You are interested in providing your customers with the ability to safely and comfortably perform online payment transactions. Since payment service providers are not all the same and have differentiated offers throughout various markets, you most surely need to understand a bit more than where do the customers enter their card details? and how do I cash in?

This article is meant to cast light on the individual steps and processes entailed by every online payment transaction made today, regardless of currency, region, or business type.

Please note that payment service providers will differentiate offerings by setting installation fees, processing fees, and percentual rates at the online payment transaction stages that are within their reach, so it pays to know these stages well enough to take the best decision for your business and avoid the pitfalls of the payment services sector.

What Are the Entities Involved in Online Payment Transactions?

Well, to start with, you and your customer. You and your customer are the leading players in this arena, and the game is called "safe online payment transaction." From the moment your customer presses that Pay Now button to the moment the funds are in your merchant account, it all takes three seconds, and it is one of the most impressive feats of automation ever deployed by the financial sector.

Apart from you and your customer, the other entities involved are the payment gateway (aka payment aggregator), the payment processor, the card networks, and the issuing bank.


To make things easier, let's place this three-second ordeal within a realistic scenario: your customer, Ursula, is about to use her Mastercard to purchase an item from an online shop owned by you, Igor. Just for the fun of it, let's say that the article in question is a great big roll of Donald Trump Toilet Paper, one of Igor's bestsellers since late 2016.

Ursula hits the Complete Purchase button and, in about three seconds, Igor's internet merchant account is supplied with $6.98, the retail value of a Donald Trump Toilet Paper roll, while the item is already flagged for delivery by Igor's ecommerce system.

The 7 Steps of Online Payment Transactions

To make the online payment transaction possible, Igor had previously set up an internet merchant account (IMA) and a payment gateway. Here is precisely how it all plays out when Ursula hits that final button on Igor's checkout page:

  1. Ursula provides her payment information (credit card details) and smashes the Buy Now button, commited to purchasing a stunning, yet a bit expensive Donald Trump Toilet Paper roll;

  2. The payment gateway picks up the online payment transaction information and encrypts it, before swiftly sending it to the approved payment processor, along with other concurrent online payment transactions;

  3. The payment processor passes the payment information along to the relevant card network - in our case, Mastercard;

  4. The card network performs a check with the issuing bank (the bank that issued Ursula's Mastercard) whether Ursula's transaction can be authenticated. If everything checks out at this stage, the online payment transaction is authorised and Ursula's card is immediately debited by the issuing bank;

  5. The issuing bank sends a confirmation of the payment authorization to the card network, thus letting Mastercard know that Ursula has been authorized to complete a $6.98 online transactions. By the way, this is when the issuing bank also informs Ursula that her card is being debited;

  6. The card network further confirms the validity of the online payment transaction to the payment processor and the payment gateway;

  7. The payment gateway delivers the good news to the merchant and Igor is now free to inform Ursula that her wonderful Donald Trump Toilet Paper roll is on its way. 

Remember: all this happens in less than three seconds. Six separate entities communicate efficiently, quickly, and safely, in seven separate stages, in less than three seconds, while thousands upon thousands of such online payment transactions are completed every single second. 


How is that for automation awesomeness?

Let's Sum Up

Basically, when the customer places an order on the merchant’s website, the payment gateway securely gathers and stores the transaction data, which is processed and forwarded to the financial institution and to the credit card networks, which, in turn, transfer the encrypted information to the customer’s card issuing bank for approval.

When the payment is confirmed by the issuing bank, the information chain is backtracked, and the merchant informs the customer, within three seconds since the order, that the transaction has been completed successfully.

Fun fact: at no point in time does the payment gateway directly interact with the customer’s or the merchant’s money. That remains the banks' job. 

Twispay is backed by its own financial institution, so we are able to simplify these processes and more efficiently aggregate payments in such a way that ultimately allows us to lower costs for our merchants, whom we consider to be partners, not customers.

Moreover, we are quite invested in keeping communication channels wide open to our partners and provide useful information and actionable insights in order to make common growth possible.