The key players in payment processing
A typical card payment involves four main parties:
- The cardholder — your customer, paying with a credit or debit card (or a digital wallet linked to one).
- The merchant — you, the business accepting the payment.
- The acquiring bank (acquirer) — the bank or financial institution that holds your merchant account and processes payments on your behalf.
- The issuing bank (issuer) — the bank that issued the customer's card and holds their funds.
Card networks — Visa, Mastercard, American Express, UnionPay, JCB — sit between the acquirer and issuer, routing transactions and setting interchange fees. In practice, most businesses work with a payment service provider (PSP) that bundles these relationships into one product.
How payment processing works, step by step
- Initiation — the customer enters card details or taps at a terminal. The data is encrypted and sent to your payment processor.
- Authorisation — the processor routes the request through the card network to the issuer, which checks funds and fraud signals, then approves or declines.
- Response — the result travels back to your checkout in a second or two.
- Capture — the merchant captures the authorised amount (often automatic at the point of sale).
- Clearing and settlement — the processor batches approved transactions, the issuer transfers funds to the acquirer, and the acquirer settles them into your merchant account — typically within a few business days.
Online vs in-person payment processing
The flow is the same whether a payment is online or in-store — the entry point differs. Online, a payment gateway captures card details from a browser or app and kicks off the authorisation chain. In-person, a card terminal reads the card via chip, NFC contactless tap, or QR code.
If you want to accept online payments without building a checkout from scratch, ONE Payments offers hosted checkout and payment links alongside a REST API, supporting Visa, Mastercard, Amex, JCB, UnionPay, and local methods like PayNow.
What payment processing costs
Fees in payment processing stack up from a few sources:
- Interchange — paid by the acquirer to the issuer, set by the card network. This is the biggest component of processing costs, and it varies by card type (debit vs credit, consumer vs corporate) and market.
- Scheme fees — charged by the card network itself.
- Processor markup — the margin charged by your PSP or acquirer on top of interchange and scheme fees.
What you see as a merchant is usually a blended rate. A flat rate (for example, 2.7% + a fixed amount per transaction) is easy to budget for, even though it bundles all three cost components. International card transactions typically carry an additional surcharge because cross-border interchange is higher. Higher volumes generally give you leverage to negotiate better rates with your provider.