How does a merchant work

[chushpan]

What is a merchant?​

Merchant is a term used to describe a seller or a company that accepts payments from customers through various payment methods, including bank cards, e-wallets, mobile payments, and other methods. Merchants play a key role in the electronic payment ecosystem as they provide goods or services and interact with payment systems (e.g. Visa, MasterCard) and banks to process transactions.

How does a merchant work?​

The merchant's work includes several stages that ensure the acceptance and processing of payments. Let's consider the process step by step:

1. Connecting to the payment system​

In order to accept payments, the merchant must connect to the payment system through the acquiring bank. The acquiring bank provides the merchant with access to payment processing systems.

• Acquiring : This is the process by which an acquiring bank processes transactions on behalf of a merchant.
• Payment Gateway : This is a software or service that ensures the secure transfer of payment data between the customer, the merchant and the bank.

2. Payment initiation​

When a customer decides to make a purchase, they select a payment method (e.g. credit card, PayPal, Apple Pay). The process begins with sending payment details.

• The client enters card details on the website or at the POS terminal.
• The data is transmitted through the payment gateway to the acquiring bank.

3. Payment authorization​

After receiving the payment data, the authorization process takes place:

1. Checking card details:
   • The payment gateway checks the correctness of the card number, expiration date and CVV code.
2. Sending a request to the issuing bank:
   • The acquiring bank sends an authorization request to the issuing bank (the bank that issued the client's card).
3. ARQC generation (cryptogram):
   • If an EMV card is used, an ARQC is generated to verify the authenticity of the card.
4. Authorization decision:
   • The issuing bank checks the card balance, limits and other parameters.
   • If everything is OK, the bank sends a positive response (ARPC).

4. Completing the transaction​

After successful authorization:

• The terminal or website notifies the client about successful payment.
• The receipt is printed or sent to the client's email.
• Transaction data is stored in the merchant system.

5. Clearing​

After the transaction is completed, the cleaning process occurs:

1. Transferring data to the payment system:
   • The merchant sends data about all completed transactions to the payment system (for example, Visa or MasterCard).
2. Payment processing:
   • The payment system checks the data and sends it to the issuing bank.
3. Transfer funds:
   • The issuing bank transfers money to the acquiring bank's account.
   • The acquiring bank credits funds to the merchant's account (usually within 1–3 days).

6. Commissions and expenses​

The merchant pays a commission for processing payments:

1. Interchange Fee:
   • The fee that the issuing bank charges the acquiring bank. It depends on the card type and region.
2. Markup Fee:
   • An additional fee that the acquiring bank charges the merchant.
3. Payment gateway:
   • The merchant may also pay for using the payment gateway.

Types of merchants​

1. Online merchants:
   • Sell goods or services via the Internet (for example, Amazon, eBay).
   • Use payment gateways to process online payments.
2. Offline merchants:
   • Sell goods or services in physical stores.
   • Use POS terminals to accept payments.
3. Mobile merchants:
   • Accept payments via mobile devices (such as Square or PayPal Here).

Example of a merchant's work​

Scenario: Online shopping​

1. The client selects the product and proceeds to checkout.
2. The customer enters card details on the payment page.
3. The payment gateway sends data to the acquiring bank.
4. The acquiring bank requests authorization from the issuing bank.
5. After successful authorization, the client receives payment confirmation.
6. After a few days, the money is transferred to the merchant's account.

Conclusion​

A merchant is an important link in the chain of electronic payments. It enables customers to pay for goods and services in a convenient way, and interacts with banks and payment systems to process transactions. Understanding how a merchant works is important for business owners, payment system developers, and financial administration specialists.

If you have additional questions about how merchants work or examples of their use, ask them!

 

[Man]

How does a merchant (merchant acquiring) work?​

A merchant is a legal entity (shop, service, website) that accepts payments from customers via bank cards, e-wallets or other methods.

Acquiring is a bank service that allows a merchant to accept non-cash payments.

1. Participants in the process​

1. Merchant – sells goods/services.
2. Client – pays by card/phone.
3. Acquiring bank – services the merchant (issues the terminal, processes payments).
4. Issuing bank – issued the client’s card.
5. Payment system (Visa/MC/MIR) – ensures money transfers between banks.

2. How does payment work?​

2.1. Offline payment (in store)​

1. The client inserts/applies the card to the terminal.
2. The terminalreads data:
   • For the chip - generates a cryptogram (ARQC).
   • For magnetic stripe – sends tracking data.
3. The acquiring bankchecks:
   • Does the client have enough money (via the payment system).
   • Is the card blocked?
4. The issuing bank confirms or rejects the payment.
5. The terminal prints a receipt (or sends it by email).

2.2. Online payment (online store)​

1. The client enters card details on the website.
2. The payment gateway (e.g. Stripe, CloudPayments) forwards the request to the bank.
3. 3D Secure – if connected, the client confirms the payment via SMS/banking application.
4. The money is reserved and transferred to the merchant’s account within 1–3 days.

3. Fees and crediting terms​

• Merchant commission: 1–5% of the amount (depending on risks).
  • Shops: 1–2%.
  • High-risk niches (bookmakers, VPN): 3–5%.
• Enrollment deadlines:
  • Usually 1-3 business days.
  • For high-risk merchants – 7–14 days (withholding part of the amount).

4. How does a merchant connect acquiring?​

1. Selecting a bank.
2. Signing the contract (business verification).
3. Receiving equipment:
   • POS terminal (for offline).
   • Payment gateway API (for online).
4. Setting:
   • For the site – integration via REST API.
   • For a store – connecting a terminal to a cash register.

5. Refunds (chargebacks)​

If a customer disputes a payment:

1. The issuer writes off money from the merchant.
2. The merchant must provide evidence (receipt, signature).
3. If you lose, your money will not be returned.

Tip: To protect against chargebacks:

• Use 3D Secure.
• Keep receipts and delivery logs.

6. Features for different businesses​

Business type	Nuances
Online store	High risk of chargebacks, 3D Secure required.
Cafe/restaurant	Tips via terminal, fiscal receipt.
Services (freelance)	You can accept payments via the Fast Payment System (FPS).

Conclusion​

1. The merchant accepts payments through the acquiring bank.
2. Money is credited minus commission (1–5%).
3. To protect yourself from fraud, use 3D Secure and keep your receipts .

Want to know about hidden fees or bypassing blocking for high-risk businesses? Ask!