Payment Technology

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The Anatomy of a Transaction

Understand how payments are processed

When You Take A Payment By Credit Or Debit Card, You Fire Off A Complex Sequence Of Operations That Result, Just A Few Seconds Later, In The Payment Being Authorised Or Declined.

But in those few seconds, a whole series of security checks, communications and analysis of the trustworthiness of the transaction has taken place. And it doesn’t stop there, because until the payment is actually in your bank, the sale isn’t complete.

The good news is that it all happens quietly behind the scenes. Its part of our job to make sure that all you see of it is fast approval and rapid payment. Sometimes, though, circumstances require that you need to get a little more involved. A customer may dispute a payment, leading to a chargeback, for example. That’s when a broad understanding of what’s going on can help you.

How a Payment is Processed

The full process to complete a card payment usually takes about three working days, during which it passes through important stages: authorisation, clearing and settlement.
  • Authorisation

    At the point of purchase, the customer will give their credit card account to the merchant.

    The merchant’s bank then asks the credit card company to identify the cardholder’s bank.

    The authorisation system then checks the card security features and sends them to cardholder’s bank for approval.

    The cardholder’s bank will then approve the purchase, and the credit card company forwards the approval to the merchant’s bank, which in turn sends approval to the merchant.

    The cardholder completes their purchase and receives their receipt.

    Download Anatomy of a Card Payment Inforgraphic

  • Clearing

    Within a day of a purchase being made, the merchant’s bank sends purchase information to the credit card network.

    Its clearing system validates the information, and sends it on its way to the cardholder’s bank, which then prepares data for the card holder’s credit card statement.

    Following this, the credit card network’s clearing system provides detailed reconciliation to the merchant’s bank, and the cardholder’s bank.

    Download Anatomy of a Card Payment Infographic

  • Settlement

    Within a week of purchase, the cardholder’s bank sends payment for the purchase to the credit card network.

    They then send payment to the merchant’s bank, which in turn pays the merchant for the customer’s purchase.

    Finally the cardholder’s bank completes the transaction by billing the cardholder.

    Download Anatomy of a Card Payment Infographic

The Parties Involved In A Card Purchase

Let’s start by looking at all the people or organisations that might be involved in a transaction.

The Cardholder

This is your customer. He or she has visited your shop, telephoned you, or possibly made a purchase online. They might also have purchased via mail order.

The Merchant

This is where you fit in. You accept the card payment and pass the details securely to the card processor. Remember that you have a responsibility to protect your customers’ card and other personal details.

The Card Processor

That’s us! The card processor is the organisation that processes the transaction for you.

The Card Issuer

This is the party, often a bank, which holds the account from which the funds for the card transaction will be drawn

The Card Scheme

This is the network that provides the infrastructure that connects the card processor and issuer to allow the transaction to be authorised and funded. Visa and MasterCard are two very well-known examples.
  • Testing And Accreditation

    When you accept a card payment from a customer, you’re responsible for the safety and security of their card details. You have to know that everything’s being done right as you’ll have to demonstrate compliance to several strict criteria.

    This isn’t as onerous as it might sound. We’re here to help you to protect yourself as well as your customers. We have help systems in place to take you through the accreditation process for both Visa and MasterCard.

  • Visa Accreditation

    Visa’s Operating Regulations require you to test and prove your Chip and PIN processing systems using the Acquirer Device Validation Toolkit. We’ll provide you with guidance and access to bespoke test cards and scripts to making it easy for you to set up best practice and gain fast accreditation.

  • MasterCard Accreditation

    We are certified by MasterCard as a self-approval company for making you compliant through the MasterCard Terminal Integration Process. You’ll have a dedicated project manager, working on-site if you need it, to speed you through the approval process.

  • Consultancy

    Many companies need a high level of bespoke tailoring to integrate payment solutions into their ePOS systems or to get the best use from our terminals in concert with their own procedures.

    Our expert consultancy team is at your service whenever you need them. They’re technically savvy, so can guide you through any connectivity questions and IT challenges you may face. They are also experienced in payment and reporting processes, so can talk knowledgeably about integrating card processing into your enterprise systems. Most importantly, they have hands-on business experience, so they understand the issues you may face.