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How do payments work?

Learn about how money gets from your card or mobile wallet to the payee or merchant.

What is a payment?

A payment happens when money is transferred in exchange for goods or services. Most payments happen with privately-issued electronic money, for example — money in your bank account is transferred to the merchant's bank account. 

The 5 steps for processing an electronic payment

banknote and credit card icon

Step 1a — Payment instrument
To make a payment, you as the payer need a payment instrument (for example — a debit card, bank payment or e-money within mobile wallet).

Step 1b — Payment gateway or
acceptance device 
The payee or merchant needs a payment gateway (for example —  a card terminal at the point of sale or receiving mobile wallet) to accept your payment.

Step 2 — Instruction
This involves an instruction from the payer (you) to your bank to transfer funds to the payee or merchant.

Step 3 — Authorisation
Your bank needs to authorise the payment by checking there are funds available.

Step 4 — Clearing
Once the payment is authorised, your bank sets up the transaction with the payee or merchant's bank.

Step 5 — Settlement
The money goes out of your account and is transferred to the payee's account.

Typical participants in an electronic payment

We need interconnecting systems, services and products to make sure a payment is successful.

These systems, services and products are provided by a range of entities or participants — from you as the customer, to a payment service provider (such as Visa), to your bank, and to the merchant's bank. 

Entities in the payment landscape