Card payment systems explained: how a payment really works
Terminal, gateway, acquirer, merchant account: the jargon makes card payment solutions sound harder than they are. Here is what each part does, how a payment flows from tap to bank, and what you need to take cards.
The short answer: what is a card payment system?
A card payment system is the set of parts that move a customer's money to your bank account. You need a way to capture the card (a terminal for face-to-face sales, a payment gateway for online, phone or pay by link), a merchant account, and an acquirer that processes the payment. Most small businesses get all of this from one provider as a single package.
The parts of a card payment system
Every card payment, whether it is a tap in a café or an online order, passes through the same handful of parties. You usually deal with only one or two of them, but it helps to know who does what.
- Card terminal: the device your customer taps, inserts or swipes a card on, or holds a phone or watch against. It reads the card, asks for a PIN when needed and encrypts the details so that you, your till and your Wi-Fi never see them.
- Payment gateway: the online equivalent of a terminal. It securely captures card details on a website, a phone payment screen or a pay by link page and passes them on.
- Acquirer: the regulated payment firm that processes your card payments and pays the money to you. It is sometimes called your payment processor or acquiring bank.
- Merchant account: the arrangement with the acquirer that lets your business accept card payments and receive the money. Some providers set it up for you as part of the agreement.
- Card scheme: the network that connects everyone, such as Visa or Mastercard. It sets the rules and routes each request.
- Card issuer: your customer's bank or card company. It decides whether to approve the payment.
For a closer look at the account side, see our guide to whether you need a merchant account.
How a card payment flows, step by step
- The customer pays. They tap a card or phone, insert the card or enter a PIN on your terminal, or enter their details on a secure payment page.
- The terminal or gateway encrypts the details and sends the request over your internet connection (Wi-Fi, Ethernet or a 4G SIM).
- The acquirer receives the request and passes it to the card scheme.
- The scheme routes it to the issuer, the customer's bank.
- The issuer checks the payment. It looks at the available funds or credit limit, and for fraud signals, and sends back an approval or a decline.
- The answer travels back through the scheme and the acquirer to your terminal, which shows "approved" or "declined". All of this normally takes a few seconds.
- Clearing and settlement happen afterwards. The acquirer collects the money from the issuer, takes off the fees and pays the rest into your bank account. How soon the money arrives depends on your provider, so ask. Our settlement times guide explains what to look for.
The approval you see at the counter is only the first half. The money moves in the second half, which is why a sale can show as approved on the terminal before it reaches your bank.
Terminal or payment gateway: which do you need?
It depends on where your customers pay.
- Face to face (shop, café, salon, market stall, on a job): you need a card terminal. This is the most common set-up for UK small businesses.
- Online, over the phone or by sending a link: you need a payment gateway or a pay by link tool, because there is no card present to tap.
- Both: many businesses use a terminal for counter sales and a pay by link or phone payment option for deposits and invoices.
PayZu supplies, sets up and supports card terminals, including the PAX A920 Pro (portable) and the PAX A35 (countertop). Card payments are processed by our regulated payment partner, which you contract with. Our guide to how to take card payments compares each way of taking a payment.
What you pay for in a card payment system
Whatever the set-up, the charges usually fall into the same few groups. The mix and the amounts vary between providers, which is why two quotes can look very different.
- A percentage of each payment, which usually differs by card type (debit, credit, business and international cards).
- A small fixed fee per transaction, which matters more if you take lots of low-value payments.
- Terminal rental, a monthly fee for the device. Terminals are rented monthly.
- Other monthly charges, such as a minimum monthly fee, a gateway fee or a PCI fee.
Part of the percentage covers fees set by the card schemes and the card issuers, and the acquirer adds its own charge on top. Our card machine fees guide shows how to add up every line so you can compare quotes properly.
How to choose card payment solutions for your business
- Decide where customers pay. At a counter, at tables, at the door or on the road, online, or a mix.
- Check the connection. A terminal with a built-in 4G SIM and Wi-Fi backup keeps working if the shop broadband drops.
- Check the till. If you use an EPOS, a countertop terminal that connects to it saves typing totals twice.
- Look at the full monthly cost, not just the headline percentage.
- Ask what support is included, and what happens if the terminal fails on a busy day.
- Read the contract. Check the term, the monthly fees and the exit terms before you sign.
If you are not sure which fits, send us your trading details and we will suggest a set-up. If you already have a card machine, send a recent statement and we will look for a saving.
What PayZu offers
- £0 upfront, zero hidden fees, zero PCI fees
- PAX A920 Pro (portable) and PAX A35 (countertop) terminals
- Your own account manager and 24/7 UK support
Rates are personalised to your business. Savings of up to 50% on some fees are possible. T&Cs apply, subject to eligibility and status.
Card payment systems: common questions
What is the difference between an acquirer and a payment gateway?
A payment gateway captures card details securely, usually online or over the phone, and passes them on. An acquirer is the regulated firm that processes the payment and pays the money to you. A face-to-face terminal does the job of the gateway at the counter.
Do I need a separate merchant account?
You need a merchant account to accept card payments, but many providers set it up as part of the agreement, so you may never deal with it separately. Ask your provider whether it is included and what the terms are.
How long does a card payment take to go through?
Approval normally takes a few seconds. The money reaches your bank account later, after clearing and settlement, and how much later depends on your provider.
Can I take payments without a card terminal?
Yes. You can take payments online, over the phone or by sending a payment link, using a payment gateway or pay by link tool. For face-to-face sales, a card terminal is the usual choice.
Does a card terminal need an internet connection?
Yes, it needs to reach the acquirer to get an approval. Terminals connect by Wi-Fi, Ethernet or a mobile data SIM. A portable terminal like the PAX A920 Pro has a built-in 4G SIM with Wi-Fi backup.
Who is responsible for keeping card data secure?
Everyone in the chain has a part, and you are responsible for the basics on your side: using a secure terminal, never writing down or storing card details and completing any compliance questionnaire your provider asks for. See our PCI compliance guide.
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- £0 upfront
- Zero hidden & PCI fees
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