{"id":3287,"date":"2026-06-20T16:41:32","date_gmt":"2026-06-20T11:11:32","guid":{"rendered":"https:\/\/cashfree.com\/blog\/?p=3287"},"modified":"2026-06-20T16:57:07","modified_gmt":"2026-06-20T11:27:07","slug":"payment-processing","status":"publish","type":"post","link":"https:\/\/blogrevamp.cashfree.com\/payment-processing\/","title":{"rendered":"What Is Online Payment Processing? Process, Components &amp; Benefits Explained"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a8f299ee7131\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #364250;color:#364250\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #364250;color:#364250\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a8f299ee7131\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#What_is_a_Payment_Processor\" >What is a Payment Processor?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#Major_Players_in_the_Payment_Processing_System\" >Major Players in the Payment Processing System<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#Common_Payment_Types_of_Payment_Processing_Systems\" >Common Payment Types of Payment Processing Systems<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#Advantages_of_Incorporating_Payment_Processing\" >Advantages of Incorporating Payment Processing\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#How_to_Select_a_Payment_Processing_Provider\" >How to Select a Payment Processing Provider<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#How_Does_a_Payment_Processor_Work\" >How Does a Payment Processor Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#How_Does_a_Payment_Processor_Work_for_Card_Transactions\" >How Does a Payment Processor Work for Card Transactions?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#How_Does_UPI_Payment_Processing_Work\" >How Does UPI Payment Processing Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#How_Does_E-Wallet_Payment_Processing_Work\" >How Does E-Wallet Payment Processing Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#How_do_businesses_offer_wallets_as_a_payment_method_to_customers\" >How do businesses offer wallets as a payment method to customers?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#How_Can_You_Apply_for_Payment_Processing\" >How Can You Apply for Payment Processing?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#Wrap_Up\" >Wrap Up<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/blogrevamp.cashfree.com\/payment-processing\/#FAQs_On_Online_Payment_Processing\" >FAQs On Online Payment Processing<\/a><\/li><\/ul><\/nav><\/div>\n\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"3287\" class=\"elementor elementor-3287\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-618dd882 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"618dd882\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-11e3e7d8\" data-id=\"11e3e7d8\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1785d1fd elementor-widget elementor-widget-text-editor\" data-id=\"1785d1fd\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Online payment processing is the system that enables businesses to accept digital payments securely and efficiently. When a customer makes a payment, the transaction moves through multiple parties-including the payment gateway, payment processor, issuing bank, and acquiring bank\u2014before funds are approved and settled. Understanding how payment processing works can help businesses reduce failed transactions, improve customer experience, strengthen security, and choose the right payment solution for growth.<\/em><\/p>\n<p><span style=\"font-weight: 400;\">More consumers are switching from cash to online payments in today&#8217;s fast-paced digital world. But this ease also raises a recurring issue for companies and their clients: Is my transaction really safe?<\/span><\/p>\n<p><!-- \/wp:paragraph --><!-- wp:separator {\"opacity\":\"css\"} --><\/p>\n<p><!-- \/wp:separator --><!-- wp:paragraph --><\/p>\n<p><span style=\"font-weight: 400;\">To do business worry-free, it is essential to choose a payment processing system that supports you at every stage and promptly resolves complex issues. Collaborating with a reliable partner that adds substantial value to your business and offers you and your clients a smooth, safe, and satisfying debit and credit payment experience is also essential.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With a tremendous increase in online shopping, choosing the right payment partners for payment processing, managing queries, and taking care of all ancillary services is more vital than ever before. This article explores the meaning of <\/span><span style=\"font-weight: 400;\">payment processing,<\/span><span style=\"font-weight: 400;\"> how it works and what the benefits of payment processing are for your business. <\/span><\/p>\n<p><!-- \/wp:paragraph --><!-- wp:heading --><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_a_Payment_Processor\"><\/span><strong>What is a Payment Processor?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Have you ever wondered what happens behind the scenes to make your debit or credit card payment go through successfully? This is where a payment processor acting as your middleman between your merchant, customer, and the bank comes into the scene to ensure every transaction done on your portal is secure, thereby providing a smooth experience to your customers.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When every payment is processed successfully from the customer\u2019s account to the merchant\u2019s, it truly feels proud to see the payment processor working in perfect harmony.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The payment processor is also responsible for cross-checking the validity and transaction limits of the credit card, as well as the overall transaction security. It enables the transaction to take place between the buyer and the merchant.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><strong>Example:<\/strong> When you buy an article online, the payment processor checks with your bank to ensure you have enough funds. Once confirmed, the payment processor transfers the amount to the merchant&#8217;s account securely within a few seconds.<\/span><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" data-recalc-dims=\"1\" src=\"https:\/\/i0.wp.com\/blogrevamp.cashfree.com\/wp-content\/uploads\/2026\/01\/payment-processed-meaning.png?resize=573%2C300&#038;ssl=1\" alt=\"payment processing system\" width=\"573\" height=\"300\" \/><\/p>\n<p><!-- \/wp:paragraph --><!-- wp:image {\"id\":3296,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} --><\/p>\n<figure><\/figure>\n<p><!-- \/wp:image --><!-- wp:paragraph --><!-- \/wp:paragraph --><!-- wp:heading --><!-- \/wp:paragraph --><!-- wp:image {\"linkDestination\":\"custom\"} --><\/p>\n<figure><\/figure>\n<p><!-- \/wp:image --><!-- wp:heading {\"level\":3} --><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Major_Players_in_the_Payment_Processing_System\"><\/span><strong>Major Players in the Payment Processing System<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Understanding the \u201cpayment processed\u201d meaning is essential before exploring the major players in the payment processing ecosystem.<\/span><\/p>\n<h3><b>The Merchant (Seller)<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">For a merchant to accept payment, they need to partner with a payment gateway company that they can trust with their every transfer. A merchant cannot accept card payments without partnering with some key players. So if a merchant wants to incorporate cashless transactions in their business, they must partner with an acquirer or a merchant bank. A merchant account with an acquirer will enable them to approve and disburse payments.<\/span><\/p>\n<h3><b>The Customer (Cardholder)<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">For a merchant to receive secure payments, someone must be willing to pay. A merchant needs a customer with a working credit\/debit card for payment to be<\/span><span style=\"font-weight: 400;\"> processed<\/span><span style=\"font-weight: 400;\"> from an issuing bank. A customer is someone who knows about the existence of the merchant and how to reach them. Only then can they pay for the merchant\u2019s services\/products. A customer will not trust the merchant unless he\/she can trust the payment gateway system on the merchant\u2019s platform.\u00a0<\/span><\/p>\n<h3><b>The Card Network (Visa\/Mastercard)<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Visa and Mastercard are the world\u2019s most renowned payment processing networks. It offers customers a wide range of prepaid, debit, and credit card options worldwide. It is a card network that connects merchants, their customers, and the banks associated with both.\u00a0<\/span><\/p>\n<h3><b>Issuing Bank (Customer\u2019s Bank)<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">An active customer account is essential to be able to send money to a merchant\u2019s account. Once your bank verifies your details and the bank balance, it lets you transfer funds on NPCI\u2019s request to the acquiring bank.<\/span><\/p>\n<h3><b>Acquiring Bank (Merchant\u2019s bank)<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The acquiring bank is entrusted with the job of crediting the receiver\u2019s account on NPCI\u2019s request. Once the amount is credited to the merchant\u2019s bank account, the customer\u2019s order is completed, and payment is processed successfully.<\/span><\/p>\n<h3><strong>Payment Processors<\/strong><\/h3>\n<p>A payment processor is an entity that takes on the responsibility of securely transferring the due amount from the customer\u2019s bank account to the merchant\u2019s bank account.<b><\/b><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Common_Payment_Types_of_Payment_Processing_Systems\"><\/span><strong>Common Payment Types of Payment Processing Systems<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Card Payments<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Card payments like credit\/debit cards allow customers to make a payment that is cashless and contact-free. A debit card payment is made by taking money straight out of your bank account and transferring it to the merchant&#8217;s account. On the other hand, a credit card payment is made by borrowing money from the customer&#8217;s bank, and then the customer is required to pay the bank back.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>E-Wallets<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Digital wallets, often known as e-wallets, allow quick payments with just a tap and safely save your card information. They provide increased convenience, improved security, and simple spending tracking. E-wallets make money management simpler and more structured with built-in budgeting tools and thorough transaction records.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Scan &amp; Pay<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Scan and pay is one of the most used and effortless modes of payment in the digital world today, especially when shopping outside. All you need to do is simply scan the merchant\u2019s QR code, and the payment processing happens instantly, deducting the amount directly from your bank account. It\u2019s fast, secure, and perfect for everyday payment processing.<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Bank Transfers<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A bank transfer is a digital method of directly moving money from one bank account to another.\u00a0 It is regarded as one of the safest and most dependable ways in the payment processing system. Bank transfers are perfect for both high-value transactions and regular payments since they provide excellent transparency, direct settlement, and low processing costs.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Advantages_of_Incorporating_Payment_Processing\"><\/span><b>Advantages of Incorporating Payment Processing\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">To streamline operations, a reliable payment processor is essential. A payment processor that can help reduce manual errors and ensure the business has as little as possible cart abandonment due to payment issues. Below are some of the advantages of incorporating a payment processor into your business.\u00a0<\/span><\/p>\n<h3><b>1. Fast &amp; Secure Transactions<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Every payment is completed swiftly and securely with a dependable payment processing system. This lowers the chance of chargebacks, fraud, and unsuccessful transactions. Faster settlements help organizations keep accurate accounting records and enhance cash flow, which is a key financial priority.\u00a0<\/span><\/p>\n<h3><b>2. Builds Customer Trust &amp; Credibility<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">A seamless checkout process boosts client confidence. People are more likely to finish the purchase and return when they fully understand the significance of payment processing, which is the safe transfer of their funds from their account to the merchant&#8217;s. Customers and companies alike benefit financially from secure processing.<\/span><\/p>\n<h3><b>3. Supports Various Modes of Payment<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Businesses may accept UPI, cards, net banking, e-wallets, and more thanks to modern payment processing. These instances of payment processing aid in expanding the clientele and lowering reliance on cash transactions. Better financial management and more revenue are the results of this flexibility.<\/span><\/p>\n<h3><b>4. Better Financial Monitoring and Efficiency<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Through digital records, real-time dashboards, and automatic reconciliation, a strong payment processing system helps organisations manage their finances more precisely. It provides instant insights into consumer transaction behaviour, earnings, and settlements while streamlining bookkeeping and reducing manual error rates.<\/span><\/p>\n<h3><b>\u00a05. Lowers Operational expenses<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Errors are decreased when billing and reconciliation reports are generated automatically. This saves time and also increases productivity.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Select_a_Payment_Processing_Provider\"><\/span>How to Select a Payment Processing Provider<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To select or add a payment gateway partner within your Cashfree Payments account (using the FlowWise routing feature), you can easily configure your processing partners through the Merchant Dashboard.\u00a0<\/p>\n<p><strong>Steps to Select and Add a Payment Processing Provider<\/strong><\/p>\n<ol>\n<li>Access FlowWise: Log in to your Cashfree Payments Merchant Dashboard, select Payment Gateway, and then click on <a href=\"https:\/\/flowwise.com\/\">FlowWise<\/a> from the left navigation menu.\u00a0<\/li>\n<li>Navigate to Gateways: In the FlowWise sub-menu, select Gateways to open your list of configured providers.\u00a0<\/li>\n<li>Initiate the Setup: Click Add Gateways in the top-right corner of the screen.\u00a0<\/li>\n<li>Choose Your Partner: Select your payment gateway partner from the drop-down list.<\/li>\n<li>Configure Partner Details:\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Enter a unique name and brief description to identify this gateway in your routing rules.<\/li>\n<li>Select your integration environment (production for live transactions or test\/sandbox for validating your setup).<\/li>\n<li>Enter the required keys, secrets, or identifiers specific to your chosen partner.\u00a0<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Save Configurations: Click Submit or Link Account to save.\u00a0<\/li>\n<\/ol>\n<h3>Setting Up Standard Payment Methods<\/h3>\n<p>If you are looking to manage which standard payment methods (like UPI, Netbanking, or Cards) your customers can use, you can view and toggle these settings directly under the Manage Payment Methods tab in your dashboard.\u00a0<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_Does_a_Payment_Processor_Work\"><\/span>How Does a Payment Processor Work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><!-- \/wp:heading --><!-- wp:paragraph --><\/p>\n<p>Here is the mechanism of a basic payment processing system explained for a card transaction:\u00a0<\/p>\n<p><!-- \/wp:paragraph --><!-- wp:list --><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul><!-- wp:list-item --><\/ul>\n<\/li>\n<\/ul>\n<p>\u00a0<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>The customer initiates the process by adding chosen products to the shopping cart and heading over to the checkout page.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><!-- \/wp:list-item --><!-- wp:list-item --><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>The customer enters the card details, and the information is transferred to the <a href=\"https:\/\/www.cashfree.com\/payment-gateway-india?utm_source=paymentprocessing&amp;utm_medium=blog\">payment gateway<\/a>. The gateway then transmits the information to the payment processor.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><!-- \/wp:list-item --><!-- wp:list-item --><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>The payment processor transfers the transaction details to the card provider for verification.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><!-- \/wp:list-item --><!-- wp:list-item --><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Once the verification is complete, the payment processor requests the provider to process the payment.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><!-- \/wp:list-item --><!-- wp:list-item --><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>The card provider verifies if there is enough balance in the account. After confirming other details, it approves or declines the request. This information is communicated to the payment processor.\u00a0<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><!-- \/wp:list-item --><!-- wp:list-item --><\/p>\n<ul>\n<li>If approved, the payment processor requests the issuing bank to transfer funds to the merchant\u2019s account.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"How_Does_a_Payment_Processor_Work_for_Card_Transactions\"><\/span><strong>How Does a Payment Processor Work for Card Transactions?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Here is the mechanism of a basic payment processing system, explained for a card transaction:\u00a0<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The customer initiates the transaction by adding selected products to the cart and proceeding to the checkout page.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The customer enters the card details, and the information is transferred to the <\/span><a href=\"https:\/\/www.cashfree.com\/payment-gateway-india?utm_source=paymentprocessing&amp;utm_medium=blog\"><span style=\"font-weight: 400;\">payment gateway<\/span><\/a><span style=\"font-weight: 400;\">. The gateway then transmits the information to the payment processor.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The payment processor transfers the transaction details to the respective bank of the customer for verification.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Once the verification is complete, the payment processor requests that the provider process the payment\/deduction from the customer\u2019s account.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The card provider verifies if there is enough balance in the account. After confirming other account details, it approves or declines the request. This information is communicated to the payment processor.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If approved, the payment processor requests the issuing bank to transfer funds to the merchant\u2019s account.<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Please note that all the above six steps are completed at lightning speed.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_Does_UPI_Payment_Processing_Work\"><\/span><strong>How Does UPI Payment Processing Work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The user chooses a UPI-enabled app and installs it. They begin their UPI journey by registering on the app using the mobile number linked to their bank accounts. <\/span><span style=\"font-weight: 400;\"><br \/><\/span><span style=\"font-weight: 400;\">The app generates a device fingerprint to authenticate the user for easy usage in the future.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The user sets up a unique UPI ID and connects it to their bank account. The bank verifies the number provided using an SMS code.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The user selects their bank account from the list of options, and the app sends a request to NPCI. The user enters card details, and once verified, the user sets a 4\u20136 digit UPI PIN. (Note: This PIN is unique to you and is not stored by banks; banks are meant only to store an encrypted hash.)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The issuing bank confirms account details, and the NPCI shares the details with the merchant\u2019s bank, and the bank updates its database by linking the user\u2019s UPI ID to their bank account.<\/span><\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"How_Does_E-Wallet_Payment_Processing_Work\"><\/span><strong>How Does E-Wallet Payment Processing Work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There are so many well-known and reliable UPI apps available, like PhonePe and Paytm. E-wallets are known to store your money and allow you to easily use it as and when you wish. The best part is that e-wallet payment processes are super efficient and faster than the traditional way of deducting the amount every now and then by entering the PIN when needed. Simply add an estimated amount to your e-wallet, and make quick and easy payments instantly.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_do_businesses_offer_wallets_as_a_payment_method_to_customers\"><\/span><strong>How do businesses offer wallets as a payment method to customers?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Well, businesses use payment aggregators or payment gateways that offer wallets as a payment mode. Tagging it as one of the fastest modes of payment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In such a scenario, the payment processor itself acts as a wallet. E-wallets have been designed to improve customer convenience by making payments faster, simpler, and completely contactless. Here, the funds already exist in the wallet\u2019s bank account. So, when a customer makes a transaction, the funds are debited from their ledger internally. In other words, there is no external stakeholder. Consequently, the transaction gets settled at the end of the day to the merchant\u2019s business bank account.<\/span><\/p>\n<p><!-- \/wp:paragraph --><!-- wp:heading --><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_Can_You_Apply_for_Payment_Processing\"><\/span>How Can You Apply for Payment Processing?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><!-- \/wp:heading --><!-- wp:paragraph --><\/p>\n<p>There are multiple entities offering payment processing services. Traditional options like banks and modern ones, like online providers, are available. Most of them provide multiple-tier pricing.<\/p>\n<p><!-- \/wp:paragraph --><!-- wp:paragraph --><\/p>\n<p>When you are picking a suitable payment processor for your business, carefully study the services on offer. Some factors you should keep in mind: fees, customer support, add-on services, and payment type support.\u00a0<\/p>\n<p><!-- \/wp:paragraph --><!-- wp:paragraph --><\/p>\n<p>Traditional providers are likely to charge less, but their services will only include the basic amenities. On the other hand, a new-age payment processor will add on a host of additional, valuable services that will help you augment your overall business.<\/p>\n<p><!-- \/wp:paragraph --><!-- wp:heading {\"level\":1} --><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Wrap_Up\"><\/span>Wrap Up<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><!-- \/wp:heading --><!-- wp:paragraph --><\/p>\n<p>The modern online customer demands versatility. Lack of options often deters them from completing a purchase. A robust payment processing structure and a reliable payment gateway will ensure that you give them the requisite leeway. The more options you offer, the higher the chance of converting a visitor to your store into a customer.<\/p>\n<p><!-- \/wp:paragraph --><!-- wp:paragraph --><\/p>\n<p>There is a significant difference between online transactions and in-person payments. The choice of payment processing partner and the payment gateway decides matters a lot. So you must do thorough research and select the one that suits your business model the best.<\/p>\n<p><!-- \/wp:paragraph --><!-- wp:heading --><\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs_On_Online_Payment_Processing\"><\/span>FAQs On Online Payment Processing<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><!-- \/wp:heading --><!-- wp:heading {\"level\":3} --><\/p>\n<h3><b>What is a merchant account?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">A merchant account allows the business owner to receive and process electronic payments via card transactions. A merchant acquiring a bank can provide such an account for your business. Essentially, it is a link between the payment processor and the merchant bank to process card transactions seamlessly.\u00a0<\/span><\/p>\n<h3><b>How to choose a payment processor?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Any online business needs a payment processor to ensure seamless integration with its accounting, invoicing, and other tools. It must be able to manage several system loads and be extremely compatible.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Strong security is crucial since processors handle sensitive customer data; for optimal protection, choose PCI DSS Level 1-compliant gateways. Select a processor with a settlement cycle that works for your company, since, despite the fact that clients see fast payments, processors frequently retain money for up to seven days. Consider all costs, including setup, monthly, and transaction fees, to ensure the payment processing system stays within your budget.<\/span><\/p>\n<h3><b>Can I use my trusted analytics software with the payment processor?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">It depends on the analytics tool you use. Most payment processors support popular software, and if yours isn\u2019t compatible, discuss potential solutions with the vendor. Today, many payment gateways provide automated dashboards with real-time insights, reducing the need for separate analytics tools.<\/span><\/p>\n<p><b>Is it necessary to have a payment processor in my business?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Yes, if you plan to do an online business and wish to accept payments through multiple modes, then you surely need a payment processing system. So, choose a payment processor that is fast, accurate and secure in order to reduce cart abandonment and increase cash flow. <\/span><\/p>\n<p><!-- \/wp:paragraph --><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Online payment processing is the system that enables businesses to accept digital payments securely and efficiently. When a customer makes a payment, the transaction moves through multiple parties-including the payment gateway, payment processor, issuing bank, and acquiring bank\u2014before funds are approved and settled. Understanding how payment processing works can help businesses reduce failed transactions, improve<\/p>\n","protected":false},"author":142,"featured_media":31603,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_themeisle_gutenberg_block_has_review":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_wpcom_ai_launchpad_first_post":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[1383],"tags":[1522,1379,1382],"class_list":["post-3287","post","type-post","status-publish","format-standard","has-post-thumbnail","category-payments","tag-cashfree-payments","tag-online-payment-gateway","tag-payment-processing"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Online Payment Processing: Definition, Workflow, Types &amp; Benefits<\/title>\n<meta name=\"description\" content=\"A complete guide to online payment processing covering transaction flow, payment gateways, processors, security measures, and tips to improve payment performance.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.cashfree.com\/blog\/payment-processing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Online Payment Processing: Definition, Workflow, Types &amp; Benefits\" \/>\n<meta property=\"og:description\" content=\"A complete guide to online payment processing covering transaction flow, payment gateways, processors, security measures, and tips to improve payment performance.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.cashfree.com\/blog\/payment-processing\/\" \/>\n<meta property=\"og:site_name\" content=\"Cashfree Payments Blog\" \/>\n<meta property=\"article:published_time\" content=\"2026-06-20T11:11:32+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-06-20T11:27:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/i0.wp.com\/blogrevamp.cashfree.com\/wp-content\/uploads\/2021\/04\/Payment-Processing-Online.png?fit=2400%2C1256&ssl=1\" \/>\n\t<meta property=\"og:image:width\" content=\"2400\" \/>\n\t<meta property=\"og:image:height\" content=\"1256\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Rishabh Ranjan\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rishabh Ranjan\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"12 minutes\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Online Payment Processing: Definition, Workflow, Types & Benefits","description":"A complete guide to online payment processing covering transaction flow, payment gateways, processors, security measures, and tips to improve payment performance.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.cashfree.com\/blog\/payment-processing\/","og_locale":"en_US","og_type":"article","og_title":"Online Payment Processing: Definition, Workflow, Types & Benefits","og_description":"A complete guide to online payment processing covering transaction flow, payment gateways, processors, security measures, and tips to improve payment performance.","og_url":"https:\/\/www.cashfree.com\/blog\/payment-processing\/","og_site_name":"Cashfree Payments Blog","article_published_time":"2026-06-20T11:11:32+00:00","article_modified_time":"2026-06-20T11:27:07+00:00","og_image":[{"width":2400,"height":1256,"url":"https:\/\/i0.wp.com\/blogrevamp.cashfree.com\/wp-content\/uploads\/2021\/04\/Payment-Processing-Online.png?fit=2400%2C1256&ssl=1","type":"image\/png"}],"author":"Rishabh Ranjan","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Rishabh Ranjan","Est. reading time":"12 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.cashfree.com\/blog\/payment-processing\/#article","isPartOf":{"@id":"https:\/\/blogrevamp.cashfree.com\/payment-processing\/"},"author":{"name":"Rishabh Ranjan","@id":"https:\/\/blogrevamp.cashfree.com\/#\/schema\/person\/f062683aff5362102e9c5b7541c1328c"},"headline":"What Is Online Payment Processing? 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