Credit Card Processing APIs: Everything you need to know
The widespread presence of credit cards — and the vast amount of money that flows through related networks — means that it is important for almost every business to accept card payments. Fortunately, it’s very easy to accept credit cards through an API.
Introduction
Credit cards are more popular than ever before. An October 2023 report from Money.uk suggests that there are 2.8 billion credit cards in circulation globally and indicates that 64% of adults in the U.K. have at least one credit card. The same report suggests that the value of the credit card industry is expected to surpass $165.6 billion by the end of 2023.
What is a credit card processing API?
Credit card processing APIs are systems that allow businesses and individual merchants to accept card payments through a secure and ready-to-use service. Credit card APIs allow businesses to accept credit cards online, typically over a website form or mobile app.
Businesses cannot informally ask a customer to provide their credit card details, so these systems are a vital and important part of any company’s operations.
Credit card APIs are typically offered by companies known as gateway providers. Notable companies that provide this service include firms such as PayPal, Stripe, and Square. These services typically support major credit cards though many APIs additionally support debit cards and payment cards as well.
It is important to note that “API” stands for “application programming interface.” True APIs are aimed at advanced developers. Most API providers offer this option but also offer easy-to-use credit card frontends that can be deployed with little technical knowledge.
How credit card processing works
There are several steps involved in processing credit card transactions, and these steps occur whenever a customer makes a credit card transaction through an API.
Setting Up the API
First, a business or merchant must set up an API through which they can accept payments. The company must subscribe to the API service, await approval, provide all relevant information, and link any necessary accounts and information to the API service.
Then, the business must set up a form on their site, publish an app with payment options, or otherwise create a way for users to initiate their card payment.
Entering the Data
Next, a user interacts with the frontend that is linked to the API. If the customer is using a web browser, they may need to type their card information manually. This may include their name, card number, expiration date, and the CVC code found on the back of their card.
If the customer is using a mobile app or dedicated payment terminal, they may simply tap or swipe their credit card. The exact process depends on the details of the setup.
Data Transmission
Next, credit card data is encrypted and transmitted through the payment gateway’s network. The data in question is encrypted in compliance with PCI DSS standards so that the payment gateway cannot compromise details about an individual, their current transaction, or their payment card, even as it handles or stores that data.
Authorization
After the gateway or payment processor transmits the data, that information is received by the credit card network itself, which attempts to authorise the request.
This involves determining whether the card account has a sufficient credit line for the transaction. It also involves determining whether the credit card number is valid.
Generally speaking, this step involves determining that the card itself is capable of completing the transaction that has been requested. It isn’t concerned with most other details about the cardholder — but rather with the standing of the card itself.
Authentication
Authorization is just the first step to approving the payment. Next, the payment is authenticated, determining that the person initiating the transaction is the proper cardholder.
Authentication takes into account information that is sent (and possibly provided manually by the customer) at the point of sale. This may include a user’s PIN, signature, CVV number, security questions, biometric data, multi-factor authentication, or geolocation.
Issues in authentication and authorization can terminate a transaction. Despite the complexity of the process and the large amount of information involved, data is handled quickly or even instantly so that all parties know whether the transaction succeeded.
Completion of the Sale
Once a credit card transaction is approved through the above steps, the customer’s payment is considered complete. The cardholder may receive a digital or paper receipt that records their credit card transaction and certain other information. This receipt is separate from the main sales receipt that details the items that the customer purchased.
Clearing and Settlement
After a transaction is authorised and authenticated, payments are cleared and settled, meaning that the transaction amounts are reflected in all relevant accounts.
Multiple parties, including the payment gateway, credit card issuer, and issuing bank, are all involved in this process. In addition to ensuring that all parties are paid and transactions are reflected across accounts, each party may also collect a fee from the transactions.
Each transaction must also be reflected in the relevant cardholder’s account, which the cardholder must pay at a later date as part of their credit card bill.
These steps may take hours or days to complete, even after the customer receives their transaction slip. If the customer has an online bank account, full details of the credit card transaction may be displayed as pending until the process is fully complete.
Benefits of using a payment processing API
Payment processing APIs and credit card APIs have several benefits. For example:
- Security: Credit card APIs are highly secure because they use encryption and adhere to PCI DSS standards, minimising the risk of fraud and compromised data
- Flexibility: Basic credit card APIs allow businesses to accept card payments, while more complete services allow firms to accept other types of payment including debit cards, digital wallets and payment apps, and bank transfers
- Efficiency: Payment APIs allow businesses to accept credit card payments and other transactions automatically and with little effort — transactions are largely handled by third-parties, and companies only need to set up very basic front ends
- International payments: Payment processing APIs streamline international and cross-currency payments by offloading most steps to a third party
- Scalability: Credit card APIs are intended to handle large volumes of payments and large individual transactions; by contrast, transactions made via cash and other traditional methods can be difficult to handle in large volumes and amounts
- Data management: APIs allow businesses to monitor transaction activities, which can help solve payment issues and strategize company operations
- Integration: Credit card APIs can often be integrated with other business software to streamline accounting, tax reporting, invoicing, and other tasks
What companies would benefit from credit card processing?
Several types of companies can benefit by using credit card processing APIs. Because credit cards are widely used by members of the public, e-commerce sites and merchants that serve retail users will likely find credit card processing APIs services especially useful.
However, other companies may find credit card processing APIs beneficial as well, even if they don’t work with retail customers. The existence of business credit cards means that business partners, corporate clients, and non-individual customers may choose to pay with a credit card. Businesses that can accept card payments online include import/export companies, freelancers, B2B companies, affiliate programs, and small businesses.
Ultimately, any company with an online or mobile presence is likely to find a credit card API useful if it serves customers that prefer card-based transactions.
Factors to consider when choosing a credit card processing API
Businesses selecting a credit card processing API should consider many factors, including:
- Security: While most card processing APIs comply with PCI DSS standards, you can also look for point-to-point encryption (P2PE) and tokenization for extra security
- Fees: Most credit card APIs impose fees on businesses and merchants; generally, these fees range between roughly 1% and 3.5%; some credit card API providers may also impose a flat fee on every transaction processed
- Ease of use: It’s important to choose a service that is easy for both your company and your customers to use; a service with a difficult-to-use frontend or frequent transaction failures can drive away users and cut into your profits
- Compatibility: It is important to choose a service that supports a wide variety of payment options, as users may choose to spend their money elsewhere if their preferred method of payment is not accepted by your business
- Integration: Businesses should consider which other services an API can be integrated with — especially integration with business operations, third-party API providers, and other payment gateways that might be needed in the future
- Documentation and support: Choosing an API with rapid customer support and thorough documentation is critical, as this will help you set up the system and recover from any issues that you might experience
- Regional availability: Some card processing APIs are available only in certain countries or regions; be sure to consider your company’s location as well as the location of the customers that you serve when finding a compatible service
Top picks for card processing APIs
Several well-known payment companies provide credit card processing APIs.
Below, we’ll take a look at three popular options: PayPal, Square, and Stripe.
PayPal
PayPal is likely the most well-known payment processor in the world. It offers a number of features that can help you accept credit card payments, including:
- Business accounts with UK seller fees advertised at 2.9% plus £0.30 per transaction
- Payflow, a payment gateway with fees starting at $0.10 per transaction
- Custom Online Checkout, which supports credit cards and other payment methods
- Point-of-sale terminal devices powered by Zettle
- API and SDK features for advanced developers
Square
Square is another popular payment firm. It is operated by Block Inc. — a company founded and currently headed by former Twitter executive Jack Dorsey. It offers:
- Online checkout plugins for websites
- A point-of-sale mobile app
- Payment terminal devices
- An advanced API for developers
- U.S. fees for select services starting at 2.6% plus $0.10 per transaction
- UK fees for select services starting at 1.75%
Stripe
Stripe is the third payment process that we will look at. It provides an extremely wide range of credit card and payment services. Some of the company’s main services include:
- Payment forms for websites
- Integration with third-party websites
- Mobile payment tools
- Point-of-sale terminal devices
- API features for advanced developers
- Fees that generally start at 2.9% plus $0.30 per transaction
Conclusion
Credit cards APIs can help your business accept payments in a simple way. Because API providers handle all of the complexities of credit card transactions, your company only needs to choose a service and sign up in order to start accepting credit card payments.
However, it’s important to choose a service that meets your needs, and you should consider the factors outlined in this piece before settling on an option.
Frequently asked questions
What is a multi-currency account/virtual IBAN?
A Payset multi-currency account allows you to receive money in 34 different currencies and send money in up to 38 currencies, all within the same account.
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A Payset multi-currency account allows startups and business owners to receive payments from clients virtually anywhere in the world and pay suppliers, staff, and contractors quickly and affordably in their chosen currency.
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Are there limits on the amount of money I can send and receive?
No, there are no transaction limits on Payset multi-currency accounts.
However, higher-volume transactions may require additional anti-fraud verification. If you plan to make a large transaction, contact us in advance to avoid verification delays.
How is Payset regulated?
Payset is regulated as an authorized Electronic Money Institution by the UK Financial Conduct Authority. Our activities are also regulated by the Payment Services Regulation 2017 and the Electronic Money Regulation 2011 (SI 2011/99).
How do I add money to my account?
How do I send money from my account?
Once you have opened your verified IBAN account and added money to a balance, transferring funds is simple.
Simply log in into your account and add a beneficiary, then simply “make a transfer” in your preferred currency to that beneficiary.
Types of Multi-Currency Accounts
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