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How do online payments work?

FinanceLesson on requestFree to read

Quick answer

An online payment works by securely passing your card or account details through several parties — the merchant, a payment gateway, and banks — who verify and authorize the transfer in seconds, all protected by encryption. You enter payment details, which are encrypted immediately.

Step by step

  1. You enter payment details, which are encrypted immediately.
  2. A payment gateway sends them to the card networks and your bank.
  3. Your bank checks funds and fraud signals, then approves or declines.
  4. Money moves from your account to the merchant, settling shortly after.

People also ask

Is it safe to pay online?
Reputable sites use encryption (HTTPS) and tokenization so your card details are protected in transit.
What is a payment gateway?
A service that securely passes payment data between the merchant and the banks/card networks.
What is two-factor authentication for payments?
An extra check (like a one-time code) confirming it's really you before a payment is approved.