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Payments

15 min read
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How card transactions actually work, from swipe to deposit.

Every control here should be treated as a test. Start small, measure, then roll out.

Are You Card-Present or Card-Not-Present?​

Not sure? If customers swipe/tap in person, you're CP. If they type their card online, you're CNP.

🏪
Card-Present (In-Person)
Lower interchange, higher liability shift
💻
Card-Not-Present (Online)
Higher fraud risk, more prevention options

Pick Your Mode​

🔧
Operator
Action guides for day-to-day decisions. Start here.
📊
Analyst
Metrics, measurement, and optimization tactics.
📚
Reference
Lookup tables, codes, and specifications.
Popular
🔄
Authorization & CaptureStart Here
How the money actually moves
📈
Auth OptimizationPopular
Improve approval rates
💰
Settlement & ReconciliationPopular
Why deposits don't match sales
❌
Decline CodesPopular
Why transactions fail
🛒
Checkout ConversionPopular
Stop losing sales at the finish line
If You Only Have 2 Hours This Week
  1. Calculate your effective rate (total fees / total volume). Is it higher than 2.9%? You might be overpaying.
  2. Pull your top 5 decline codes from last month. Pick the most common one and read what it means.
  3. If you have recurring billing: check how many customers failed payment in the last 30 days. Are you retrying intelligently?

That's it. Dashboards and optimization can wait.

How a Transaction Flows​

From checkout to cash in your bank account.

PhaseWhat HappensTiming
Authorization"Can this card pay?" - Funds reserved2-3 seconds
Capture"Charge it now" - Transaction finalizedSame day or delayed
ClearingNetworks calculate who owes whatEnd of day
SettlementMoney moves between banksT+1 to T+3
FundingCash hits your accountT+1 to T+3

Deep dives: Authorization & Capture | Settlement | Money Flow

Planning & Budgeting
💰
Business Model Viability
Can you afford payment costs? Unit economics calculator.
📊
Total Cost Model
Complete budgeting worksheet - fees, chargebacks, tools, reserves.
🛠️
Tool Stack by Tier
What fraud/chargeback tools to buy at each volume tier.
⚠️
Top 10 Mistakes
Preventable errors costing $5K-$50K+ each.
📈
Scaling Milestones
What changes at each volume tier as you grow.
Getting Started
🔌
Gateway Basics
What gateways do and when you need one.
🏢
Processor Profiles
Stripe vs Square vs PayPal vs Adyen - which to use.
🛍️
Buying Payments
Choosing a processor, negotiating rates, avoiding contract traps.
⚡
Stripe First Week
Day-by-day setup after Stripe approval.
▪️
Square First Week
POS setup, staff training, prevent keyed-in fees.
🛒
Shopify First Week
Shopify Payments setup and optimization.
📟
Card-Present Terminal Decisions
Picking terminals, EMV vs contactless, keyed entry risk.
🔒
E2EE vs P2PE
Terminal encryption and PCI scope reduction.

Optimization​

📈
Auth Optimization
Improving approval rates, understanding declines.
🛒
Checkout Conversion
Reducing abandonment, payment form design.
🔁
Subscriptions & Recurring
Card-on-file, dunning, account updaters.
📄
Invoicing
Payment links, net terms, B2B workflows.
Core Concepts

If you're new to payments, read these in order:

1️⃣
Payment Ecosystem
Who's who in payments: processors, acquirers, networks, and why it matters.
2️⃣
Authorization & Capture
What happens in the 2 seconds after a card is swiped.
3️⃣
Settlement & Reconciliation
How money moves and who takes what cut.
4️⃣
Payment Methods
Cards vs. ACH vs. wallets vs. everything else.
Experiment to Run

Test capture timing: For one product line, compare capture-at-shipment vs. capture-at-order. Measure "goods not received" disputes vs. operational complexity over 30 days.

Payment Methods
💳
Cards
Credit/debit, interchange tiers
🏦
Bank Transfers
ACH, direct debit, check conversion
⚡
Real-Time Payments
RTP, FedNow, instant payouts
📱
Digital Wallets
Apple Pay, PayPal, Pay by Bank
🌐
Alternative Methods
BNPL, crypto, mobile money
🎯
Choosing Methods
Decision framework by business type
Before Adding a Payment Method

Run a 2-week checkout survey: "What payment method do you wish we had?" If fewer than 10% of customers mention it, it's probably not worth the integration effort.

Next Steps​

New to payments?
  1. Authorization & Capture - How transactions work
  2. Settlement & Reconciliation - Where your money goes
  3. Payment Methods Overview - Your options
Running a business?
  1. Buying Payments - Choose the right processor
  2. Checkout Conversion - Stop losing sales
  3. Auth Optimization - Improve approval rates
Scaling up?
  1. Interchange - Optimize your fees
  2. Digital Wallets - Add Apple Pay, Google Pay
  3. Going Global - International expansion

See Also​

❌ Decline Codes🛡️ Fraud Prevention💳 Chargebacks🔒 PCI DSS