Payment Processing: The Primary Players

To understand how payment processing works, start with getting to know the players

As part of our series, “Understanding the Ins and Outs of Credit Card Processing” we explain who the primary players are in the payment process.

Most businesses accept credit cards from their customers on a daily basis, but few think much about it. As a business owner, it’s important and beneficial to understand the payment process starting with the primary players. The more you know, the more ahead you’ll be should you have to address issues that may come up. The first order of business for successfully accepting a credit card payment is to learn who the players are, and what actually happens from the moment a customer’s card has been swiped, keyed into a terminal, or entered into a web page, up to the moment the funds are transferred into your bank account.


The Customer

The person who wants to use their credit card to pay you for your goods or services


The Merchant

That’s you. A Merchant is any company that enables Customers to purchase goods or services using a credit or debit card.


The Issuer

The Issuer is the entity or bank that grants credit to a Customer and issues a credit card. The Issuer typically partners with Visa or Mastercard. Discover and American Express are examples of private label cards that a customer applies to directly.

These institutions also issue payment to the merchant bank (also called the acquiring bank) on behalf of its customers, the buyers in any given transaction.


Merchant Provider (or Merchant Acquirer)

The bank or agent of a financial institution that supplies you with your merchant account is the Merchant Provider. Merchants negotiate an agreement with the Merchant Provider for the purpose of accepting credit cards. The Merchant Provider represents the Merchant’s interests and supports you through every step of the process — from installation to day-to-day service calls. The Merchant Provider also receives deposits through the Interchange Network from each Issuer and transfers them into the appropriate merchant accounts.


The Interchange Network

Visa, MasterCard, American Express and Discover make up what is referred to as the Interchange Network or “The Network.” Card networks sit at the center of the payment industry, facilitating transactions among consumers, merchants, processors, and banks. These companies supply the electronic networks that allow all the players to communicate and process transactions. For their trouble, they charge fees to the financial institutions involved in transactions based on total transaction volume (rather than on a per-transaction basis).


Payment Processor

A Processor is an intermediary that enables transactions to flow through the system to obtain authorizations and deposits via the Interchange Network. There are several major Processors that facilitate this movement. In most cases, Merchants do not choose their Processor. It is usually determined as a result of which bank or financial institution your bank or Merchant Provider represents; however, this is transparent to you.


Payment Gateway

A Payment Gateway is a software service and set of APIs that enable the Merchant to access the systems needed to transmit a request for payment. The moment card data is received via swipe, key, dip, or tap, the Gateway securely transmits the information via the Processor to the Issuer for authorization. The Issuer returns the authorization back to the Payment Gateway through the Processor.


Now that you know about the players in the payment process, learn how they work together from the moment a customer’s card has been swiped, keyed into a terminal, or entered into a web page, up to the moment the funds are transferred into your bank account. Our ebook, Understanding the Ins and Outs of Credit Card Processing explains this and more.

Kim Miller, VP of Business Development

Kim Miller, VP of Business Development

As Vice President of Business Development, Kimberly Miller brings to the table several decades of experience in marketing, selling software and self-service solutions to the industry.


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