How Payment Gateways Work: Card-Tap to Bank Deposit
The full end-to-end journey, the three phases, and where each fee accrues.
Every card transaction goes through authorisation (real-time check that the card is valid and the customer has funds), clearing (batch process that records the obligation between issuer and acquirer), and settlement (the money actually moves into your merchant bank account). Fees accrue at each phase but only the merchant sees the bundled net amount.
End-to-end transaction flow
Phase 1: Authorisation (real-time, ~250ms)
- Customer enters card details on your checkout (or taps NFC, or dips a chip).
- Gateway captures the card data and tokenises it. PCI scope ends here for SAQ-A merchants.
- Processor sends the authorisation request to the card network.
- Card network routes to the issuing bank.
- Issuer checks: valid card, sufficient funds, no fraud flag.
- Issuer returns approval (or decline) with an auth code.
- Customer sees 'Payment successful' or a specific decline reason.
Phase 2: Clearing (batched, T+0 to T+1)
At end of day (or in real time on most modern stacks), the merchant's processor submits a clearing file to the card network. Clearing records the obligation between the issuer and the acquirer. No money has moved yet, but the transaction is now committed.
Phase 3: Settlement (T+1 to T+2)
The acquirer credits the merchant's bank account (minus all fees) on the agreed settlement schedule. Same-day or instant payout services (Stripe 1% instant, PayPal Push to Bank) compress this window for an additional fee.
Where each fee accrues
- Authorisation: gateway and processor fees (the per-transaction cents).
- Clearing: interchange and assessment (the per-transaction percentages).
- Settlement: payout fees if any (Stripe instant 1%, PayPal push to bank).
- Disputes and refunds happen outside this flow and carry their own fee schedules. See chargeback fees by gateway.