital link to accounting. This not only makes it simple for employees to pay, but also makes it easy for the finance team to keep control of budgets.
Want to know more about paying by credit card? Then feel free to contact our team of experts. They will answer all your questions. Or download the brochure for more information.