In order to explain the exact process, you should know the major participants in the credit card transaction and settlement process as well as their roles:

• Authorize.Net acts as a bridge between your company and the financial entities that handle the processing and settlement of credit card transactions.
• Your Merchant Bank Account is the bank account that allows you to receive settlement funds for credit card transactions processed through the Internet.
• The Acquiring Bank is the bank that holds your merchant bank account. If you signed up for the Authorize.Net Payment Gateway through a reseller or other sales organization, you may not have a direct relationship with your acquiring bank.
• The Processor refers to the payment processor that processes credit card transactions (e.g. TSYS, FDMS Nashville).
• The Credit Card Issuer is the financial institution or bank that issued the credit card to your customer.
• The Credit Card Interchange System refers to the system established by the credit card associations that allows acquiring banks to submit credit card transactions to the credit card issuing bank for settlement on behalf of their merchant clients.

The following steps describe the actual credit card process:

1. A credit card transaction is submitted to the Authorize.Net Payment Gateway.
2. Authorize.Net automatically passes the transaction over a secure connection to the Processor.
3. The Processor passes the transaction to the Credit Card Interchange System.
4. The Credit Card Interchange System routes the transaction to the appropriate Credit Card Issuer.
5. The Credit Card Issuer approves or declines the transaction based on available funds and passes both the transaction results and, if approved, the appropriate funds back through the Credit Card Interchange System.
6. The Credit Card Interchange System relays the transaction results to the Processor.
7. The Processor relays the transaction results to Authorize.Net.
8. Authorize.Net stores the transaction results and sends them back to the customer, and/or you, the merchant.
9. The Credit Card Interchange System passes the appropriate funds for the transaction to the Acquiring Bank.
10. The Acquiring Bank passes remaining funds to the merchant bank account you use to receive settlement funds.