What Actually Happens with an Online Payment?

Mia Gardner | 02 Nov 2017

What Actually Happens with an Online Payment?It’s hard to imagine that not too long ago, ecommerce and the daily practice of paying online was unheard of. At the time when gaming halls reigned supreme and playing on your smartphone was a futuristic concept, the only way to transact was with cash or card. In the past 15 years, the number of online businesses and ecommerce stores have increased a thousand-fold. For the average person, transacting online is part and parcel of your daily routine. Whether it is funding your online gaming account, buying music, paying your lights and water bill, or topping up your airtime, it has become second nature for us to pay online.

We take for granted the fact that we can all remember a time when online transactions simply did not exist. But have you ever taken the time to think about how online payments actually work? In the UK alone there are loads of online payment options available including Visa, MasterCard, Skrill, Neteller, PayPal, Trustly and WorldPay, to name just a few. Knowing how online payment systems work will give you a better idea of what is happening with your money and how secure your transactions really are.

From Your Account to Theirs

In order to process an online payment, there are four main components that need to work in unison. These include a merchant account, an issuing bank, a payment gateway and a payment processor. On the merchant side, in the case of slots or other games, this is the online casino operator, and they need to have a merchant account. This is a physical bank account where all the money from their sales or services will be deposited.

Next, we have the issuing bank. This is essentially your own bank where your debit or credit card is linked to. Web-wallets are a little different, but we will get to that. If you are doing a direct bank transfer, your issuing bank simply transfers funds from your bank account into the merchant account. In order for your funds to get from your card/account into the merchant’s account, the merchant needs to have a payment gateway. This is a kind of middleman service between the customer and the payment gateway.

The Payment Gateway

The Payment Gateway

For online merchants, a payment gateway is a software-based system that authorises the transaction. In the case of card payments, the payment gateway is used to check the validity of the card, determines the issuing bank, encrypts the data and then tells the merchant bank to initiate the transfer. Sites that use an online shopping cart will use the info to send it off to a payment gateway. From there, the transaction is sent to the payment processor. This is the entity that actually does the transaction of the payment.

Payment Processors

In the case of web-wallets, the payment gateway and the payment processor are one and the same. Since you are not using an issuing bank, the funds move within the payment processor itself. This is mainly why web-wallets payments and cash outs are instantaneous while card transactions can take a few days to process. In the case of card payments, the payment processor transfers the actual payment between the two bank accounts. The processor takes the information from the gateway and checks it with the issuing bank to confirm if the payment is valid, if the info matches and if the funds are actually available.

Card Associations

In amongst all this, we have the card associations. These are companies like Visa or MasterCard. They function as a type of payment network between your bank, the merchant’s bank and everyone in-between. What they do is set specific payment transaction rules like the interchange rate, or the percentage of orders that can be chargebacks.

Now you know a bit more about how online transactions work you can choose an option that suits you, and play real money casino with complete peace of mind. Trusted banking solutions are always the best option, and when you opt for a reputable provider, you can rest assured your funds are in good hands!