Efficient payment processing is a top priority for any company selling online, regardless of what you’re selling. When your customer goes to check out, their payment must be error free, friction free, and a pleasant experience. 

Any unnecessary barriers between your customer and a complete payment subtracts from their experience with your brand and reduces the likelihood they’ll either complete the transaction or return again next time. 

Optimizing this payment experience on the front end (customers) and back end (you) can be challenging for business owners simply for all the variables involved. There are out-of-the-box payment systems and custom solutions alike to help you accommodate the sheer number of payment transaction types and determine how they affect your business. 

Before you make a decision on what payment solution is right for you, it’s well worth getting familiar with the seven core payment transaction types that may affect your decision. Let’s explore. 

The Charge/Sale

Once a customer lands on your e-commerce site (for example), browses your products or services, makes their selection, and adds it to their cart, it’s time to check out. In contrast to a cash payment, an all digital transaction process like this requires a few more pieces of information from your customer to initiate and validate the sale: 

  • billing information
  • card number
  • expiration date
  • security code (CVV)

With all their information provided, the charge/sale transaction has been initiated. In most cases, your payment gateway validates and captures your customer’s funds and payments in a single call. 

It’s worth noting there are payment processors, gateways, and solutions that do both. In this case, your gateway “calls” the processor to transfer various payment data and confirm the validity of the payment with your customer’s card issuer. 

payment transaction types charge and sale blog image

Assuming a successful call, the card issuer will transfer the secured funds once the settlement process occurs. In a charge/sale, authorization and capture occurs in one call, however the settlement tends to occur later behind the scenes. As the merchant, you will receive a transaction ID from the gateway or processor for potential future requirements, like issuing a refund.

Pre-Authorization and Authorization (“Pre-auth/Auth”)

In certain situations, credit and debit card transactions have to pass through authorization (auth) or pre-authorization (pre-auth) to validate the information attached to a card and place a hold on your customer’s funds. Auth involves more steps than your standard charge/sale transaction above and requires two calls to the processor, which increases the complexity of the transaction as the auth must then be captured or voided. 

Let’s say your customer wants to buy an item for $30, with $3 in tax, and $10 in shipping, the auth amount would be $43. When they run their card, the gateway/processor puts a hold on those funds to reserve them for this purchase, while making them unavailable for other uses. Depending on the processing system, this hold can last up to three days. 

In some cases, the processor/gateway may authorize a higher amount than the transaction total as a safeguard against undercharging. This is common with gas stations where the final sale amount won’t be known until the fuel has been dispensed. 

payment transaction types authorization and capture blog image

Another pre-auth or auth use case is for recurring transactions, like if you sell a subscription service. As the merchant, you might process $1.00 to validate your customer’s card is good for future payments and store it. The upside is you get to confirm the payment method, but the downside is the $1.00 will linger until the hold period expires or you issue a reversal (see Payment Reversal below). 

Another factor to consider is that the auth transaction may show up as an unexpected alert on the customer’s account, making them wary of what’s going on with their funds that they may not have intentionally approved.

Required: An auth typically just requires your customer’s full card number, CVV, and cardholder information, as well as the purchase amount.

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Payment Capture

“Capturing” is a payment transaction type referring to securing funds previously authorized for transfer. Once the capture is final, your payment processor can transfer the funds during the standard settlement process. In nearly all circumstances, the capture will be for the amount previously authorized, although certain types of transactions (such as buying gas above) will often capture less than the authorized amount. There is also a risk that the capture will fail, but the previous authorization and validation of cardholder information make this very rare.

Required: A capture call only requires the original auth ID or transaction ID, as well as the purchase amount. 

Payment Reversal

A reversal is precisely what it sounds like – a reversal of a successful auth or pre-auth transaction where your customer’s funds have been put on hold but not deposited into your account yet. This is different than a refund, which we’ll cover further down. 

A reversal typically removes the hold placed on your customer’s funds, but can also be used in cases where there’s a smaller charge for validation purposes only. 

payment transaction types payment reversal process blog image

Required: In most instances, reversals only require the original authorization ID or transaction ID and will not require the customer’s personal information, card number, or CVV.

Void Payments

Customers can often change their minds, and sometimes you’re in the middle of processing a customer’s purchase when this happens. Thankfully, a void transaction can help prevent funds from being transferred instead of issuing a refund later – which comes at additional cost to you. A “void” is simply a canceled transaction before funds are moved or settled, and if done at the right time, you can avoid transaction fees that come with refunds. 

payment transaction types void payments blog image

Required: To void a sale, merchants only need the original transaction ID.

Payment Refunds

No merchant likes issuing refunds, but they happen for a wide range of reasons and are to be expected in the world of online payment processing. It’s standard practice to take the item back and credit the customer’s card within your refund policy. 

In a refund, your customer’s money has already been authorized, captured and settled – meaning you have to completely undo the payment you just processed and return the full funds. A few things to note about payment refunds:

  • Refunds always return the money to the original card, so your customers cannot move money from one card to another. 
  • Refunds come at a cost to you, the merchant. 
  • You may also be at the mercy of the payment processor or gateway in terms of how long you can issue refunds, such as 14 days from the date of purchase.
payment transaction types refund process blog image

In addition to a full refund, merchants can also issue a partial refund. For instance, maybe a customer ordered five items, loves three, and wants to return the other two. This is where a partial refund would be useful as it allows merchants to refund money up to the full amount of the original purchase. 

Required: To issue a refund, you’ll need the original charge transaction ID from the processor.


Last on our list of payment types is the credit. Credits are useful if your customer is outside the time limit specified by the processor/gateway for a refund, or if there’s another reason a refund cannot be issued – like if their original card is no longer available. This process works just like a charge/sale, except that the funds are transferred from the merchant to the customer’s payment method. 

payment transaction types credit process blog image

Required: Merchants need the card number, CVV, and the customer’s information to issue a credit.

Why Payment Types Matter in Payment Processing

Cash transactions will always be so much simpler than processing credit and debit cards, but the benefits of an airtight payment process makes your business sales infinitely scalable, automated, measurable, and far more relevant in the world of online purchasing. 

Understanding the various transaction types can help you make sense of services and fees offered by payment processors and gateways so you can spend more time offering unique value to your clients and customers – and build a bigger brand market share. 

As always, Clear Function is here if you ever need a hand figuring it all out. Schedule a discovery call with us and let’s dig in.

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Get to know modern payment processing and the key components that affect how you do business. 

Payment processing hasn’t changed much since the world upgraded from bartering to currency. You want to sell something and your customers want to buy it – transaction complete. 

But what makes payment processing different today is the ability to do it well at scale, which includes technology, compliance, information security, accounting, tax, shipping, global reach, and other key elements that are integral to selling digitally. 

  • Good news for buyers: getting your next t-shirt online is much faster, greener, and more convenient. 
  • Good news for sellers: facilitating the transaction is trickier than with cash, but infinitely scalable with the right payment system in place. 

Payment Processing in the Internet Age

The marketplace has become increasingly comfortable with digital payments as security, regulations, and compliance have caught up with the internet wave. Today, you could even say we’re dependent on it. As a result, you can now choose between building a custom payments platform or a slew of ready-out-of-the-box payment processing solutions with varying capabilities.  

Both have their perks and downsides, but the most important consideration is functionality and your return on your investment. Whether you’re new to the subject or a seasoned veteran, it’s well worth the time to look before you leap on a solution to ensure it meets your business goals five or ten years from now. 

To lend a hand in this evaluation process, we’ll be diving into these topics the next few months:

Payment Processing Overview blog image

Payments in a Global Economy

Globalization enables businesses to operate across vast distances, nations, cultures, and currencies. According to the Federal Reserve Bank of San Francisco, online or remote purchases doubled in the last 6 years. Even physical money has become rare as people favor debit/credit cards and online payment platforms like Venmo, PayPal, or Zelle – or now even your smartphone. 

As a merchant, you may sell three products to someone in Maine today, seven to a buyer in Portugal tomorrow, and 15 in your Minneapolis brick-and-mortar store this week. Ultimately, this means that any tech-enabled organization needs tech-empowered payment solutions to make the purchasing experience as quick and convenient as your customers expect.

Let’s explore.

Key Features in Modern Payment Processing Systems

1. Basic Payment Flow

When a customer comes to your physical store or online store, they do their shopping and we hope they initiate payment. It tends to look a something like this:

Online Payment Process blog image

You are the merchant, they are the customer, and if they’re using a digital payment method, a payment gateway is a key part of the process.

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2. Payment Gateways: Gathering the Details

In short, payment gateways request certain information about a transaction and a customer to help confirm the validity of the card or direct payment. For example:

  • Brick-and-mortar stores generally use POS (Point-of-Sale) systems to collect payment information, such as credit and debit card numbers. In this case, the information you need about the customer is stored on the card, plus some sort of security like a PIN. 
  • Online merchants use payment gateways to collect the necessary customer information to make a payment. This info is key for facilitating transactions, but it’s just the start.

The latter group of merchants may include eCommerce, eBusinesses, online retailers, “bricks and clicks,” and more. Your customer makes their selection and upon checkout must fill out a form gathering payment details such as name, address, shipping information, coupon codes, card information, and more – depending on the scenario. 

Online payment process - payment gateways

Payment gateways like these typically work with a variety of card-issuing banks and card associations

  • Card-issuing bank: financial institution that offers branded payment cards from card associations directly to consumers. This may include credit cards, debit cards, key fobs, and prepaid cards.
  • Card association: a network of issuing banks and acquiring banks that process branded payment cards. For example: Discover, MasterCard, Visa, etc.

Besides ensuring that the payment details are securely transferred, the gateway can also check the customer’s credit card number and billing address to make sure that they match. Otherwise, the transaction may get flagged for potentially being fraudulent. If everything checks out, the information passes to a payment processor.

Note: Some services like PayPal and Stripe provide combined payment gateway and payment processing services. For simplicity, we’ll treat them as separate. Let’s dive into payment processors next. 

3. Payment Processor: Processing the Transaction

Payment gateways work with payment processors to make the transaction process fast and simple. A payment processor connects customers and their card-issuing bank with merchants and their acquiring bank to facilitate transactions.

Once the payment processor receives payment information, they contact your customer’s credit/debit card issuer, often their bank, or other relevant financial institution (say, PayPal). With credit and debit card transactions, like Visa or Mastercard, a card network facilitates communication and transfers.

The customer’s card issuer or other relevant financial institution (sometimes called the merchant acquiring bank) will then check to make sure that the customer has the necessary funds or credit to cover the transaction. If the financial institution notices any red flags, say suspicious purchases, they might pause the transaction and contact the cardholder/client. Otherwise, if the funds are available, they will approve the transaction.

Online payment process - payment processor blog image

From here, the payment processor will pass the info back to the payment gateway, which will update you (the merchant) and your customer.

4. How Funds Get Transferred from Customer to Merchants

The payment gateway will let you and your customer know whether the transaction was approved or declined. Assuming it was approved, your customer’s bank or other relevant financial institution will send money to your (the merchant’s) acquiring bank, which is the financial institution you use to accept payments.

The acquiring bank will deposit the money either into a merchant account specific to your business’ merchant ID (MID), or an aggregated merchant account. Your money stays in this account in case of chargebacks, returns, and/or other issues later on. After the appropriate time frame, it’ll be deposited into your designated business accounts.

Online payment process - payment settlement blog image

5. Fast and Secure Transactions

Don’t worry if this is still a bit confusing. Fact is, modern payment systems are intricate and have many stakeholders. But what you get is the ability to process payments worldwide within a matter of seconds. This way, customers can get the products and services they need, and businesses can reel in the revenues needed to thrive.

Yet when it comes to money, speed isn’t everything. In fact, payment systems sacrifice a fair amount of speed in exchange for security. This is a trade we gladly make to preserve relationships with customers who expect us to handle their sensitive information with respect and care. Fortunately, modern payment systems are typically quite safe.

6. How Are Transactions Secured?

Where there is money, there will be fraudsters trying to get away with the loot. The internet is massive and data constantly bounces around on different pieces of hardware via highways of digital infrastructure. Often, criminals will try to hijack the data while it’s being transmitted. 

Fortunately, there are many steps merchants, cardholders, banks, and other entities can take to reduce the risk of criminal activities.

We’ll dive into this topic in more detail soon if you need to know more about acronyms like TLS, SSL, SIEM, PCI DSS, GLBA, GDPR, FISMA, and more. But for now, it’s worth noting that when shopping for a payment system solution or team of developers to help modify what you have, security is an essential component.

The Wrap Up

We covered a lot here, but we just skimmed the surface. We love this topic because it’s our specialty and it’s important. 

Modern payment systems simplify purchases for customers in a world where money is invisible and everything rides on how you handle the data. You may find yourself in a situation where you’re choosing between a custom payment system or an out-of-the-box payment system, depending on your business needs and goals. 

It’s worth a hard look, because as business models change and relationships with customers evolve alongside the internet, out-of-the-box payment solutions often fall short of meeting many companies’ need for more flexible, custom payment platforms.

Whichever you choose, Clear Function is always here to lend a hand. Book a call with us at a time that works for you and we’d be happy to help.

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Happy New Year! As we look back on the previous year and plan for the year to come, it is important to think about setting goals. Digital entrepreneurs are always looking for the next big product they can create. Being able to evaluate and prioritize the goals in your personal and professional life can save you valuable time. Throughout this article, we will discuss how to assess where you are in life today (your current state) and where you want to be next year (your desired state). We will be using the Personal & Professional Growth Matrix, which you can download for free at the bottom of the page to complete on your own! Let’s get started.

5 Tensions of Growth

To be able to evaluate growth in your personal and professional life, you must first identify 5 categories that will move you forward and hold you back.

Current State

Where are you today? If you were to take a step back and look at your life from the outside, your current state would be where you are at this moment. Emotionally, physically, professionally, all of these categories comprise your current state.

Desired State

What are your dreams? Instead of where you are now, think about where you want to be in one year, 5 years, or even 10 years. This could be a big change like you start your own business and create 2 mobile apps in 5 years or a smaller change such as receiving a business class certification in 1 year.


When you evaluate your life, think of all the things that are preventing you from accomplishing your goals. These things getting in the way are ‘constraints,’ and can range from big to small. A small constraint could be a limited schedule due to family obligations while a big constraint could be a lack of money. Things we can’t change or think we can’t change provide even more backward tension from growth.


Your resources are what help you move from your current state to your desired state, despite your constraints. Resources are what help you move forward and see change. A resource could be a gym membership, a business coach, or even clothes for a new job. Take time to evaluate the resources you have and the ones you need to accomplish your goals. This can be very beneficial in the long run.


Anchors are long-term goals you set to help you reach your desired state. You look forward to your anchors and they help keep you motivated along the way. If your desired state involves creating an app, an anchor for you could be completing a coding class. The forward tension of combining Resources with Anchors produces the maximum effect in moving from Current State to Desired State.

Evaluating Your Personal Growth

Now that we have covered the categories of growth, let’s discuss the sections you should evaluate in your personal life. Try to be as open and honest with yourself while filling this out. It will be a great guide for you to reference as you plan for the future.

Heart and Spirit

The first state to evaluate is your heart and spirit. This is your relationship with a higher spiritual being or with nature. What do you look up to at a higher level? Who do you look to for guidance and inner peace?

Body, Mind, and Self

The relationship with yourself is very important. Take time to view your physical body, your emotional state, and your mental state through the lens of the growth matrix. Your desired state could involve a fitness goal or a hobby you want to start. Don’t feel selfish for devoting time to work on you – spending time in this category will benefit all other categories!

Inner Circle and Loves

Now that you have thought about yourself, it is time to think about the people around you who support and uplift you. How are your relationships with your family and best friends? They make up your inner circle and are who you would be able to call on during hard times. If you sense a lack of meaningful relationships in your life, how can you change that?

Outer Circle and Social Life

After your inner circle comes your outer circle. These tend to be larger groups of people who still hold an important place in your life, but that doesn’t normally consist of deep relationships. For example, this could be the church you attend, your coworkers, or a group of friends from college you still keep in contact with.

Work-Life and Career

The final category to evaluate is your work-life and career. Where do you want to be in your career in the next 1, 5, or 10 years? How do those goals affect your personal life? It can be helpful to compare the goals of your career with the other 4 categories to see how you can devote ample resources and energy to each one without getting stressed or burnt out.

The 5 categories work together to shape your personal life. When one category is lacking, your personal life can suffer. Have you noticed an off-balance in your personal life because you are not providing the time and energy to a specific part?

Evaluating Your Professional Growth as an Entrepreneur

Although your personal and professional life overlap, your goals for growth tend to be different. Completing the growth matrix is a great way to start a conversation with your coworkers or supervisor about what you want to see in the future. Here are the topics to consider:

My Goals

As a professional, it is important to have a list of goals you are working towards. Because your personal and professional goals coincide, writing them out side by side can help you evaluate how attainable they are. Do you want to increase your sales numbers or earn a promotion? Add those as your goals!

My Role

Your role is where you currently are in the company. Try to go deeper than just simply stating your job title. If your title is ‘Software Engineer,’ how do you feel like you could improve? What is the natural next step your career should take?

My Team

When you think about your professional growth, you have to consider your relationship with your coworkers. Working together as a cohesive team is important and without those friendly relationships, your work (and the overall work of the office) could falter. The desired state for your relationships with your team could be to mend bridges and know more about those you work with. How could you achieve this goal with the help of those in your office?

My Leaders

If you don’t trust the leaders of your company, how will you feel secure in your career? If you are the leader, how do you want your staff to view you? Each relationship needs solid communication and visibility — two things you can strive for in the desired state of your relationship.

My Company

When you wake up each morning, are you excited for the workday? This overall feeling can come from experiencing a healthy work environment where the policies and processes uplift and encourage employees. Improvements for the overall view of the company are something the whole team should work on. Great ways to boost the morale of the company are team lunches and retreats. Surveys can also be helpful to let team members voice concerns anonymously.

My Clients

Even the best companies, with the best work environment, struggle with creating strong relationships with their clients. Evaluate the current state of your client relationships and brainstorm how you can improve those in the year to come. Keeping high standards of visibility and communication can make a big impact overall. Your desired state (better client relationships) can lead to more money coming in!

Now that we have covered each section in the matrix, you have a better understanding of what to consider when setting personal and professional goals. Download our free worksheet, fill it out, and share it with your family and coworkers. They will help keep you accountable for reaching your desired state.

Review your growth matrix at the end of the year and celebrate the progress you made, big and small. We suggest filling out the worksheets every year, even if you think it will stay the same. Your goals will change and it can be helpful to see that mapped out!

As a mobile entrepreneur, one of the most important things is making sure that your product is properly managed. Knowing if the product is staying on track and within the budget can make or break a new company. We tackle these problems every day and recommend you check out these products to easily manage your workflow and to recommend to your other entrepreneurs.

First, differentiate between product and project

Before beginning the development of an idea, it is important to differentiate the product from the project. When an entrepreneur comes to a developer or agency, they have a product idea. This is what will eventually be a tangible item that has the best ability to make revenue and solve a problem for a group of people. 

When that product begins the development phase, it turns into a project. A project has a start and an end, a time frame, and a budget. When a project is done, the product remains.
A product could have many different projects throughout its digital life and they all need to be expertly managed. 

A lot of times the entrepreneur will act as the product manager. They will decide which features to add, who is the target audience, and what they want the design of the product to be. They can decide to hire someone to serve as the product manager, but because they are investing time and money into the product they will want to make sure the manager has their best interests in mind. A bad product manager can quickly derail development and leave the client with a product that doesn’t match what they want.  

For the project side of things, it is important to hire a project manager to oversee the technical aspects of development. With an offshore development team communication and cultural differences can cause issues. It can be very helpful to leave the communication and management up to someone else and the product will benefit from this. This is a practice we recommend as new entrepreneurs have a lot on their plates and managing how a product is developed can be overwhelming. 

If the product and the project are split into two worlds, different tools must be presented to manage both. In the next section, we will introduce you to tools that we have used to manage our workflow and that help make the development experience easier on you.

3 Tools to Make Product and Project Management More Efficient and Effective
  1. Easily managing version releases with Jira: The first tool that we recommend using to manage the project is Jira. Jira is a software that allows team members to plan, track, and release elements of the development. Users can easily manage version releases and track what still needs to be done. Users can also assign certain aspects of the project to team members and keep track of how they are progressing on tasks.

We typically plan our workflow in two-week sprints. This is essentially what we will accomplish in the next two weeks and is an easier way to manage a long-term development project because you are working toward multiple small goals. After each sprint, the product manager can review the progress that has been made.

  • Why do we suggest letting a project manager handle Jira? Jira can be complex and overwhelming to a product owner who might not be as technically savvy. It has a big learning curve and having an expert manage it can save the owner valuable time and money. A product owner has solid ideas, but the implementation of those ideas can go much farther with a strong project manager leading the development.
  1. Receive real-time feedback and manage features with Productboard: When it comes to managing the overall product, we use Productboard. It is a friendly environment where a product owner can manage their product features and subfeatures. With Productboard the product owner can easily see and understand what users need, prioritize what to work on next, and receive feedback in real-time.

Productboard allows users to gather much-needed user feedback early on. Future customers can rank features and designs by must-have, nice to have, and critical. Knowing this from the beginning can save the product owner time and money in the long run because they are only putting effort into what the customers actually want and need.

Not only can the product owner manage their product, but each of the needs and changes maps over to the project side. Jira and Productboard integrate with one another to make the management of the product easier. A feature (a segment of a product) on Productboard matches an epic (large body of work that can be broken down into a number of smaller tasks)on the Jira side and developers are able to see exactly what the product owner and future customers want and need.

  • Why do we recommend using Productboard? It is important for the product owner to have a safe place where they can manage things without stepping on the developer. Productboard presents what needs to be done and how to do it in an easy and efficient way, perfect for product owners. While small teams can see the benefit in the tool, larger teams may find it more helpful for managing product requirements and user feedback. A small team and product can do product management in Jira without having to have two separate platforms.
  1. Early-stage idea tracking excels in Confluence: Early on in the development process we use Confluence to document details. Once an entrepreneur first meets with us to discuss the product idea we immediately start tracking details, features, and ideas. Once the initial product idea is defined we move it into Productboard for larger products or straight to Jira for solo entrepreneurs.
Why do we use these tools?

We have been using Jira for years and Productboard for several months. Our clients needed a solid platform to be able to take their products with them when they no longer need our services. We are committed to our clients being able to take everything they have with them and these tools allow that to be done.

While Jira is a more expensive option, it does have a high value for its cost. Confluence and Productboard are cheaper options that don’t necessarily have all of the features as Jira but could serve your needs.

Find tools that work for you and your products!

How Project & Product Management tools Can Help Make Your Development Process Seamless It is important to research different management tools that are available for different products and projects. While we see the value in the tools we have mentioned, each product is unique and could benefit from different tools. Do you have other tools that your team has found value in using? Reach out and let us know!

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    Get to know what payment transaction types you need before choosing your solution.

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    Get to know modern payment processing and the key components that affect how you do business. 

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