These days most of the Merchant Card Processing is widely done electronically. Transaction data is sent to the merchant processing banks for authorization, capture and deposit. Many methods exist for accessing a credit card transaction into “the payment processing system”. These methods commonly involve:

1. Magnetic strip reading by an EDC or a swipe terminal
2. Sending transaction and card data through an encrypted means of communication
3. Processing in a central clearing house which credits the seller account and debits the buyer account

Earlier Credit Card transactions involved:

1. Mechanically imprinting the embossed card number information onto the forms
2. Sending transaction slip to Banks via mail or by accessing Automated Response Unit (ARU) by telephone

These earlier methods are still available these days, especially in less developed countries like Argentina, Spain, etc. But this type of payment processing has long been overshadowed by the ease of electronic devices because of the high growth of internet penetration and high development in encryption technology.

To fully understand Merchant Card processing, let us get an overview on the tools used within the process:

1. Credit card terminal
   A credit card terminal is a stand-alone piece of electronic equipment that allows a merchant to swipe or key-enter a credit card's information. A credit card terminal is a dedicated piece of equipment that only processes credit cards although it is common for related transactions including gift cards and check verification to also be performed. A credit card terminal typically must be plugged in to a power supply and connected to a telephone line. However, some terminals may be powered by batteries, communicate over the Internet or through the cellular phone networks. When a credit card is processed (either swiped through the magnetic stripe reader or keyed in to the keypad), it contacts the network to verify if the credit card can be authorized. The most popular credit card terminals consist of a modem, keypad, printer, magnetic stripe reader, power supply and a memory card. As with computers, there is a wide range of memory capacities and other features like built-in printers and debit card pin pads that affect the manufacturing cost of a credit card terminal.


2. Automated Response Unit
   ARU (also known as a voice authorization, capture and deposit) is considered to be an outbreak since the telephone has already been accepted as commonly utilized means of communication. The ARU allows the manual keyed entry and subsequent authorization of a credit card over a cellular or land-line telephone. Using this method, the seller can gain speed over the transaction processing time.


3. Payment gateway
   A payment gateway is an e-commerce portal system that automatically accepts data sent by the payment terminal (Credit Card Terminal or ARU Terminal) and processes it into the core banking system in which the Merchant Account has been stored. A merchant account provider is a separate company from the payment gateway provider. Some giant merchant account providers have their own payment gateways but usually merchant account providers use 3rd party payment gateways to maintain system availability since managing payment gateway involving a massive technology use. A gateway usually has one of these two components which are:
   
   
   • A virtual terminal that allows a merchant to securely login and key in credit card numbers
   • Has the website's shopping-cart connected to the gateway via an API to allow real time processing from the merchant website

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