How Online Card Payments Work

The parties and the three stages

Five parties take part in an online card payment: the customer (cardholder), the merchant (you), the payment processor (Stripe, which also acts as the acquirer relationship for you), the card network (Visa, Mastercard and others) and the issuer (the customer's bank). Authorisation asks the issuer whether the payment is allowed; if approved, the funds are reserved on the card. Capture tells the issuer to actually take the authorised amount; Stripe captures automatically by default, but you can authorise now and capture later. Settlement is the movement of funds from the issuer through the network to Stripe, which adds them to your Stripe balance and later pays out to your bank account, minus fees.

From tap to bank account

A card payment passes from the customer through the merchant and Stripe to the card network and the issuing bank, and money later settles back.

Authorise now, capture later

Separate authorisation and capture with the Node.js library (a sketch).

import Stripe from 'stripe';
const stripe = new Stripe(process.env.STRIPE_SECRET_KEY); // sk_test_...

// 1. Authorise only: funds are held on the card, not yet taken
const intent = await stripe.paymentIntents.create({
  amount: 5000,            // 50.00 in the smallest currency unit
  currency: 'usd',
  capture_method: 'manual',
  automatic_payment_methods: { enabled: true },
});
// ...the customer confirms the payment on the client...
// the PaymentIntent then waits in status 'requires_capture'

// 2. Later, when the goods ship: capture all or part of the amount
await stripe.paymentIntents.capture(intent.id, { amount_to_capture: 4500 });

A restaurant bill and a tip

Authorisation is like the waiter checking your card can cover the meal; capture is the final charge once the bill is settled; settlement is the restaurant's bank receiving the money a few days later.

Quick check: Which stage reserves funds on the card without taking them yet?

• Payout
• Settlement
• Authorisation
• Reconciliation