Behind the scenes of credit card payments

5 min read


Accepting card payments is probably a fundamental part of your day-to-day business. But have you ever realised how much goes on between the customer giving you their card details and the money hitting your account?

The first thing to understand is the main players in the transaction cycle – there are five altogether:

  • Customer
  • Merchant (that’s you)
  • Acquirer (your payment gateway)
  • Card network (e.g. Visa or MasterCard)
  • Issuer (the customer’s financial institution)

They all get involved in different stages of the process, which is outlined below.


 Authorisation of credit card payments

Here’s what happens when the customer hands over their card details:

  1.  The customer gives you their card details – either in person using your EFTPOS machine or providing the card details over the phone/online.
  2. Your payment processing terminal electronically sends the relevant information (card details, payment amount and your merchant ID number) to the acquirer.
  3. The acquirer then sends this information to the customer’s financial institution (issuer) requesting them to authorise the payment.
  4. The issuer checks if the transaction is fraudulent, and whether the customer has enough funds to pay before sending an authorisation code to the acquirer.
  5. The acquirer then authorises the transaction, and lets you know it’s been approved.

It would have actually taken you about three times as long to read about this process than it actually takes to happen!

This is the point at which you provide the goods or services to your customer, as the payment has been authorised. However, no money has changed hands as yet – that’s the next stage.

Receiving payment

The first step is when you batch up all your payments and send them through to the acquirer, which is your payment gateway (this could be your bank or an intermediary service provider). The acquirer then sends the payments through to the relevant card network (so some of your transactions would go to Visa, some to MasterCard, etc.). The card network then requests payments from the relevant issuers. The money then travels back down the chain, from network to acquirer to you (and, of course, at some point the issuer recoups the money from the customer).

While the authorisation process takes seconds, this part of the process can take days. Many acquirers are, however, now offering merchants same day payment, meaning you get the money in your account the same day the customer makes the purchase. In this scenario, you’re effectively ‘selling’ the transaction to the acquirer, and they will recoup the funds from the issuer via the card network.

Understanding the fees

As you’re aware, you don’t get the full amount of the customer’s payments, as fees are deducted along the way. So what are they and who is getting them? The first fee comes from the issuing bank, and is generally around 1-3% of the total transaction amount (although some businesses do charge a surcharge to offset this amount). This fee is linked to what’s called an interchange fee, which is published by the card network. The issuing bank shares a small portion of this fee with the card network.

The other fee is the one charged by your acquirer, which is sometimes called a discount fee. This is also linked to the interchange fee, but is generally a smaller amount than the transaction fee. Of course, your acquirer may also charge you additional fees for providing your card processing service, and this will vary from provider to provider.

Ezidebit offers a simple and secure way for your business to accept credit card payments online. To learn how our payment solution can become part of your business strategy, simply call 1300 763 256.