Demo article created to preview the Explainers section.
A card payment can look like a single action at the checkout. Behind the approval message, financial institutions exchange instructions that authorize the purchase and arrange the transfer of money. This example follows a card transaction; other digital payment methods can take different routes.
The merchant sends the payment information to its acquiring institution, which serves the merchant’s side of the transaction. A card network carries the authorization request to the institution that issued the customer’s card. Mastercard’s explanation of a card purchase identifies the roles of the merchant, acquirer, network and issuer.
The issuer approves or declines the request, and the response travels back to the checkout. Authorization establishes whether the transaction can proceed. It is a separate step from transferring the funds between the institutions.
Clearing then exchanges the transaction details needed to update accounts and reconcile the amounts involved. Settlement handles the movement of funds between the issuer and acquirer. Mastercard describes these as distinct processing activities.
The acquirer credits the merchant’s account as part of the payment process. The customer’s approval message and the merchant’s receipt of funds therefore refer to different points in the same transaction.