How Does Payment Processing Work?

How Does Payment Processing Work?
Share on facebook
Share on twitter
Share on linkedin
Share on email

As is the case with a lot of things related to technology, electronic payments seem much simpler than they are.  The person paying either scans or enters his or her credit card number and – Voilà! – the money appears in the seller’s business account not long thereafter. 

It’s just that simple, right? 


There are a lot of steps involved with electronic payment processing, and each one needs to be built and managed properly in order to maintain the flow of revenue.  If you’re someone who handles back office solutions, you’re likely spending time working on your payment processing situation.  If you’re new to this or you’re experiencing problems, then you probably already realize that this can be quite complicated.

Therefore, Curious Check would like to provide you with a straightforward explanation and an answer to the question, “How does payment processing work?”  We’ll take you through a step-by-step transaction so that you can get a feel for what actually happens from the time the customer agrees to buy to the moment the funds are available to your business.  We are doing this because that’s what we do – Curious Check helps our partners fins the right payment processing systems for them so that their transactions can be handled quickly, safely and painlessly.

If you need to find great payment processors for your online business or brick and mortar, read our blog on our top credit card alternatives to Paypal & Stripe (all with lower rates).

The Credit Card Processors Work (5 Steps)

1. The Credit Card Payment

The first step, of course, is the payment itself.  Your customer presents a credit card, either online or in-person, and you accept that payment.  

While different payment processing systems work in different ways in terms of their particularities, the first step that any system is going to take is to record that payment information, meaning the credit card number, expiration date and verification number at the very least.  That information is not stored for long in that form, as it needs to be sent in a way that minimizes the chance that it can be stolen.

2. The Encryption

Encryption is the most important aspect when answering the question of how payment processing works.  That’s because every second of every day, people and computers are out there trying to steal information, payment information in particular.  

According to information on the Council of Insurance Agents and Brokers’ Web site, one National Security Agency data center located in Utah was experiencing 300 million hacking attempts every day.  Small and medium businesses do not face that level of scrutiny, but hackers are out there watching.  The payment data needs to be encrypted and authenticated by the payment processor in order to minimize fraud and theft.  This happens immediately after the information is taken.

3. The Payment Authorization

In addition to protecting from fraud and theft, payment processors need to be able to immediately tell the seller if that credit card is valid and therefore can be used in this transaction. 

There are many reasons that a credit card may not be authorized, including suspension of the account for nonpayment, suspicion of fraud, the card is over its limit and any other situations that could arise.  The payment processor needs to answer this question within seconds so that the seller can prevent a faulty sale.

4. The Transfer

The penultimate step that a payment processing system takes is to transfer the funds to the seller’s receiving account after the information has been encrypted and the transaction has been authorized. 

Once again, this is a transaction that needs to be encrypted while those funds are “traveling through cyberspace” so that hackers cannot reroute that payment to a different account, thereby causing the seller to never see them.  The initial transfer of funds to the seller’s account usually takes seconds, but it can take a bit of time for those funds to actually hit that bank account’s ledger.

5. The Arrival

Finally, after all of the steps above are taken, the funds arrive in the seller’s bank account and are available for use. 

Different payment processing systems and different banks have different time periods that exist between payment and the ability to access funds.  Some are nearly immediate, but others can take a few days depending on a whole host of factors.  Regardless, at this point, the transaction is truly complete.

As you can see, the question of how payment processing works is one that’s quite involved.  If you need this type of solution, you need one that’s scaled to meet your needs and protect your interests.  


CuriousCheck Software Finder & SEO Experts


If you’d like to learn more about what can work for you without getting overwhelmed, click this link to take a short survey.  Curious Check will be able to match you with payment processors that are a fit for your needs without the hassle and stress.  

Top Payment Processors for Businesses (Less than 2.9% per Transaction)

  • PayJunction – If making over $15k sales a month  –  Learn More
  • PaymentCloud– For High Risk and small business. 98% Approval Rating – Learn More
  • Shift Processing– New Zero Fee Processing – Learn More


accept payments with these merchant services and integrations with low fee


PayJunction accepts payments on your website or in-person​   Receive amazing financial reports, and drastically reduce processing fees compared to Stripe and Paypal. Just check

Read More »

Leave a Reply

Start Ranking on Google | Rebuild Your Site

Contact Our Team!

Send us a message below or book a call with our team!

Our Five Star Reviews on Trustpilot, Clutch and Google Speak for Themselves.

Ivan Cadena
Ivan Cadena
Verified Google Review
Read More
There’s no doubt when I say that Curious Check is a professional SEO company. Their SEO services are top-notch and their team listened to our needs. In just a few months our website traffic and search-engine rankings noticeably improved. New clients were finally finding us online! They're one of the best agencies we've ever worked with and would highly recommend them to anybody!
Jordan Beasley
Jordan Beasley
Verified Google Review
Read More
CuriousCheck is a blessing for anyone with questions on how to build a solid business foundation for future growth. 10 of 10 will recommend to colleagues and coworkers alike.
D Dozier
D Dozier
Verified Google Review
Read More
I threw a curveball, they knocked it out of the park. I was recommended by a client and I now eagerly recommend them to any small business.
Patrick Whiddon
Patrick Whiddon
Verified Google Review
Read More
I wish CuriousCheck was around when I had my first business- this has been a definite positive for the second time around and has made the hassles I went through the first time non-existent. Employees and staff are exceptional, and I would recommend to all my business comrades.
Lucas Gil Canton
Lucas Gil Canton
Verified TrustPilot Review
Read More
As the CEO of a Startup entering the HR/Background Screening space, being able to find all relevant players at one site is extremely valuable. Not only is it good to check the status of the market, and the innovations taking place, but also to find potential partners and applications we can use ourselves! I recommend CuriousCheck to anyone who wants to improve their business through...
Tracy Shatus
Tracy Shatus
Google Review
Read More
This company went above and beyond in listening to the needs of my small business and delivered in a big way!!! Within 4 months, ranking for top keywords and custom built our background check eCommerce platform!
Highly Recommended by Locals On Alignable
web design companies in georgia

 2020 CuriousCheck, LLC ©. All rights reserved – Atlanta SEO Company

Get a free site audit and suggestions for your website - No hassle

Free Expert Site Audit

Enter your email address to receive  FREE Traffic-Boosting suggestions and an audit of your site’s health. 

Easily Share with your SEO Team!