The Lifecycle of a Single Debit or Credit Payment

October 8, 2018

Debit and credit transactions seem to happen in the blink of an eye – a quick tap of your card or smartphone, a few seconds of processing time, and you can be out the door.

But what you don’t see is all the steps that go on within those few seconds that make the transaction possible, the lifecycle of the transaction process. For payment processors like us here at Moneris, it’s all those steps between tapping a card and depositing revenue into a merchant’s account that we take to heart. There’s a number of different variables that can impact the way the lifecycle works, but in most scenarios, the lifecycle is something similar to the below!

Step 1: Interaction

The first step to any debit or credit card transaction is the use of the card! Card use can be done on a number of different platforms, including payment terminals, virtual terminals and online solutions, in a number of different ways, including chip & PIN, contactless, card-not present transactions, ect. Regardless of however a customer chooses to make a payment, once that initial interaction with a processing device starts, the lifecycle begins.  

Step 2: Back and Forth Communication

Once a payment has begun, there’s a chain of communication that happens between a few different parties. The payment processor will acknowledge the payment, and notify the issuer of the card involved; the issuer will identify the account information, and determine whether or not the transaction is approved to move forward; that decision is then sent back to the payment processor, who then communicates it to the platform that the purchase was prompted on.

This communication chain is what occurs during the few seconds of processing time that customers have become accustom to waiting for. But this isn’t close to the end of the process of completing a payment, and many more steps continue to go on after the customer has left. 

Step 3: Batching 

It might surprise you to know that once a card issuer has approved a transaction amount, that money isn’t immediately deposited into a merchants bank account.

What happens next is something called batching. Here, transactions for merchants are grouped together for a short period of time until the payment processor’s batching cycle is complete – typically the end of the day.

Step 4: Secondary Authorization

Once the batch cycle is complete, payment processors may have a different set of steps that they follow before moving money into a merchant’s account. Typically, there is some sort of fraud-detection service that occurs, to ensure that there was nothing risky about the approved transaction that the card issuer may want to double check before clearing.

Step 5: Clearing

Once the tests are run the batch cycle is complete. The time between a finished batch cycle and settlement into the merchants account varies depending on a few variables, including the bank the information is going to and it’s processing speeds, where the money is coming from, and if there were any red or yellow flags that appeared during screening. Once it does happen though, the money has safely been moved between parties, and the lifecycle of the initial payment is complete!

Choosing the right payment method for your business is important. To learn more about the best payment solutions for your business, check out our articles The Best Online Payment Methods For Your Business and 5 Reasons Why Merchants Choose Moneris.


The information in this article is provided solely for informational purposes and is not intended to be legal, business or other professional advice or an endorsement of any of the websites or services listed. 

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