Wednesday, August 18, 2010

Credit Card vs. Phone Bill Payment

(reposted from ILD Teleservices Blog ) When making a purchase online, there are a variety of methods that can be used to complete a payment transaction. Two of the most common used are credit and third party billing to a telephone bill. These two methods are similar in some aspects but vary in several.Applying a purchase to a phone bill works similarly to credit card transactions in that the customer chooses the bill to phone payment option then is prompted to enter their telephone data much in the same way credit card information is entered to be verified and accepted. There is information obtained that is unique to the bill subscriber that is used strictly for verification purposes. The information is then communicated from the merchant over a secure gateway to a processor, or third party biller (also known as third party clearinghouse). Next, the data is authenticated by the processor or clearinghouse. Once the identifier information is authenticated, the clearinghouse sends confirmation back to the merchant. The merchant then sends the EMI record for billing to the clearinghouse for processing. The clearinghouse in turn sends the EMI record to the Local Exchange Carrier (LEC) for inclusion in the next billing cycle. The LEC is responsible to remit payments received less processing fees to the clearinghouse, which then is remitted by the clearinghouse to the merchant, much like credit card payment flow as follows (courtesy of Bank of America).In the credit card world, the flow of information and money between the merchant, the acquirer, card association and issuer is known as the interchange, and it consists of a few steps:AuthorizationThe cardholder pays for the purchase and the merchant submits the transaction to the acquirer. The acquirer verifies with the issuer—almost instantly—that the card number and transaction amount are both valid, and then processes the transaction for the cardholder.BatchingAfter the transaction is authorized it is then stored in a batch, which the merchant sends to the acquirer later to receive payment (usually at the end of the day).Clearing and settlementThe acquirer sends the transactions in the batch through the card association, which debits the issuers for payment and credits the acquirer. In effect, the issuers pay the acquirer for the transactions.FundingOnce the acquirer has been paid, the merchant receives payment. The amount the merchant receives is equal to the transaction amount minus the discount rate, which is the fee the merchant pays the acquirer for processing the transaction.Bill to Phone MethodThe bill to phone method is different from credit card purchases in that the consumer is not offered a credit line, but has the ability to charge services to their home phone bill by the phone company. Payment in full is due during the next billing cycle. In general, with this form of payment merchants are not paid until the consumer pays the bill. However, there are instances and companies that forward monies to the merchant upon receipt of the bill in expectance of compliance by the subscriber, which is direct billing.There are benefits to applying a purchase price to an existing telecommunications account. Being that the account is already established, minimal identifier information is necessary to complete the transaction. This means that your credit information is still safe and secure and not across the internet for the public to see. Let’s face it; the internet is not the most secure place to display personal information. This method of alternative payment is not only more secure, it is easy to do. The ease of use coupled with the security is what sets this method apart from credit card transactions.

1 comment:

  1. I don't really feel comfortable doing transactions online but for me it is more convenient. I just take extra precautions to avoid credit card frauds.