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The Online Payment Lifecycle

Hero Paymen Lifecycle Hero Paymen Lifecycle Placehoder
13 JULY 2020

When is an online payment complete? Is it when the consumer’s money is withdrawn? When the funds settle in the merchant’s bank account? A lot goes on behind the scenes with payments, who is to know where the official finish line is?

After completing a transaction, it may be a few days before the merchant sees the money deposited in their account. They may see it sitting in limbo, marked as processing. Or the transaction may be declined, and the payment reversed.

So, when is an online payment actually complete?

From Sending it to Settling it

Regardless of card type, all online payments go through the same basic sequence.

Once a consumer has submitted a payment through a merchant’s checkout page, the payment process has begun.

Before a payment can be settled into the right bank account, a payment service provider (PSP) and acquirer such as Bambora acts as an intermediary between the bank and the merchant. The process from start to finish looks like this:

  1. Purchase: A consumer completes a purchase on a checkout page.
  2. Authentication: The payment information travels through a payment gateway, which ensures that the data is correct, and that there is available money in the customer’s account. The payment information is collected and ready to be sent to the bank.
  3. Processing: A payment processor compiles the consumer’s payment information and sends it to the merchant’s banking institution. Here, the payment is in processing and will not be approved until the banking institution gives it the go-ahead.
  4. Approved: Once the banking institution approves the payment, the transaction is accepted, and the money is deposited into the merchant’s bank account.
  5. Complete: That’s it! The payment is now complete. After bouncing around from bank to bank, the money ends up where it belongs.

On the consumer side, the payment is complete when the money is withdrawn from their account. On the merchant’s side, the payment is not complete until they see the money in their bank account.

Although it may seem like the work of the payment is complete, a few challenges can happen along the way.

An Online Payment can be Un-Done

On both the consumer and the merchant’s side, a payment can be stopped before it is complete, or reversed after the fact. If a consumer is unhappy with their purchase, they may return it. If a payment is fraudulent, a chargeback may be issued.

Before an online payment is complete, it still needs to outlast several circumstances:

  1. Abandoned: A consumer can abandon a purchase before it ever reaches the gateway stage.
  2. Declined: The payment can be refused/rejected by the financial institution, for example, if there are insufficient amount of money in the consumer’s bank account.
  3. Void: The seller can cancel the transaction before it settles through the consumer’s account.
  4. Expired: An authorized payment has not yet been captured after a certain period, rendering it no longer possible.
  5. Return/Refund: The customer requested a return or refund, and the money is reimbursed to the consumer.
  6. Chargeback: Of course, no one’s favorite, the infamous chargeback. When a purchase is fraudulently made, a whole new process begins to ensure the money ends up in the right hands.

Most of the time, a payment will go through the process to completion. But every once in a while, a circumstance will arise that causes the payment to stop in its tracks. The good news? There are steps any business can take to ensure more payments end up completed. Just ask us how!

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