What does batch credit card

Saturday, January 03, 2015

What is batch credit card processing?

Merchants who accept credit cards as payment for their products or services can decide to save groups – known as “batches” – to process together at the end of the business day. This is known as batch credit card processing. The main reason for saving batches to process at once is because there is a fee for each credit card transaction that a business must pay in order to have the payment processed. By sending all of the payments at once, a business can save money and, in some cases, time.

There are significant benefits to saving these batches for processing all at once, which is why it is a popular way for businesses who process credit card payments to do so; but there are also some downsides that business owners should be aware of before they decide to process payments this way.

Here, we’ll describe how credit card batch processing works and then address the pros and cons so you can make the best decision for your business’s payment processing needs.

How does it work?

The most important thing to know about batch credit card processing is how it works. It’s a two-step process: (1) authorization, and (2) sending the transaction.

Authorization

At the point of sale (POS), the customer’s card information and transaction amount is sent to their card issuer (e.g., Visa, Mastercard, etc.) to be approved. The authorization checks for:

  • Card legitimacy
  • Ensuring that the card belongs to the user
  • Ensuring there is a sufficient amount of credit available on the card

After this information has been verified, the transaction is ready to be sent.

Sending the transaction

For batch processing, the authorization step happens at the POS, but sending the transaction must be done by the merchant, meaning it is not automatic after the authorization goes through. Because each transaction comes with a fee, and sending them in one batch only incurs one fee, the merchant can decide to send the transactions as they see fit for their business; however, batches must be sent at least once every 24 hours.

When the merchant is ready to send a batch, the authorization codes for each credit card are sent to the issuer. Then, when the transactions are approved, they are transferred to the merchant bank for settlement. The funds then make it to the merchant bank account. If transactions are rejected, the funds are not transferred, and the merchant is informed of the rejections.

If the merchant uses a PCI-compliant payment processor, the information is sent back as two separate files. If you are curious about how your processor handles this information, reach out to your merchant account provider.

Why do some merchants like batch processing?

Batch processing is the alternative to real-time processing. While both processes are viable means of sending transactions to be approved, real-time processing incurs more fees, involves less organized recordkeeping, and, due to the frequency of transaction-sending, involves higher security risks. Even though real-time processing offers the merchant faster payments, batch-processing offers a few other benefits. He’s what both merchants and consumers gain from batch payment processing.

Save on fees

Each credit card transaction incurs processing fees, so the first benefit to batching transactions is saving money. Each batch comes with its own batch fee, so a merchant can decide how long to save these batches, although it is typical to send a batch at the end of each workday.

Easy to review transactions

Another benefit to batching is the ease with which specific transactions can later be located. Batches provide organization that real-time processing can’t.

For example, if a business sends all transactions individually and later needs to review which transactions were rejected, they’ll have to sort through all the files from that particular day to find them. In a batch, the rejected payments can easily be found in one file. Payment gateways make this recordkeeping especially easy with one location for all batches.

Automated process

The process of sending batches is also simplified and automated. Using a payment gateway, batches can be sent all at once, and from there two separate files are returned to the merchant – accepted transactions and rejected transactions.

Using a PCI-compliant payment gateway is one of the best ways to automate this process as there is no need to manually transmit any of the credit card data into your system nor store that information on your system. Instead, this type of gateway collects, encrypts, and stores that data for you, thereby simplifying the process while also adding security.

Keeps data secure

A notable benefit for both consumers and merchants in processing payments via batch transactions is the security that the process offers. Using a payment gateway is helpful in keeping batches secure by encrypting the cardholder data and storing that data in secure databases for the merchant.

The encryption bonus of a payment gateway is one way financial security is ensured, but sending transactions in batches also means fewer interactions with the payment processor, meaning fewer security risks.

Cons to batch processing

There are a couple of cons to batch processing that are important to consider as you determine the best payment processing system for your business needs. Let’s look at those now.

Slower payment

The first downside to batch processing is the time it takes for payment to reach the merchant account. Furthermore, since the transactions are processed all at once later in the day, there is a risk that some payments may be rejected and therefore some transactions might not be received at all.

Lastly, in cases where large volumes of transactions are being sent at once, the transactions may bottleneck, causing the payment to the merchant account to take even longer to be processed. If your business needs revenue right away, it may be worth it to weigh costs between processing fees for real-time transactions and batch fees, and consider the time it may take to process transactions if you receive a large quantity of transactions at once that need to be processed.

Can end up costing more if you don’t batch for a period of time

The second con to batch payment processing is the higher fees that can occur if batches aren’t processed in time. The issue of batches costing more doesn’t happen often, but the risk serves as a reminder to send in batches within 24-hour periods to avoid late fees and deadline issues.

Batch processing makes payment processing simple and efficient

A business takes a lot of time and energy to run successfully, so it’s important to be as efficient and organized with your processes as possible. That’s why most businesses opt to send transactions in batches for processing. Batching is a fast, reliable, secure, and organized way to ensure that your customers’ data remains private, and you lose the least amount of money to process and store that data.

As always, check with your merchant services provider to weigh your own costs and benefits to batch processing.

Heartland makes credit card processing straightforward

Overall, credit card processing can be complicated. But after learning the basics, we hope that you feel confident in accepting credit card payments and sending your transactions to be processed in the way that works best for your small business.


Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us.