Every time a customer checks out, whether it’s tapping a card at a café or buying online, money has to move securely from their account to the merchant’s. Behind that simple moment is a chain of players: banks, card networks, gateways, and processors. Understanding these parts of the payment process helps merchants identify where to optimise, improve approval rates, and avoid extra fees.
What is payment processing?
Payment processing is the set of steps that transfers money from the customer to the business. It includes verifying the payment method, authorising the transaction, transferring the funds, and recording the details. The same principles apply whether the payment happens online or in person.
Why is it important?
When payments fail, sales are lost. In 2020, failed payments cost businesses an estimated US$118.5 billion worldwide, and 60% of organisations reported losing customers as a result.
Customers expect payments to go through without friction. If a payment method isn’t supported or a transaction is declined, they may abandon the purchase and switch to a competitor. For merchants, weak systems can also create reconciliation errors, chargebacks, and extra support work. A reliable process prevents these problems and protects revenue.
Key players in the payment process
- Customer or cardholder: chooses a payment method and provides the details.
- Merchant: accepts the payment and receives the funds through connected systems.
- Payment gateway: captures and encrypts sensitive data, then transmits it securely.
- Payment processor: carries information between the gateway, networks, and banks, and coordinates authorisation and settlement.
- Acquiring bank: provides the merchant account and ensures funds are deposited into it.
- Issuing bank: the customer’s bank, which approves or declines the transaction depending on account status and available funds.
- Card networks: Visa, Mastercard, and others that connect acquiring and issuing banks, enforce rules, and route transactions.
How payment processing works
1. Checkout and encryption
The customer picks a payment method and confirms the amount. The payment gateway captures the details, encrypts them (or tokenises the card), and sends a secure request to the processor.
2. Authorisation
The processor passes the request through the card network to the customer’s issuing bank. The issuer checks funds, card status, and risk, then approves or declines and returns an authorisation code (an approved card payment also places a temporary hold).
3. Confirmation and capture
On approval, the merchant confirms the order. For in-person sales, the charge is usually captured immediately; online, capture may happen at ship/fulfilment. If not captured, the authorisation will expire.
4. Clearing and settlement
Captured transactions are batched and sent for clearing. Issuers send funds (minus interchange) to the acquirer, which deposits the net amount to the merchant’s account according to the payout schedule.
5. Reconciliation and reporting
The merchant reconciles payouts (net of fees, refunds, and chargebacks) against orders, investigates gaps, and updates accounting and BI reports.
Top preferred payment methods
Offering relevant payment methods improves conversion rates:
Digital wallets
Digital wallets are the most popular payment method in global e-commerce. In 2024, they accounted for 53% of online transactions worldwide, and that share is expected to rise to 65% by 2028. Adoption is especially high among younger shoppers, with 91% of Gen Z in the US using digital wallets regularly.
Regional differences remain strong: e-wallets make up about 60% of e-commerce payments in Asia-Pacific, compared to just 20% in Latin America.
Credit and debit cards
Even as new options like e-wallets and bank transfers grow, cards remain the second most popular method worldwide, responsible for 20% of global online payments in 2024, according to PCMI. Usage patterns differ by market. In the UK, around 30% of online shoppers prefer debit cards, while credit cards are the preferred choice in the US.
Buy Now, Pay Later (BNPL)
Buy Now, Pay Later has expanded quickly in recent years, particularly across Europe. Analysts expect the global BNPL market to add around $450 billion by 2026. In fact, by 2024, Northwestern Europe accounted for eight of the world’s ten largest BNPL markets. Providers such as Klarna have been central to that growth, turning BNPL into a standard way to pay online in the region.
Regional payment methods
Local payment methods often outperform global ones in their home markets. PCMI projects Pix to make up 51% of e-commerce transactions in Brazil by 2027. In Asia, mobile wallets are dominant, for example, GCash and PayMaya lead in the Philippines, PhonePe in India, and AliPay in China.
How to optimise payments
- Offer multiple ways to pay. Credit and debit cards are essential, but don’t stop there. Add bank transfers, digital wallets, and local methods your customers expect. The more options you give, the fewer carts get abandoned.
- Route through local acquirers. Using local acquiring banks usually means higher approval rates, fewer declines, and often lower interchange costs compared to cross-border processing.
- Keep data secure. Follow PCI DSS standards and use tokenisation so sensitive card details aren’t stored directly. This lowers both risk and compliance burden.
- Apply strong fraud prevention. Tools like Antom Shield can flag suspicious patterns in real time, while standard checks (CVV, AVS, 3D Secure) add extra layers of verification without blocking legitimate customers.
- Encrypt everything. End-to-end encryption makes sure payment data can’t be intercepted in transit, which is critical for trust.
- Reconcile daily. Match your sales records against settlements every day. That way, you’ll spot missing funds, processor errors, or chargebacks early — before they escalate.
- Handle refunds and disputes openly. Fast refunds and clear policies reduce the chance of a customer escalating an issue to their bank.
- Educate your team. Fraud prevention isn’t just about software. Train staff to recognise unusual transactions or misuse of payment methods so problems are stopped before they spread.
Why global merchants choose Antom
Merchants need payment systems that handle more than just card payments. Customers expect to use local wallets or regional methods, and each market has its own requirements. For finance and operations teams, the challenge is avoiding multiple providers, manual reconciliations, and delays in settlement.
Antom addresses these issues directly. It supports global and local payment methods on one platform, applies advanced fraud checks to reduce false declines, and offers daily settlement tools so finance teams know exactly when funds will arrive. For companies expanding abroad or aiming to lift approval rates, Antom provides a straightforward, reliable way to manage payments across markets.
