How Card Payments Work?

  • Jul. 28th 2020
  • |
  • BankApply
How Card Payments Work?

We all use cards to make payments either in physical stores or online. It's simple - we just whip out the bank card, swipe/touch the terminal or insert PIN where needed, and it's done.

However, behind the scenes, it's a lot more difficult process that takes place.

This is also the reason why card payments can still be expensive, though we rarely notice the fees anymore.

In this article, we're going to go through different counterparties who take part in processing payments.

The Customer

The customer is the person making the payment and providing the payment details at the point of sale. 

The Merchant

Merchant collects the payment information and uses a credit card terminal or payment gateway to initiate the payment process.

The Issuing Financial Institution

From who did you get your debit and credit cards? It's the issuing financial institution. These are the organization who issue credit and debit cards to consumers and corporations. They also transfer the funds to pay the merchants.

The Acquiring Financial Institution

The acquiring financial institution is the organization that provides the merchant's bank account. The merchant processor sends the payments to the acquiring financial institution and this institution, in turn, deposits the funds on the merchant's behalf. 

The Merchant Processor

The merchant processor routes the payment details through the card networks to the issuing bank of the customer. Additionally, the processor sends payment approvals to merchants, the acquiring bank and the consumer.

The Card Network

Like in auditing, there's a Big Four in credit card networks as well - Mastercard, Visa, American Express and Discover. They connect everything together, the merchant's bank and the consumer's bank. 


This, in short, is how making payments work and what happens behind the curtains. We've got so sophisticated financial system that everything feels and looks seamless. If you're looking to obtain new credit or debit card or any other banking services, register with BankApply and find the best options for your needs!


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