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    • Business Resource Centre
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    • How online payments work

    How online payments work: a step-by-step guide

    Read time: 5 mins Added: 16/12/2025

    Online payments provide a means of getting money from your customer or donor to your bank account.

    It’s worth taking the time to understand how an online transaction process works. You will then know how long it will take and what is involved. But first, you’ll need to understand some of the terminology involved.

    Online payments allow you to easily make and receive payments from your customers or suppliers. This guide sets out the process and how long payments take.

    Important terms

    A merchant account is an account that exclusively holds funds from card transactions. These funds are regularly transferred to your organisation’s bank account by your Merchant Acquirer.

    An Issuer / Issuing bank is the bank (or financial institution) that issued a customer with their card and maintains a contract with them for repayment of card transactions.

    A payment gateway is a service provider, often referred to as a Payment Service Provider (PSP). It links your website’s shopping basket or donor form to the card processing network. Bank of Scotland Cardnet has a Payment Gateway platform that supports this requirement.

    You must choose a suitable Payment Gateway to meet your business's initial and future needs. Ideally, it should support tokenisation which enables your customers to securely store their card details in a virtual wallet to simplify payment at your checkout.

    Fraudsters regularly target ecommerce websites so choose a Gateway with good fraud management.

    A Merchant Acquirer will handle the transaction, moving it through the processing network. They will also send you a billing statement.

    How the process works

    1. Your customer buys an item on your website with a credit or debit card, or with Google Pay® or Apple Pay®.
    2. Their personal details and card information then pass through the payment gateway. Their data is encrypted to protect it before forwarding it to the merchant acquirer.
    3. The merchant acquirer sends a request to the customer’s issuing bank for funds to pay for the items or services they wish to purchase.
    4. The issuer will either approve or refuse the transaction.
    5. If approved, the result is passed back through the payment gateway to advise that:
      • the transaction is accepted
      • your merchant acquirer should credit your account.

      The customer will then be told whether or not their payment is accepted.
      If the payment is refused, you can simply cancel the purchase with the buyer, or request an alternative card or payment method.
      This entire first part of the process takes place within a few seconds. The second part, known as settlement, can take up to a few days.

    6. The card issuer sends the funds to your merchant acquirer, which deposits the money into your bank account.
    7. The funds are now available for you to use. Your bank may let you access your money before it is even sent to them, but this can vary between banks and accounts.

    Your bank may also ringfence some of the money in your account so that you can’t yet spend it. This is known as a reserve. It’s done in case the customer decides to return the goods later. Under the Distance Selling Regulations, customers have the right to change their minds within 14 days.

    When considering provider options, make sure you fully understand the charges

    These can include:

    • a Merchant Service Charge (MSC)
    • set up fees
    • monthly fees.

    Make sure your customers’ money is safe

    This should inform your decisions about how you build your website, which providers you select and how they integrate.

    Some solutions have secure built-in payment software modules that connect to secure payment gateways. 

    Cardnet® is a registered trademark of Lloyds Bank plc.
    Google Pay® is a registered trademark of Google LLC.
    Apple Pay® is a registered trademark of Apple inc.

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    Taking payments

    How to manage your business

    A selection of guides and products to help with the day-to-day running of your operation – focusing on money and tax, insurance, and people.

    Visit the hub

    While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Bank of Scotland for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.

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    Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ.  Registered in Scotland no. SC327000. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 169628.

    Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Due to FSCS and FOS eligibility criteria not all business customers will be covered.

    Lloyds Banking Group is a financial services group that incorporates a number of brands including Bank of Scotland. More information on Lloyds Banking Group can be found at lloydsbankinggroup.com.

    © Bank of Scotland plc 2026. All rights reserved

    FSCS Protected.

    Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ.  Registered in Scotland no. SC327000. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 169628.

    Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Due to FSCS and FOS eligibility criteria not all business customers will be covered.

    Lloyds Banking Group is a financial services group that incorporates a number of brands including Bank of Scotland. More information on Lloyds Banking Group can be found at lloydsbankinggroup.com.

    © Bank of Scotland plc 2026. All rights reserved