Learn how card payments are processed to help you make an informed decision when choosing a new provider
Learn how card payments are processed to help you make an informed decision when choosing a new provider
Payment cards are the leading payment instrument in the world, used by consumers to initiate over 1.8 billion debit and credit card transactions across the UK each month. When your customer chooses to pay for your products or services by card, a complex sequence of events is executed over the 1.5 to 2 seconds it takes for transaction to be approved or declined.
As a business owner, it’s important to understand how card payments are processed and settled to help you make an informed decision when next selecting a card payments provider for your business.
1. Authorisation
2. Settlement
3. Funding
1. The cardholder presents their card (or other secure method) to a merchant in exchange for goods or services. The payment request might originate from a credit card terminal or point of sale system in a brick-and-mortar store, an eCommerce website gateway, through mobile or in-app payment acceptance.
2. The merchant sends a request for payment authorisation to their payment processor using a payment gateway.
3. The payment processor submits transactions to the appropriate card association, for example VISA, MasterCard, American Express, and the transactions eventually reach the issuing bank.
4. Authorisation requests are made to the issuing bank, and include parameters such as CVV, AVS validation and expiration date.
5. The issuing bank approves or declines the transaction. Transactions can be declined for insufficient funds or available credit, if the cardholder’s account has been closed or expired, if a payment is past due or other factors such as suspected card fraud.
6. The issuing bank then sends the transaction approval or denial status back along the line to the card association, merchant bank and finally to the merchant.
1. Merchants send batches of authorised transactions to their payment processor.
2.The payment processor passes transaction details to the card associations that communicate the appropriate debits with the issuing banks in their network.
3. The issuing bank charges the cardholder’s account for the amount of the transactions.
4. The issuing bank then transfers appropriate funds for the transactions to the merchant bank, minus interchange fees.
5. The merchant bank deposits funds into the merchant account.
6. The card payments provider transfers funds from the merchant account into the merchant’s business bank account in a period ranging from less than a day to a week
That’s the simplified credit card payment process. Authorisation takes a matter of seconds. Settlement and funding that used to take days are now almost always handled overnight, helping you get your money quickly.
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