Merchant Questions and Answers

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What is transaction authorization and how does it differ from processing and settlement?

Authorization involves communication between the card issuing bank and the merchants bank verifying that the cardholder has available credit or funds to cover the transaction. The card-issuing bank puts those funds on hold and assigns an authorization code to the transaction.

Processing refers to the transaction workflow and how each party involved receives the data. Settlement refers to the final accounting stage in which the transaction posts to the appropriate accounts at the card issuer and the acquiring bank.