A pending transaction is a payment which has been authorised but is still awaiting the acquirer’s presentment. Sound confusing enough? Let’s take a closer look and see how a card transaction actually works behind the scenes.
How does a card transaction work?
When you use your Revolut card to pay at your local Starbucks, a few things happen behind the scenes.
As soon as you tap your contactless card on the point-of-sale (POS) system, your account information is collected and immediately sent to Starbucks’ acquiring bank. We call Starbucks the ‘merchant’ and its acquiring bank, the ‘acquirer’ — which is nothing more than a bank or financial services company licensed to process payments on behalf of a merchant (in our case, on behalf of Starbucks).
The acquirer then asks the card network (Revolut uses the MasterCard network) to send the authorisation request to the card issuer — Revolut.
MasterCard forwards the request to the issuer who then authorises the transaction after it has verified there are enough funds in the account to cover the cost of the purchase.
The issuer then responds to the authorisation request and sends the response back to the card network (MasterCard) who forwards it to the acquirer then back to the POS machine in Starbucks. And all this happens in under 2 seconds —super quick, right?
At this point, the person at the till gives you your receipt and your coffee gets brewed — hurrah!
But when does the money actually change hands?
Once the issuer has authorised the transaction, the purchase amount is blocked on the account and the transaction becomes ‘pending’, but the funds are not directly transferred to the merchant.
To receive the funds, the acquirer (Starbucks’ bank) must first send the issuer (Revolut) a presentment to be processed by the card network before arriving at Revolut. This process can take place up to 8 days after the POS authorisation is accepted, although this can vary depending on many factors.
After receiving the presentment, Revolut is obliged to settle to MasterCard (consequently to the acquirer and then to the merchant) the funds for the authorised amount.
Finally, Revolut (the issuer) deducts the ‘blocked amount’, which travels through the card network over to Starbucks’ bank (the acquirer). At this point, the transaction has settled (it is no longer pending) and will appear on your statement.
In short, as the processing period varies with different merchants, their acquirers and the various payment processors involved, some transactions can be completed much quicker than others and therefore some pending transactions might seem instant, while others can take a few days to be fully processed and appear on your statement.
To recap, in this article we’ve briefly discussed the mechanics of a card transaction to help us understand what a pending transaction is and also why some transactions might seem faster than others.
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