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Credit Card Processing APIs: Everything you need to know

Fintech and banking

Nov 6, 2023

4 min. read

James Irwin

Author

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.

A UK multi-currency account can streamline how you manage your finances. Whether for business or personal use, a multi-currency account provides you with added freedom and flexibility and removes barriers to payments and transfer methods.

Here is everything you need to know about UK multi-currency accounts.

A Payset UK multi-currency account is a single account with which you can hold, send, and receive funds in up to 38 currencies. This allows business or personal account holders to save endless time and money on foreign exchange, and money transfers, which from a traditional bank account would be far more expensive and slow.

From your personal UK-based IBAN account, you can transfer money to bank accounts around the world as well as send and receive free and instant transfers to and from other Payset clients. You can send funds using a diverse network of payment networks, including SWIFT, SEPA, Target2, Faster Payments, CHAPS, and more.

When you exchange funds from one currency to another, there are no margins added to our exchange rates and the fees are clearly displayed before you click send. If you, for example, work with multiple currencies, make purchases in other countries, travel frequently, invest in foreign currencies, pay staff in other countries, or receive payments in other currencies, a multi-currency account can save you time, money, and work compared to a traditional bank account.

There are lots of banking institutions and financial services that will aid you in opening a multi-currency account. Often they can allow you to convert and transfer a considerable number of currencies.

Before you open a UK multi-currency account with any platform or service, make sure you have explored all of the different options available to you and have found the best type of account to suit your financial needs.

How Does a UK Multi-Currency Account Work?

A UK multi-currency account works in the same way as a standard bank account or electronic wallet. Although the services provided will change depending on where you choose to open your account and who you choose to open the account with, all multi-currency accounts should allow you to:

Withdraw money

Send and receive payments in multiple currencies internationally

Access your funds for electronic transfers

Earn interest on your account total

In the same way that fees can occur with a standard bank account you may run into additional charges with a UK multi-currency account.

You could be charged for a number of actions including; making withdrawals, account opening and closure fees, transfer fees, and more.

The frequency or amount of these charges will often vary and if you ask your banking agency they will usually be able to tell you exactly how much you will be charged and which services you will be charged for before you open your account.

Alternative Options to Consider Before Opening a UK Multi-Currency Account

There are many alternatives to opening a UK multi-currency account. For example, there are also money transfer services and online electronic wallets such as Payset that allow you to send your money in over 34 currencies without the need for a UK multi-currency account. You can start sending money across the globe or in person today using your existing bank account.

Frequently asked questions

What is a UK multi-currency account/IBAN?

Are there limits to the amount of money I can send and receive with a UK multi currency account?

Which currencies can I send and receive in my UK multi currency account?

How do I add money to my UK multi currency account?

Types of UK Multi-Currency Accounts

Multi-currency IBAN accounts
Personal multi-currency accounts
Multi-currency accounts for business
Multi-currency cash passports
Multi-currency wallets

Information contained in this publication is provided for general education and information purposes only and should not be construed as legal, tax, investment or other professional advice or recommendation, or an offer of, or solicitation for, any transactions or any other actions (or refraining therefrom); This material has been prepared without taking into account any particular recipient’s financial objectives or situation. We make no warranty, guarantee or representation, whether express or implied, as to the completeness or accuracy of the information contained herein or fitness thereof for a particular purpose; Use of images and symbols is made for illustrative purposes only and does not constitute a recommendation or advice to take or refraining from any action; Use of brand logos does not necessarily imply a contractual relationship between us and the entities owning the logos, nor does it represent an endorsement of any such entity by Pay Set Limited, or vice versa; Market information is made available to you only as a service, and we do not endorse or approve it; Any reference to past performance, predicted returns, or likelihood performance scenarios may not reflect actual future performance and certainly do not guarantee future outcomes.