Posts
What is a Payment? (The Anatomy of a Transaction)
A payment is the movement of value between two parties. Most often, a buyer and a seller settle the cost of goods or services. While this may sound simple, each payment triggers a sophisticated chain of actions between financial institutions, networks, and technology platforms that together form the global payments ecosystem.
In a typical card payment, the process starts when a customer initiates a transaction at a point of sale or online checkout. This request flows from the merchant to their acquiring bank (or acquirer), which connects to a payment processor responsible for routing and managing the technical message known as an authorisation request. That request is then passed through a card network such as Visa, Mastercard, or Discover, before reaching the issuing bank or issuer, the institution that issued the card to the customer.
The issuer verifies the card details, checks the available balance, and performs fraud and security checks such as 3D Secure, tokenisation, and velocity limits. If everything checks out, the issuer sends an authorisation approval back through the network to the acquirer and finally to the merchant’s terminal or checkout page, usually within two to three seconds.
Once authorisation occurs, the transaction moves into the clearing and settlement phase. During clearing, transaction data is shared between the acquirer and issuer to calculate the exact amount owed, including interchange fees, scheme fees, and FX conversions if the payment crosses currencies. Settlement is when the actual transfer of funds occurs, moving money from the issuer to the acquirer and finally into the merchant’s account.
Each stage is underpinned by strict regulatory and compliance frameworks like KYC (Know Your Customer), AML (Anti-Money Laundering), PSD2, and PCI DSS, all of which ensure payments are secure, traceable, and compliant with financial laws.
Understanding the anatomy of a payment is foundational to anyone working in fintech, embedded finance, or Web3 payments. It highlights how issuers, acquirers, card networks, and processors work together to create the seamless, real-time experiences we take for granted.
At Monavate, we sit at the heart of this ecosystem, providing the infrastructure, licensing, and technology that allow businesses to issue cards, process payments, and innovate with confidence across currencies, geographies, and digital economies.