Introduction to Online Payments
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Welcome to online payments. This guide explains how money moves from your customer's card to your bank account, and what you need to know to get paid reliably.
You Don't Need to Master This
Most of this happens automatically when you sign up with a payment provider. But understanding the basics helps you ask better questions, troubleshoot problems, and avoid overpaying.
What You'll Learn
- The key players in a payment transaction
- How money moves from your customer to your bank account
- The difference between a payment gateway and payment processor
The Payments Ecosystem
Every online transaction involves four key players:
| Player | Who They Are | What They Do |
|---|---|---|
| Customer | The person buying | Enters their card details |
| Merchant | You | Sells the product, receives the money |
| Acquirer | Your payment provider's bank | Deposits money into your account |
| Issuer | Customer's bank (Chase, Citi, etc.) | Approves or declines the transaction |
When you sign up with Stripe, Square, or similar providers, they handle the acquirer relationship for you. You don't need to set up a separate merchant account.
The Flow of a Transaction
Here's a simplified view of what happens when a customer clicks "buy":
- The customer enters their payment details on your checkout page.
- This information is securely sent to your payment gateway.
- The payment gateway sends the transaction details to the payment processor.
- The processor routes the transaction to the card networks (Visa, Mastercard, etc.).
- The card network communicates with the customer's bank (the issuer) to check for funds and approve the transaction.
- The approval (or decline) message travels back through the chain to your website, and the customer is notified.
- If approved, the funds are eventually transferred from the issuer to your merchant account (this is called settlement).
This entire process usually takes just a few seconds!
What This Means for Your Business
A few practical takeaways:
- You get paid in 1-3 days, not instantly. The authorization is immediate, but money takes time to settle into your bank account.
- Declines happen. About 10-15% of transactions get declined. Some you can recover, some you can't.
- Every step costs money. The card networks, issuing banks, and your processor all take a cut. That's why fees exist.
- Problems usually trace back to one player. When something goes wrong, knowing this flow helps you figure out who to call.