How it all Works
There are many components that make up the credit card map. Issuers, Acquires, Processors, Associations etc. To gain a better understanding of how they all work together and fit into your Merchant Processing Account, we have compiled a simple reference for each part of the Credit Card chain. From the Associations that back the card to the card holder. To learn more simply click on the topic you would like more information about.
Participants
Enables payment/value exchange between key business parties
Sets standards for payment processing, roles & responsibilities
Facilitates authorization of payment
Sets standards for risk mitigation and consumer protections
Settles funds between key parties (merchant/acquirer & issuers)
Support multiple payment types:
- Credit Cards
- Debit Cards
- Prepaid Cards
Typically banks or financial services organizations
Within the association model, charter must exist
Prepaid issuers are sometimes less traditional financial organizations
Offers consumers and business payment management and payment access accounts:
- Demand deposit/shared draft (cash, check, debit, wire)
- Credit (cash, line, card)
- Investment (cash, check, debit access)
Provides cardholders:
- Pricing/APR
- Service
- Offer elements such as rewards and benefits
Facilitates payment processing between merchants, processors (may in some cases also be the processor) and payments networks
Responsible for settling merchant payments
- Merchant risk assessment
Responsible for service, price and settlement
Typically processes multiple payment types:
- Payment cards (credit, debit and prepaid)
- PIN debit
- Sometimes: ACH (eCheck)
Accepts payments for goods or services
Typically accepts multiple payment types:
Cash
Check
Payment cards (credit, debit and prepaid)
PIN debit
Sometimes: ACH, wires, store credit
Responsible for:
- Cardholder verification
- Card security verification
- Authorization protocol compliance
Make payment/purchases
Make payment "choice"
The Process
- Cardholder presents a card (account) to pay for a purchase
- The merchant submits the transaction to the acquirer
- The acquirer sends the transaction request to the network
- The network sends the authorization message to the issuer/issuer processor
- The issuer validates the card number and approves the transaction amount
- The authorization response is transmitted from the issuer processor back through the network
- The network forwards the response to the acquirer and the acquirer sends the response to the merchant
- The merchant stores transactions in batches or process in real time
- Merchant sends the transaction to the acquirer to receive payment
- The acquirer sends the transactions in the batch through the payments network
- The payments network debits/credits the issuers for payment
- The issuer bills the cardholder
- The payments network credits the acquirer
- The acquirer pays the merchant
- The merchant receives the transaction amount minus discount and transaction fees