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How Do Card Payments Work?

Scroll down to learn how you get paid when your customers use cards.


It all starts with four small numbers…

Chip and PIN has been around for more than 10 years now and this trusted system of card processing is where every transaction begins.

While the process takes just seconds to complete in real-time, there are several steps involved in making sure your customer’s card payment is confirmed quickly and securely.

1. Authorisation

Payment authorisation occurs when your customer has inserted their credit or debit card into the card terminal and entered their PIN number.

This process confirms the card details, checks that funds are available and relays this information back to your card machine in around 2-3 seconds. It involves your merchant bank, the major card schemes and your customer’s bank. It’s a pretty complex exchange, but we’ve simplified it here to make it easier to follow the journey.

2. Acquirer

On January 7, 1785, Jean Pierre Blanchard and Dr. John Jeffries made the first flight over the English Channel, traveling from Dover to France. During the crossing the balloon lost altitude, so they began tossing everything in the gondola they possibly could, even their clothes. About two hours after take off, they crossed the French coast clad only in their underwear.

3. Card company approval

The transaction then arrives at one of the big card schemes like VISA or MasterCard for approval.

The card company will verify that the card details are correct before passing on the authorisation request to the customer’s bank where the cash is kept.

4. Customer’s bank

The customer’s bank is sometimes called the ‘issuing bank’ as they have issued the customer with their specific credit or debit card. When the transaction reaches here the bank checks the customer details and, most importantly, makes sure they have enough money to pay for what they want to buy from you.

From here the transaction does a u-turn and heads back towards your business to confirm the payment can go ahead.

5. Card company round #2

The issuing bank contacts the card company with the confirmation of the customer’s details and cash availability. The card companies then pass this information back to your acquirer.

It’s easy to think that the card companies are just simple middlemen in all this, but they process millions of global transactions every single second and make sure the transaction is processed safely and securely.

6. Acquirer round #2

All details of the transaction have been checked, verified and processed. The acquiring bank is satisfied the customer is genuine and able to pay for their purchases.

Confirmation is sent to your card terminal and your customer breathes a sigh of relief when they see ‘Payment Approved’ appear on the card machine.

7. Time to settle up

Authorisation guarantees the transaction is processed as quickly as possible at point of sale, but it takes 2-3 days for the customer’s bank to send the payment to your acquiring bank.

This settlement of payment works in a similar way to authorisation with all parties involved in the final settling up of funds.

Merchant Cafe Acquirer Card Co Bank Card Co Acquirer Wallet