Your credit card machine is probably such a familiar part of your business that you take it for granted. Yet this device, generally part of a larger point of sale solution for today’s sellers, is an indispensable part of every credit card payment that you accept. Additionally, your credit card terminal probably has tools that make virtually every aspect of running your business flow more smoothly. But just how does it do its job, and what are its technological inner workings?
Stages of the transaction process
The path to a successful payment involves three distinct stages. In the authorization phase, the customer swipes or inserts their card reader or waves their device near it. After the data is read, the machine sends an authorization request to the customer’s bank. That entity then verifies for available funds and runs a security check. Only then do they send an approval or declination response to the machine.
The second stage is known as capture. At this time, the machine stores the transaction data for later processing.
In the final step, settlement occurs. The machine combines all authorized transactions into one group. This occurs at the end of the day or at some other predetermined time. The batch of transactions is then sent to the card company or payment processor. That entity then withdraws funds from the customer’s account and transfers them into that of the merchant.
In the next step, the payment is confirmed. The seller’s machine generates a confirmation and furnishes a receipt to the customer.
Your credit card terminal can also process refunds and voided transactions. In the former case, it credits the refunded amount back to the customer’s card. In the latter, it cancels a transaction before it is settled. This ensures that the customer is not charged.
How EMV readers work
The successor to old-school magstripe versions, EMV cards represent the pinnacle of security for today’s credit and debit cards. Instead of having data recorded on the strip on the back of the plastic, as was the case in the past, bank details are embedded into a computer chip on the card. For enhanced security, data is encrypted and changed constantly. This shields the entire process from threat actors.
How contactless card readers work
When customers use contactless cards or digital wallets such as Apple Pay or Google Pay, they are taking advantage of near field communication (NFC) technology. This innovation allows two equipped devices, such as a customer’s card and your reader, to communicate wirelessly as long as they are only a few centimeters apart. Thanks to encryption and dynamic modification techniques, the data is masked from hackers in a transaction that takes only seconds to complete.
Although your credit card terminal might look humble, it is packed with features designed to streamline payments while keeping them secure at every step. Combine this impressive skill set with its ability to integrate with a host of other business management features, and your humble terminal is transformed into a powerhouse of talents that no business owner would want to live without.
North is a leading financial technology company that builds innovative, frictionless end-to-end payment solutions designed to simplify and grow businesses of all sizes. From the front door, to the back office, the developer world, and partnerships that expand the payments landscape, North offers proactive, comprehensive merchant services, in-house processing, and more.
