On a basic level, online payments are processed quickly due to the automated communication between card issuers and merchant service providers. This ensures that payments can be verified and processed instantaneously and makes the transaction appear seamless to the customer.
On a more complicated level, the likes of payment gateways and fraud detection models are at work to ensure transactions are not only fast, but also safe and secure. This guide will explore the topic of quick online payment methods further.
The Importance of Fast Online Transactions
Fast payment processing technology helps improve customer experience. On everything from e-commerce to online casinos, fast payments increase customer satisfaction and decrease abandoned transactions.
Real-time processing helps e-commerce businesses build a strong customer base. A seamless and speedy checkout process, in addition to instant purchase confirmation, enhances customer trust in a business. Customer loyalty can be fostered through fast online transactions.
Instant processing also ensures that refunds and withdrawals can be processed quickly. On a fast withdrawal casino UK players can access, not only are deposits processed promptly, but payouts are instant, too. This is thanks to their compatibility with e-wallets like PayPal and other fast payment methods like crypto.
The Different Components of Online Payment Processing
Besides the customer’s bank and the merchant service provider, there are a host of other components needed to make fast payment processing a possibility. These components are:
- The card issuer/issuing bank – The bank that the customer uses. This bank verifies the payment and communicates this verification with the merchant service provider
- The merchant service provider – This is the company that provides the business with payment services. Beyond providing credit card terminals, they also facilitate all incoming transactions
- Payment gateway – This component transfers the information between the payer’s issuing bank and the payee’s account
- Acquiring bank – The merchant’s bank that receives the transaction via the merchant service provider
- Fraud detection and prevention – These tools are used to verify the legitimacy of the payment to prevent fraud
- Settlement and funding – These components collect the payment from the payment gateway and deposit it in the recipient’s bank
How Online Payments Work
When a customer initiates a payment on a merchant’s website using a credit or debit card, the transaction follows these steps:
Payment initiation
The customer initiates the transaction by selecting their desired product and entering their payment information. Once the data has been entered and the purchase confirmed, the inputted information is encrypted to protect the customer’s privacy.
Merchant receives payment information
Payment details are forwarded to the business and are then sent to the payment gateway.
Payment gateway
The payment gateway can be seen as the middleman between the merchant’s website and their acquiring bank. The gateway carries out initial fraud checks before transmitting it to the payment processor.
It’s important that as many fraud checks as possible are carried out during the processing of payments given that the AFP found that 80% of organisations were victims of fraudulent payments or attempted fraudulent payments in 2023.
Payment processing begins
The payment processor sends an authorisation request to the customer’s card network. This is done to confirm whether the customer’s bank details are correct and to ensure that they have sufficient funds to cover the transaction.
Issuer verification
It’s then up to the customer’s bank to verify the customer’s details. This is done by performing specific checks, such as a Card Verification Code (CVC) check. The bank will then carry out an Address Verification Service (AVS) to verify the correct billing address has been used and fraud detection to check for suspicious activity.
Authorisation response
The customer’s bank will then send a payment approval or denial back to the receiving bank. If approved, the merchant service provider takes full responsibility for the payment. The customer is also notified that the payment has been processed successfully.
So, while the payment has not yet been received by the acquiring bank, it is officially processed by this stage – which explains why online payments can be processed so quickly.
The response is also sent to the payment processor and gateway, which lets the business know whether the payment has been a success or a failure.
Settlement and funding
Now that the processing stage has been completed, the settlement and funding processes can begin. During this final stage, the actual transference of the funds between the customer’s bank and the acquiring bank will take place.
Do Merchants Receive Payments Instantly?
Most merchants do not receive payments instantly because the most popular payment method for online transactions remains debit cards.
According to UK Finance, debit cards account for half of all financial transactions. Unlike payment wallets, transactions that are completed using debit or credit cards take a few days to complete settlement and funding.
Payment processing is different from receiving a payment. Once a payment has been processed, the settlement and funding stage begins. Processing specifically refers to the verification of the payment rather than the delivery of it.
Once a digital payment has been processed, it can take anywhere between 1 to 3 days to settle. The processing stage verifies that the payment is legit and confirms to the merchant that they will receive the payment at a later time.
However, this is not the case for merchants who accept e-wallet transactions. For example, PayPal transactions can be completed at a much quicker rate than payments sent via a bank.
Many online casinos accept e-wallet payments. Not only does this mean that the casino can receive payments at a faster rate, but also that withdrawals land in players’ accounts sooner. Some online betting sites even accept cryptocurrency, which also ensures fast payment and withdrawal times.
