For many people, what goes on behind the scenes of a credit card transaction is murky business. There are a few major players at work here, and getting to know what they do can help in understanding how the money moves from patron to bank.
Here’s a flow chart to help visualize what happens when credit card information is entered into Arts People:
Before any money is taken from the patron or collected by the bank, a few things need to happen.
First, Arts People sends the card information to the payment gateway, who either approves or declines the transaction. If approved, the payment gateway sends the card information to the payment processor, who then communicates with the credit card company to validate and approve the transaction. Then, if approved, the credit card company asks for authorization from the patron’s card issuing bank to move forward with the transaction. If the issuing bank approves the transaction, the confirmation is sent down the line back to Arts People’s system. The entire authorization process takes only a second or two.
Once the transaction is authorized and completed, the funds are moved to the issuing bank via patron’s credit or debit account. The issuing bank then transfers the money to the acquiring bank: your bank account. How long this part of the process takes depends upon your financial institution, payment gateway, and payment processor. It can be anywhere from real-time, to a week or two.
Note: when the patron's card company asks for authorization from the issuing bank, they generate a pre-authorization request. This can appear like a charge on a card or bank statement. Once the request has been approved or declined, the pre-authorization request will drop off the statement within 24-72 hours, depending upon the card company and financial institution.