What Happens When You Click ‘Buy’

I started TechBreakdows with the goal of making tech accessible for all. This, this right here is the very first post!

This first post deals with something we’ve all done on the internet, hopefully one day you’ll do it on this very site. Today, we’re exploring what happens when you click that ‘buy’ button online.

Why? Well, it’s a pretty foundational topic for investors, makers, product people, and others who are generally interested in technology. When you click that ‘buy’ button, in seconds, your transaction navigates a maze of banks, gateways, and tech providers. So, today, I wanted to give you a clear, high-level, breakdown of how your money moves.

The Two Phases of Card Payments - Quickly

Only got a few minutes? Ok, let’s make this quick.

You can break payments down into two large stages: “authorization” and “clearing & settlement.”

Authorization == “Can I make this purchase?”
Clearing & Settlement == “Now let’s move the money.”

Authorization starts the moment you click the “buy” button:

You hit “Buy,” and your payment info goes to the merchant
The merchant asks your bank “is this good?” Your bank quickly says yes or no, temporarily reserving the money
The merchant receives this thumbs-up. You see an “approved” message back in the browser.

At this point, no money has moved. If you log into your bank / credit card you’ll see the transaction listed as “pending.”

The money moves during the clearing & settlement phase. This usually occurs a couple of days later. The banks confirm transactions and move money where it needs to be behind the scenes.

A Little More Granular

Step 1: You click “Buy”

We have to assume here that you’re using a merchant for the first time, and you’re using a card. Stored cards, Apple Pay, PayPal, Link etc. all function a little different. But, assuming you’re on a new store, you click buy, a whole lot is about to happen.

In this first step, your credit card details are wrapped up and sent securely over the internet using TLS (Transport Layer Security). This is the ’S” in HTTPS. Those details are received by either the merchant or the gateway, and tokenized.

Tokenization: this is where data is securely captured, stored, and a unique value provided back. Typically the unique value is tied to a particular service.

The token, along with your order (item, quantity, shipping address etc.) are then sent to the merchant.

Step 2: Merchant Time

The merchant now receives your order. Their systems will check stock, price, and make sure everything checks out. If things look good your payment begins its journey towards authorization.

First: the gateway looks up your token, finds your card brand, and determines where to route the transaction.
Second: Visa/Mastercard/Amex/whoever receives the transaction and looks up the issuing bank.
Third: the issuing bank does fraud checks, balance checks, purchasing category checks, and sends back its approval or declines the transaction

Step 3: Above, but backwards

Once the issuing bank has made its decision, that decision works its way back through the chain.

In the case of approval, the issuing bank reserves the cost of the transaction in a “pending” state and tells the payment network (Visa / Mastercard) that the transaction is approved. The card network informs the payment gateway, which then makes the merchant aware.

Once the merchant is aware, you’ll see an order confirmation on your screen.

300 Words!

Yes, that was 300 words to describe something that happens in just a few seconds. But, it goes even deeper, and we only scratched the surface here. A premium series on TechBreakdowns will cover the intricacies and technical details, so be on the lookout for that, and consider signing up [LINK]!

Step 4: Moving the Money

At some point over the next few days transactions will close.

Clearing:
1. The merchant’s acquirer will submit a “batch” of authorized transactions.
2. These batches get routed through the same steps above (card networks <-> issuing banks)
3. The issuer double-checks things, and gets ready to move the money.

Settlement:
1. The issuing bank sends funds to the acquiring bank via Fedwire, CHIPS, or another high-value bank settlement network.
2. The acquiring bank then takes their cut and drops funds into the merchant accounts.

So, Who Makes Money Here?

None of the parties above are partaking out of the goodness of their hearts, all of them are taking a slice.

The biggest slice is the merchant. The numbers can vary wildly from here on out, but it’s usually safe to say 3-5% of everything you buy is being eaten by transaction costs.

So, sticking with a hypothetical “merchant gets 97%” here’s how the rest usually breaks down:

~0.05%-0.10% -> Payment Gateway. Responsible for securing payment info, handling tokenization, and routing the payment to the processor.
- Stripe, Braintree (PayPal), Adyen, Checkout.com
~0.10%-0.50% -> Acquirer/Processor. Transmits the payment data and instructions between merchant and card networks.
- Fiserv, Adyen, Stripe, Worldpay
~0.05%-0.15% -> Card Network. Runs the “railroads” connecting banks and enforces rules.
- Visa, Mastercard, Amex, Discover
~1.50%-2.00% -> Issuer. Bank that issued the customer card, approves/rejects, pays on behalf of the cardholder
- Chase, Capital One, Citi, American Express

Note that some companies play multiple roles at times. For example, American Express is the card network and issuer for its transactions while Adyen bundles the gateway and acquiring into one product.

Why This Matters?

Payments might seem boring, but they are a goldmine!

Every single swipe, tap, or click triggers multiple toll booths. Different parties collect small chunks that on a $100 transaction don’t seem like much, but on $100B of volume... hey, now we’re talking.

In the premium deep dives on payments, we’ll continue exploring a few topics like the strategy behind the checkout and why everyone wants to own it, and we’ll also talk about the stickiness of payments as a product. Oh, and let’s not forget, that we’ve discussed one flow in a uniquely American way today - the rest of the world has different ideas.

In short: payments are invisible to users—but central to business models. Follow the money, and you understand the strategy.

Here’s a conclusion in your voice that wraps the piece cleanly, points to what’s next, and reinforces the value of what readers just learned:

Wrapping Up

So that’s what’s really happening when you click “buy.” It feels instant, but under the hood, a whole system of checks, tokens, banks, and rails kicks into gear, just to move your money a few inches across the internet.

We only scratched the surface here. But if you’re someone who builds, invests, or just wants to understand how the modern world works, this is the kind of stuff worth knowing.

There’s more coming. We’ll dig deeper into each piece of the stack, explore how these players make money, and why the smartest companies are fighting to own checkout.

If you liked this breakdown, keep an eye out for the premium series on payments. It gets fun.