Electronic payments are financial transactions conducted through digital systems rather than physical cash or checks. When a person purchases a product online or taps a card at a terminal, an electronic payment moves funds from their account to the merchant's account through a chain of intermediaries.
These intermediaries — payment gateways, processors, card networks, and banks — each play a specific role in authorizing, clearing, and settling the transaction.
A typical card payment follows this sequence.
- Initiation: The person submits payment details (card number, expiration, CVV) through the merchant's checkout.
- Encryption and routing: The payment gateway encrypts the data and forwards it to a payment processor.
- Authorization: The processor routes the request through the card network to the issuing bank, which checks the account for available funds and fraud signals.
- Response: The issuing bank approves or declines the transaction. The response travels back through the chain to the merchant in milliseconds.
- Settlement: At the end of the business day, approved transactions are batched and settled. The issuing bank transfers funds through the card network to the merchant's acquiring bank.
| Payment type | Description | Example |
|---|---|---|
| Credit and debit cards | Card credentials authorize a transfer from the cardholder's account | Visa, Mastercard |
| ACH / bank transfers | Funds move directly between bank accounts through the Automated Clearing House network | Payroll direct deposits, bill payments |
| Digital wallets | Card or bank credentials stored in a mobile device for contactless payments | Apple Pay, Google Pay |
| Contactless payments | Near Field Communication (NFC) or QR codes enable tap-to-pay at terminals | Tap-to-pay cards, mobile NFC |
| Entity | Role |
|---|---|
| Person (cardholder) | Initiates the purchase |
| Merchant | Sells goods or services and accepts payment |
| Payment gateway | Encrypts payment data and routes it between the merchant and processor |
| Payment processor | Communicates with card networks and banks to authorize transactions |
| Card network | Provides the infrastructure connecting issuing and acquiring banks (Visa, Mastercard, etc.) |
| Issuing bank | The person's bank; holds their funds and approves or declines transactions |
| Acquiring bank | The merchant's bank; receives settled funds |
As a developer integrating with Reefpay, you interact primarily with the gateway layer. Reefpay handles encryption, processor routing, and response normalization so your application does not need direct connections to processors or banks.
Understanding the full transaction flow helps you:
- Design correct authorization and capture workflows
- Handle declines and errors with appropriate person-facing messages
- Implement settlement reconciliation against batch reports