Transaction initiation: The cardholder swipes or taps to pay or otherwise provides card details at checkout, and your credit card processing system captures the payment data.
Authorization request: The data is sent from a payment gateway or terminal to the processor, which routes it to the acquiring bank. The acquirer forwards transaction details to the customer’s bank (card issuer) via the card network for approval.
Transaction authorization: The issuing bank verifies cardholder information, checks for available funds and fraud signals, and approves or declines the transaction.
Authorization response: The issuer sends an approval or decline code (auth code) to the card network, which passes it to the acquirer, who then routes it to the processor and, ultimately, to the payment terminal, POS system, or e-commerce platform.
Transaction completion: The card payment system responds to the authorization code by approving or denying the transaction.
Batch settlement: The merchant submits a group of authorized transactions to the payment processor, which forwards them to the acquiring bank. Acquirers reconcile transactions and pass them to the correct card networks.
Clearing and settlement: The card association confirms transaction records, calculates fees, and sends data to the issuing bank. Issuers cross-check information and coordinate with card networks to transfer funds to acquirers.
Funds transfer and merchant deposit: The acquirer receives card payments in a merchant account. Generally, the acquiring bank deposits funds, minus fees, into the company’s regular bank account within one to five days.
Processing a credit card transaction takes seconds, but getting funds in your bank account can take days. Settlement timing depends on your payment processor, acquirer, and card issuer.
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