What happens when you make a card payment?

May 19, 2016

The UK is the biggest card payments market in the European Union, accounting for more than 30%* of all EU card spending, allowing cardholders to pay for goods and services easily, conveniently and securely.
Considering cards are the most popular payment method in the UK, have you ever wondered how your card transactions are processed and how the money is taken from your bank account?
It’s not imperative that you have an in-depth knowledge on the payment cycle, however it is useful to have a general understanding, on how things work, especially if you are a merchant accepting a number of card payments.
When you enter your PIN or swipe your card, the transaction appears to happen instantly. Surprisingly, the process is a lot more complex than you think and involves a number of stages and key players to ensure your transaction is processed correctly.

Here is a brief overview of who these key players are and their role in settling a card transaction.


The cardholder is someone who obtains a bank card (credit or debit) from an issuing bank.
The card payment cycle commences when a cardholder keys in their PIN or touches their card on a PDQ/terminal for a contactless payment. Both of these actions indicate that the cardholder is happy to proceed with the card transaction.


A merchant is the name for an organisation that sells goods or services.
Once the cardholder has entered their PIN details into the terminal, the card transaction details are then sent directly to the merchant’s/retailer’s acquiring bank.

Acquiring Bank (Merchant Bank)

An Acquiring Bank is a financial institution, also known as a merchant bank that is contracted with the merchant to collect funds from card issuers for goods sold by credit and debit cards.
The acquiring bank is responsible for receiving the card transaction details, and passing these through to the card issuer via the card scheme for authorisation.

Card Schemes

Card schemes manage and control the process of clearing of card payment transactions. Examples of card scheme organisations in the UK include; MasterCard, Visa, AMEX to name but a few.
These organisations are responsible for passing card transaction details from the acquirer to the issuer and for passing payments back to the acquirer (which in turn pays the merchant).

Issuing Bank (Cardholder Bank)

As you have probably guessed, the issuer is the bank, building society or financial organisation that provides payment cards to the cardholder.
The issuing bank has responsibility for transactions made on the cards that they have issued, and will be responsible for the final part of the process, which is debiting funds from the cardholders account.

For further details on card processing click here

Source – * &