How does a card reader work and how does it process payments?

In our tech-driven populace, it is becoming increasingly net that an ever-growing issue of consumers are opting for making purchases using their cards. This means merchants need to be prepared to offer this type of payment method, but because there are Chip & PIN, magnetic stripe, contactless payments, and payments with mobile wallets, it becomes crucial for a merchant to understand how to operate with such systems .
In this blog post, we answer the question “ how does a card reader work ? ”, ultimately aiming to help you understand the basic workings of this crucial and sophisticate patch of engineering in today ’ sulfur business landscape .

How card readers work in 5 steps – a general overview

If you ’ ve ever accepted payments with a card reader before, you ’ ll know that the transaction is approved about instantaneously, in merely a few seconds. It ’ s a preferably logical summons that involves communication between respective actors .
so, how do card readers work ? First, they read the data from the customer ’ s batting order – they can do this via the card ’ south chip, the magnetic chevron, or by tapping a contactless requital on the card reading device. But what is the communication process that takes place behind the scenes ?

Let ’ s break the process polish into 5 bare steps :

Step 1. Payment authentication

The customer presents their card so that the poster subscriber can “ read ” the information contained in the physical poster itself. alternatively, customers can make payments via QR codes or mobile wallets .

Step 2. Payment verification 

The merchant ’ mho processing provider/bank receives the request and contacts the customer ’ s card issuer/provider to verify the wag and proceed to authorization .

Step 3. Payment authorisation

The customer ’ s card issuer will check that the cardholder ’ south details are correct and whether there are sufficient funds in the cardholder ’ sulfur explanation and then either approve or decline the transaction .

Step 4. Payment confirmation

In the event that the card issuer approves the operation, they sent a response to the poster proofreader, which transmits information that they have approved the transaction .

Step 5. Payment completion

The funds are withdrawn from the customer ’ s/cardholder ’ s account and are then transferred into the merchant ’ mho bill. The common industry standard for fund colony into the merchant ’ s account is 2-3 days, although some providers, like myPOS, settle funds immediately, therefore eliminating liquid challenges and more .

How do contactless readers work?

The cardholder taps or hovers their contactless tease to make contactless payments on or above the batting order reviewer. Contactless payments affair on short-range radio receiver technology which sends information to the card payment machine.

You can find this radio engineering in the card through a chip incorporated in it. It is besides known as radio frequency identification ( RFID ) and it is not limited to security tags, smartwatches, security system fob, mobile wallets, discussed in more detail below, and others .

How do Chip&PIN card readers work?

The ‘ chip ’ installed in debit and credit cards is approximately the size of a pinhead. Small as it may be, it stores a record of the customer ’ s four-digit PIN count. When a customer inserts their card into the menu reader, the chip is read and the transaction is verified when the customer enters their match PIN either onto the computer keyboard or on the device ’ s touch screen .
Chip & PIN tease readers were introduced on the market over a decade ago, replacing the more traditional sign and swipe method acting – magstripe or magnetic stripe, which was more prone to deceitful transactions .

How do Apple Pay and Google Pay readers work?

Apple Pay and Google Payare apps that use Near-Field Communication ( NFC ), exchangeable to the RFID engineering that is used to process contactless payments. NFC payment data is highly encrypted with multiple layers of security to ensure better security of a customer ’ sulfur account details .
As a start point, app users need to add their debit/credit cards to their virtual wallets. then, through a action of “ tokenisation ”, the calling card details are exchanged with a “ token ” to mirror the real/existing tease details .
The purpose of tokenisation is increased condom and security in the event of a lost or stolen device or lost/stolen card data. You can make payments with these mobile wallets either in-store or on-line.


A card lector is a advanced piece of engineering that “ reads ” circuit board information or information from mobile wallets and then communicates this information to the relevant parties. The way in which this communication serve works is practically the same whether you ’ re paying by debit or credit batting order, Chip & PIN, contactless, or through a mobile wallet – with a few differences, of course .
This communication process is about instantaneous – it takes just a few seconds for the cardholder and requital information to be transferred from the cardholder ’ s bank to the merchant ’ randomness acquiring bank/payment services supplier .
And that, in a nutshell, answers the question of “ how does a calling card reader exploit ? ”. This simplicity, ease, and convenience offered by circuit board readers make them a brainy option for merchants who wish to accept circuit board or digital payments .