What steps do payment processors perform after format validation to confirm a card can be charged?
Executive summary
Payment processors do much more than check a card number’s format: after initial validation they build and route an authorization request through the acquirer, card network and issuer, where a sequence of technical, business, fraud and authentication checks determine whether funds can be reserved and a one-time hold or approval returned to the merchant with an authorization code [1] [2]. Merchants and gateways may also run independent zero- or small-dollar verifications, address/CVV checks, or 3-D Secure/SCA flows before—or in parallel with—the issuer’s approval to reduce fraud and ensure future chargeability [3] [4] [1].
1. Authorization request and routing: how the message gets to the issuer
Once a merchant accepts card details the processor constructs an authorization request and sends it from the terminal or gateway to the merchant’s acquirer, through the card scheme (Visa/Mastercard) and on to the issuing bank or its processor for a decision; the same route is used in reverse to return the issuer’s response [1] [2] [5].
2. Technical validation inside the network: messages, keys and chip data
Before an issuer even applies business rules, the authorization message is technically validated: cryptographic elements, security fields and data formats (different for card‑present versus card‑not‑present) are checked to ensure the request is authentic and correctly formed—chip data, magnetic stripe or tokenized payloads are validated against keys and expected message elements [1] [6].
3. Fraud and identity checks: AVS, CVV, 3-D Secure and platform-level screening
Payment systems layer fraud controls in parallel: address verification (AVS) and CVV2 checks validate billing details, card‑on‑file or vaulting products often enable $0 or $1 authorizations to verify account validity, and 3‑D Secure / Strong Customer Authentication flows may be invoked to cryptographically confirm the cardholder—these measures reduce chargebacks and enable exemptions only when fraud thresholds and risk rules permit [4] [3] [1] [7].
4. Issuer business checks: card validity, available funds and account status
The issuer applies business logic—confirming the card is valid, not expired, not frozen or reported stolen, that the CVV/AVS match as required, and that sufficient balance or credit is available—then returns an approval, decline or error code; the processor relays that response to the merchant as a short transaction response code and usually an authorization code on approval [8] [5] [9] [1].
5. Authorizations, holds and verification transactions: what the merchant sees
On approval the issuer typically places an authorization hold that reduces available funds by the authorized amount (and possibly fees or currency mark‑ups) and issues an authorization code to the merchant; gateways that perform “card verification” may submit a $0 or $1 authorization and then void it so the card can be stored for later charging, but customers may still see a pending hold until the void propagates [1] [3].
6. Post‑authorization checks and settlement risks
Authorization is only step one: settlement and clearing move the authorized amount through acquiring and issuing banks; additional verification steps or network/ledger reconciliations may detect errors after execution, which is why some systems perform secondary validations or rechecks—an acknowledgment that multiple confirmations and parties reduce fraud and ledger risk [10] [2] [5].
7. Where ambiguity remains and why implementations differ
Exact sequencing and which party performs which check vary by architecture and contract—some gateways handle most fraud controls and vaulting, others leave checks to issuers or schemes, and exemptions to SCA depend on risk thresholds and who assumes liability—sources explain the available tools (AVS, ANI, account verification) but not a single universal flow, so specifics require reviewing a given processor or scheme’s documentation [4] [1] [3].