The Cashless economy is driven by new innovations and tech-based solutions to make it faster, efficient, and transparent. We have come a long way from swiping the card to making a payment. The new smart systems are built to process digital payments with minimum to zero-contact and with improved efficiency. Although UPI (Unified Payments Interface) and Digital Wallets are growing in popularity and usage, card payments remain to be one of the reliable and secure payment methods. Hence, it is important to have a basic understanding of card payments, security essentials and how they are processed.

To understand the basics of online card payment, you must know a few basic terms used in FinTech sector. You can take a quick peek at our FinTech Glossary to familiarize yourself with the acronyms and portmanteaus commonly used in the FinTech Sector. The number of payment modes currently available in the marketplace is wide and varied but the most reliable and secure mode of payment is the Card Payment. Let us have a detailed understanding of behind-the-scenes of Card Payment. The lifecycle of online card payment can be divided into 3 distinct stages- Authentication, Authorization, and Capture.

Stage 1: Authentication-Authentication is the process of verifying a user's identity and their ability to access a requested account. For instance, entering online banking credentials (username/password/PIN) authenticates a user by identifying the individual and verifying that he/she is who they claim to be. Let us break this down into different steps to understand the Authentication Stage.

Step 1: Customer initiates the payment process for a purchase by swiping or tapping the Debit or Credit Card in the Vendor’s PoS terminal or enters the same card information online to make an online purchase.

Step 2: Payment Request is sent to the Payment Service Provider who has facilitated the vendor with the right financial tools.

Step 3: Payment Service Provider sends the Authentication Request to the Payment Gateway.

Step 4: The Payment Gateway sends the Authentication Request to the corresponding Card Network (Visa or MasterCard, etc.)

Step 5: Authentication Request is forwarded to the Issuer Bank, which responds with an OTP Page URL.

Step 6: The OTP Page URL is relayed through the card network, Payment Gateway, Payment Service Provider, and the vendor to reach the customer.

Step 7: The customer opens the OTP page to submit OTP to the issuer bank. Once the authentication stage is successfully completed, the payment cycle moves on to the Authorization stage.

Step 1: The Payment Service Provider sends an Authorization Request to the Payment Gateway, which connects with the Issuer Bank via the Card Network.

Step 2: The Issuer Bank performs a Health Check on the Card’s Account to know if the account has sufficient funds for payment or if the credit card limit has been exhausted.

Step 3: If the result of the evaluation is positive, the corresponding amount of money is charged or the same is blocked in the customer’s account. If declined, the subsequent notification and reason for transaction failure is sent to the customer.

Step 4: The customer’s role in the Payment Process ends with Authentication and Authorization. The vendor has one more step to complete to acquire the amount.

Step 1: Upon successful authentication and authorization stages, The Payment Service Provider sends a ‘Capture Request’ to the Acquiring Bank and helps settle the transaction amount to the merchant.

Step 2: As per the RBI (Reserve Bank of India) guidelines, the ‘Capture Request’ for online card payments must be processed within 5 days of transaction or the amount would be deposited back in the customer’s account by the issuing bank.