The Card Payment Lifecycle


The card payment lifecycle demonstrates the participation of key players in the payments ecosystem. The top, black dotted line follows the authorization request for a transaction. The bottom, solid blue line follows the settlement process.


Key Players

  • issuing bank
  • cardholder / customer
  • merchant
  • processor: in Pagos’ references, we will refer to any payment gateway, acquiring bank, payment processor, or payment service provider as "processor". It’s important to note that if appropriately certified as per the relevant regulatory requirements, any of these providers could perform the services of one or more of these specific key players.
  • card brands
  • government / regulators: these entities play a critical role in the card payment lifecycle by developing public policy and monitoring commercial activities. The depth of the intervention varies by country and can have significant impacts on the business processes of global companies.



An authorization request starts when a cardholder / customer attempts to purchase a good or service with a payment card by providing their card details to the merchant. The request for authorization is sent to the merchant's processor.

From there, the processor submits the request to the issuing bank via the appropriate card brand. When notified, the cardholder's bank (the issuing bank) then approves or declines the card based on any number of reasons, such as the customer's available credit funds, the possibility of fraud, or the validity of the card.


The decline or approval travels back through the processor to the merchant, who will then present a message to the customer to advise them if their purchase was successful.

If the transaction is not successful, many merchants will ask the customer to enter their payment information again or enter new payment details. Such practices are a common way to try to retain the customer and successfully make the sale.

If the transaction is approved, the merchant provides the customer with a receipt or invoice.

Capture Request

Upon a successful authorization, the merchant will also submit a request to capture those funds via the same path as the authorization. The amount of the transaction will then be deducted from the customer's account and the funds remitted to the merchant via the processor.


The processor will withhold various processing fees and assessments, such as interchange fees, for the transaction upon settlement to the merchant.