How Does Payment Processing Work [Infographic]

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As long as transactions go through successfully, most merchants never give a second thought to how payment processing works. There doesn’t even seem to be much to think about given the speed with which credit card purchases are initiated and approved.

After all, most sales only take a few seconds to complete.

Yet whether you’re a small merchant or a large multinational corporation, understanding the individual steps involved is important for two key reasons:

  1. Each payment processor and card issuer charges slightly different fees for every successful transaction. By understanding the payment processing workflow, you can identify areas to reduce costs and negotiate better rates.
  2. Every time credit card data is sent or received represents a potential opportunity for thieves to steal your customers’ financial information. The more you know about how payment processing works, the better equipped you are to choose the right payment provider to protect your business.

What all is really involved?

The Anatomy of a Credit Card Purchase

Below is a brief overview of how credit card processing works, complete with a shareable infographic that breaks down the individual steps even more:

Step 1: Trigger the Transaction

When a customer is ready to purchase something from your online store, he or she enters his or her credit card details and clicks the “Buy” button to begin the transaction.

Step 2: Open the Gates

As the merchant, you automatically pass on this credit card information to your payment processor through a secure gateway.

Step 3: Ask the Issuer

Your payment processor then asks the customer’s credit card issuer to verify the transaction details.

Step 4: Authorize and Advance

The credit card issuer either denies or authorizes the transaction:

  • If the purchase is declined, notifications are sent back to all relevant parties, including the payment processor, the customer and you — the merchant.
  • If the purchase is authorized, the credit card issuer deducts money from the customer’s account.

Step 5: Approve the Move

After receiving approval from the card issuer, your payment processor instantly notifies you that the transaction has gone through successfully.

Step 6: Credit the Account

The money taken from the customer’s credit card account (in Step 4) is deposited in your business account.

And the entire transaction is finally complete.

Want a More Detailed Explanation?

For an even more comprehensive overview of how payment processing works, check out the free, shareable infographic below.


How does payment processing work?

Learn more about Performance Card Service offshore merchant accounts.