What Is Batch Processing? An Explainer

When a credit card is used to make a purchase, batch processing is the term for the steps that must be taken to transfer funds from a consumer to a merchant. This process involves several steps and in most cases a merchant can expect to see the funds in their accounts within 24 to 48 hours. The main steps involved in batch processing are: the authorization, the capture, and the settlement.

Authorization
When a consumer presents a credit card to make a purchase, it is usually swiped through or dipped into a credit card terminal. The company’s merchant services account will communicate with the bank that issued the card to ensure that the card holder has the funds available to make the purchase. If sufficient funds are available, a hold will be placed and the purchase will be authorized. When a purchase is authorized, no money changes hand - an authorization can be thought of as a promise to pay the amount of the purchase.

Capture
The authorization process will be repeated for all credit card transactions that a business processes each day. Batch processing is used to capture the funds, and eventually settle the sale. A company may choose to do batch processing as often as they would like, but there is a charge associated with this service. When batch processing is initiated, the banks that have authorized the purchases, and the funds are captured.

Settlement
After the funds are captured, they are settled and transferred to the merchant’s bank account. The entire process usually takes 24-48 hours. At this time a merchant should be able to access the funds. It is important for a merchant to keep careful records of their batch processing. It is possible for errors to be made during batch processing and having records gives merchant the evidence needed to have errors corrected.