What is a payment transaction?

A payment transaction is a funds transfer from one account to another. It can be a purchase, a refund, a salary transfer, or another type of payment.

Examples of payment transactions

• Employee salaries
• Buying a product or service
• Requesting a refund
• Exchanging services between companies

Types of B2B payment transactions

• Credit cards
• Debit cards
• Mobile payments
• Checks
• Electronic funds transfers
• Cryptocurrency
• Bank transfers
• Virtual Wallet

How does a payment transaction work?

1. An entity initiates a payment transaction
2. The transaction is processed through multiple systems, including the payment channel, payment method, and issuing bank
3. The transaction is authorized and settled

What affects a payment transaction?

• Payment method (credit card, debit card, bank transfer, or digital wallet)
• Payment environment (whether the payment is in-person, online, or mobile)
• Payment channel (Whether the payment is made on a website, mobile app, or in-store)

Payment processing vs payment transactions

Payment processing is the practice of enabling transactions between two parties; payment transactions are individual transactions.

Payment processing

• Involves a payment processor that communicates with entities, merchants, and banks
• Credit card issuers authorize and provide payment receipts
• Can be used for online or in-person transactions
• Involves transferring funds from one account to another

Payment transactions

• Individual transactions that occur
• Can include credit card, debit card, ACH, or direct debit payments
• Payment process time depends on the payment method

Payment processing steps

1. The individual enters payment information online
2. Payment gateway encrypts the payment data and sends it to the payment processor
3. Payment processor requests authorization from the individual’s bank
4. Bank verifies their account and approves or declines the transaction
5. Payment processor informs the recipient of the transaction status
6. Funds are transferred from the sender’s account to the recipient’s account