payment gateway

When most merchants think about credit card payment processing, they think of a card scheme, i.e., a payment network that uses cards such as Visa or Mastercard. However, completing a successful credit card transaction entails a combination of an entire ecosystem of players and a series of actions.

Now for merchants figuring out the best ways to accept credit cards online and choosing the right payment processor might seem a bit of a task. Since it is the heart of your eCommerce operation, it is necessary to gain some insight into how the credit card processing system works. In this guide, we have decided to create a checklist of things you must be aware of before choosing the cheapest payment gateway to start accepting credit card payments.

Understanding credit card processing system

Online credit card processing happens when a customer makes online payments using credit cards in the eCommerce store. The system involves a credit card processor and a payment gateway to ensure the merchant receives the exact amount.

With the significant rise in the popularity of digital payments, credit card processing has become more of a necessity these days. According to surveys, there has been a decline of about 43% in the use of cash between 2019 and 2020.

The credit card processing ecosystem

To make it easier for merchants, let us help you identify the key players in the ecosystem. From the moment a customer clicks on the “Pay Now” button on the website or application till the merchant receiving the payment, below is the process how it works:


Customer that initiates the online transaction using a credit card.


The business owner that sells products online and accepts payment through a payment gateway.

Issuing Bank:

The issuing bank issues credit cards to consumers on behalf of the networks such as Visa or Mastercard. The issuing bank sends the funds to a merchant’s accounts when a customer pays using a credit card.

Acquiring bank:

An acquiring bank or merchant bank deposits funds from credit card sales into a merchant’s account. The bank manages and underwrites the merchant’s account to allow merchants to accept credit and debit cards. While doing so, it carries the same risk as issuing a line of credit.

Payment processor:

Issuing and acquiring banks do not possess the infrastructure to connect directly to a payment network. This is where a third-party payment processor comes into the picture to join the merchant with the financial institutions and authorize transactions and facilitate fund transfer.

Credit card payment gateway: 

Integrating a single payment processor might be challenging. In a majority of cases, a company take advantage of multiple payment processors. A payment gateway offers a single interface that connects with multiple payment processors and provides value-added services like tax calculation, hosted payment pages, 3D secure, mobile SDK, fraud management to reduce PCI scope, and more.

Payment service providers:

They work with merchants and acquiring banks to facilitate and manage the entire process of online payment, with most having their own gateways. With merchants software and APIs to collect payments effectively, merchants can improve the overall payment experience for their customers.

PayKun is an example of a payment service provider that aims to give merchants the opportunity to have access to cards and alternative payment methods both locally and internationally. If you are looking for a comprehensive payment solution to grow your business globally, look no further.

A brief overview of the credit card payment process

The card transaction information is transferred from the acquiring bank to the issuing bank, followed by a movement of payment to the acquirer to confirm the payment.

Credit card payment authorization

Authorizations permit or deny a cardholder from paying using a credit card. The cardholder’s information is sent to the acquiring bank for routing through the card network to the cardholder’s issuing bank for approval. The transaction is granted or denied once the necessary checks are made. This includes validation of the transaction information, available funds in the issuing bank and more.

Capture requests

When the merchant initiates the collection for their services, they perform a capture in real-time when the authorization happens. These capture requests are sent to the gateway throughout the day, held and submitted to the acquiring bank in one batch each night, usually before midnight.


during the settlement process, funds are moved from the issuing bank to the acquiring bank through ACH.


This is the step when merchants receive payment into their bank accounts. If a merchant has their deposit account at the same bank as their merchant account, in that case, next-day funding happens.

Choosing a payment gateway for credit card payment processing

While choosing a merchant credit card processing system and payment gateway may seem a lot of legwork, that does not have to be so. Since the safety of your client’s credit card information and your brand reputation are at stake, choosing the right credit card payment solution is vital.

PayKun makes it easier for merchants to manage the credit card processing system, providing flexible payments for customers. So, make sure that you connect with us to start your online payment collection journey today!

By Anurag Rathod

Anurag Rathod is an Editor of, who is passionate for app-based startup solutions and on-demand business ideas. He believes in spreading tech trends. He is an avid reader and loves thinking out of the box to promote new technologies.