According to StatsPanda, there are 2.17 billion credit card transactions per day. While many transactions happen in person through brick-and-mortar shops, many more are processed digitally, as consumers prefer to shop online.
We may make online payments without a second thought, but what's the technology powering these transactions? We'll go behind the scenes to show you how modern online payments work.
Modern online payments use several systems, and they can work together within seconds, too. When someone enters card details at checkout, the payment gateway securely sends the transaction information to a payment processor. This processor communicates with the card network and the customer's issuing bank, and then the bank approves or declines the transaction.
At the center of this process, you'll find payment platforms, such as Xplor Pay. They help businesses accept payments without having to build complex financial infrastructure themselves. This gives them a connected system that moves payment information between customers, merchants, processors, banks, and card networks seamlessly.
Before an online payment is completed, there are several checks made to determine whether the transaction is valid. Card verification may involve checking the:
Additional tools such as Address Verification Service (AVS) can compare billing information, too. These checks can help identify suspicious or incorrectly entered payment information before the transaction moves forward. The payment systems can also consider whether an account is expired, frozen, or otherwise unable to support a transaction.
Payment information has to travel between multiple systems without exposing sensitive data unnecessarily, so strong security technology is a must. Encryption can transform information into a protected format during transmission, and tokenization can replace sensitive credentials with randomly generated tokens.
Payment platforms may also combine these technologies with other security measures, such as point-to-point encryption and PCI-focused infrastructure. This helps businesses reduce the amount of sensitive card data that they directly handle. As a result, there's a safer transaction environment, and businesses can meet important payment security responsibilities.
Application programming interfaces (APIs) allow different software systems to communicate, all without the businesses developing payment infrastructure from scratch. Various stakeholders can use APIs to:
This technology is especially important for embedded payments. This is where customers can complete transactions without being redirected to an unrelated payments website. APIs can make payments feel like a natural part of the existing customer journey while also connecting payment activity with other operational systems.
The technology behind online payments does more than just authorize purchases. Platforms can give businesses tools for:
In addition, APIs and webhooks can communicate payment events back to business software in real time. This allows other systems to respond when a transaction succeeds, fails, or changes status.
When a business has this much connectivity, it reduces manual administration and helps it maintain a clearer view of its financial activity. It can also connect transaction data to broader workflows, and it won't have to treat every payment as an isolated event.
The next time you pick up your credit card to make an online purchase, think about what you've learned here. From payment platforms and APIs to AVS and encryption, there's a lot working together to ensure that your online payments go smoothly and safely.
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