Online Payments - Behind the Scenes
We make them every single day, but have you ever stopped to think about just what actually happens when you make a credit card or debit card payment?
The 6 players behind every online card payment
It seems like it happens immediately - you type in the number of your credit or debit card, the expiry date and the security code, and then the transaction is completed. However, what you didn't know perhaps is the fact that there are as many as six different parties that have important parts to play in ensuring your transaction is completed and that the money is moved from your own account to the account of the retailer you are buying from.
The stakeholders involved in this purchase are:
- Cardholder (That’s you!)
- Payment Service Provider
- Card Scheme
- Card Issuer
The cardholder when you make a purchase is you and this is obviously the first step in the purchasing process. You begin by entering the details about the card you are using, your address and you give permission for a particular amount of money to be debited.
The retailer is the party that has responsibility for collecting the details of your credit card, this is then used to enable them to receive your payment and complete your order. It is important to note here though that most retailers do not actually handle the sensitive information regarding your payment by themselves. They will use a Payment Service Provider (PSP) who takes care of this part of the process for them.
Payment Service Provider
In simple terms, a Payment Service Provider replaces the card reader you would have in a bricks and mortar store. They provide a secure payment page which is accessed via the merchant's website, a cardholder simply enters the relevant security information and card details to process the transaction and complete their purchase.
If the retailer has requested it, the Payment Service Provider can present the Verified by Visa or MasterCard SecureCode pages to increase the level of security for the transaction.
Often Payment Service Providers perform in a similar capacity to an acquirer and this is generally reflected in their charges.
Retailers usually have to pay an acquirer to process the credit or debit card transactions on behalf of them, unless their Payment Service Provider is an Acquirer or Payment Facilitator also.
An Acquirer has responsibility for the receipt of transaction details after the Payment Service Provider has collected them. It then passes the details through the relevant card scheme (Visa, MasterCard, Amex etc,) and then on to the card issuer for approval.
Card Schemes, such as MasterCard and Visa, are in control of the operating and clearing of card transactions, following the rules determined by that particular card scheme.
The card scheme passes the payment details received from the Acquirer on to the card issuer, who gives permission for your credit card or bank account to be debited. An authorisation message is then passed through to the Acquirer who then credits the bank account of the retailer.
The Card Issuer is the building society or bank that gave you your credit card or debit card. They have responsibility for the crediting of funds to the card scheme from your account.