Swipe secrets: The story of your card transaction

Picture this: You're standing in a line at your favorite coffee shop. The barista hands you your latte, you tap your card on the terminal and within a second or two, you hear that satisfying “beep” confirming your payment. But have you ever wondered what happens in those few moments? Most of us don’t care, after all, who has time to think about the mysteries of payment processing when the aroma of fresh coffee is calling? ??

Yet, every time you tap your card, a fascinating journey unfolds in the background. A journey that involves multiple players working in perfect harmony to ensure your transaction goes through smoothly. I’ll admit, before joining the payments industry, I didn’t give it much thought either. But now that I live and breathe this stuff, I thought, why not break it down for you in plain, everyday language?

Step 1: The Consumer — That’s You!

It all starts with you, the consumer. So whether you're buying that coffee, a pair of sneakers or subscribing to an online service, you're the one who initiates the process. You tap, swipe or insert your card and in doing so, you start a communication chain which is technically called the Four-party model. Simply speaking, a behind-the-scenes conversation between a few key players before you see that reassuring green “Approved” on the card terminal.

Step 2: The Merchant — Coffee shop?

Next up is the merchant, say the coffee shop, restaurant or online store you’re buying from. While they’re happy to accept your card, they don’t have the means to check if your card is valid or if you have enough funds. So, they rely on the next two key players to handle that for them. This is where things get interesting, as the merchant steps aside and lets the Pros take over.

Step 3: The Acquirer — Coffee shop’s bank

The acquirer is the merchant’s bank, think of them as the merchant’s bank who ensures that the payment flows smoothly from your bank account to the merchant’s account. When you tap your card, the acquirer starts a conversation with your bank i.e. the bank that issued you the card (aka Issuing Bank). What do they talk about? Well, the acquirer asks the issuing bank, “Hey, is this card valid and does it have enough money on it?”. The issuer then begins his side of work (below).

Step 4: The Card Issuer — Your Bank who issued you the card

Finally, we arrive at the card issuer i.e. your bank who issued you the card in the first place. When the acquirer sends over the payment request, your bank’s job is to verify that you have enough funds to cover the purchase. If everything checks out, your bank gives the green light, saying, “All good here, let’s make this happen!”

Recapping the full circle…

Four parties, one mission: You get your coffee and the merchant gets paid lightning fast !!

So, how does it all come together? When you tap your card, the merchant sends your payment details to their acquirer, who then forwards it to your bank (the card issuer). Your bank checks if the funds are there and, if all’s well, authorizes the payment. The acquirer then ensures that the merchant gets paid. And just like that, within a few seconds, your transaction is complete.

If you think about it, the most routine actions in our day-to-day lives often have a fascinating, and sometimes under appreciated, story behind them.

So, the next time you’re in line for your latte, you might just think about the little “chatter” your card is about to start. And while your mind may still be on that first sip, at least now you know the story behind the swipe.

Here is a video I made to help visualize this journey.