A card payment feels instant, but behind that two-second approval a handful of institutions are quietly talking to each other. Understanding the flow is the first step to paying less for it.
The five-step flow
At the highest level, every transaction follows the same path: the customer pays, the merchant captures the card, the processor requests authorization, the customer's issuing bank approves (or declines), and the funds settle to the merchant a day or two later - minus fees.
Who's involved
- Cardholder - the customer paying.
- Merchant - your business.
- Payment processor / gateway - routes the transaction.
- Card networks - Visa, Mastercard and friends.
- Issuing & acquiring banks - the customer's bank and yours.
Authorization, then settlement
Authorization happens in real time - the issuing bank confirms funds and flags obvious fraud. Settlement happens later: transactions batch overnight and the money lands in your account within roughly 24-72 hours.
Where the fees live
Merchants typically pay 1.5%-3.5% per transaction, split across interchange, assessment and processor fees. The good news: once you understand the breakdown, a better pricing model, a cash-discount program, or simply the right processor can shrink it meaningfully.