Batch

Often taken for granted, batch processing is a behind the scenes procedure that is essential to payment processing. 
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Batch Payment Processing

Often taken for granted, batch processing is a behind the scenes procedure that is essential to payment processing.

Batch processing refers to the practice of a merchant processing all of its credit card transactions from the day after the end of the business day, or at some other time that has been determined by the credit card processor.

Batch processing is an efficient and cost-effective way to process credit card payments.

How Does it Work?

You may not even be aware of it or realize when it happens but there are typically two major steps in the process.

Authorization

The first occurs when the merchant accepts a payment from the customer.

In real-time, the legitimacy of the card and availability of funds to make the purchase is confirmed. This transaction is then said to be authorized.

At this step, the merchant would also receive notification if the card is reported as stolen, is not authentic, or does not have sufficient funds to complete the transaction. This would be classified as declined.

Settlement

From an observer’s perspective, after the transaction is authorized, it might seem like the end of the process. There is another step, however, that occurs at some later point.

At the end of the day, or at some other time, the batch of transactions is sent to the payment processor who then categorizes the transactions by the credit card issuing banks.

The banks will then issue payments to the merchant and the transaction is settled.

Why is it Necessary?

The short answer is that it isn’t required but it is preferred.

There is the option of real-time processing, in which the above steps happen instantaneously. This method often costs more as the transactions are being treated as individuals instead of a batch.

Another potential pitfall of batch processing is that the status of the card may change in the time between authorization and settlement.

For example, if the card has sufficient funds when authorized but no longer does when settlement occurs, you will not be able to process the sale. This is rare but may leave you without a way to collect payment.

Benefits to Batch Processing

  • More secure method - If you are only transmitting data once a day versus multiple times, this limits the communication with your payment process and keeps information more secure.
  • Automation - Many merchants prefer this method of processing simply because it is a time saver. Your employees spend less time processing payments.
  • Organization - By processing in a batch, you can easily reference past transactions.
  • Recurring Billing - If you have customers that get billed on a recurring basis, they can be processed as an automated batch. This type of billing also leads to customer retention.
  • Savings - By processing in bulk, you are saving on bank fees versus individual transactions.

Which Method Should You Use?

We always suggest discussing your specific business needs with our experts to determine which method of payment processing fits your business.

Understanding your options and setting up an efficient payment processing system will help streamline your operations and transactions.

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