Credit Card Transaction 101
A merchant's guide to basic credit card processing.
What Makes a Credit Card "Click": A Merchant's Guide to Basic Credit Card Processing
Credit cards. Debit cards. Company and stored-value cards. Smart cards. Electronic checks and electronic bill payment services. These are the systems already available to the consumer market! Thanks to companies like First Data and our many bank and technology partners, customers now enjoy more options in paying for goods and services than ever before. And the choices keep on growing. In order for you to better understand how money travels from the point of sale into a merchant bank account, we've prepared a glossary and basic overview of the process.
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Clearly, there are variations in the way each payment method functions, but certain fundamentals apply. Every credit card transaction starts with a customer and ends with an exchange of money, services or goods. Converting that credit card number into a payment in a merchant's bank account involves several "invisible" electronic steps. If you're not already familiar with the payment processing industry, you'll be surprised at how integral the First Data Merchant Services (FDMS) services are and at how many steps are involved. |
First, the terms you'll need to know... |
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AcquirerThe "acquirer" is a Visa® and/or MasterCard® member or is entity sponsored by such a member. Acquirers solicit, screen and accept merchants into their program. They: |
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Associations*Visa and MasterCard are worldwide payment services associations made up of member financial institutions. They: |
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| *Note: Associations neither issue cards nor sign merchants. Instead, they license member financial institutions to "issue" cards and/or "acquire" merchants' sales drafts under the association's brand name. The Associations then manage the transfer of transaction data and funds between "issuing" and "acquiring" members, creating an infrastructure that is called an "interchange" system. | |
CardholderA financial institution (issuer) offers an application to a potential cardholder. The applicant is screened for creditworthiness, and if the application is approved, the applicant becomes a cardholder". |
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IssuerThe "issuer" is the cardholder's financial institution. It must: |
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MerchantThe "merchant" is any person or entity that sells a product or service. In order to accept bankcards, a merchant must meet various qualifications of Visa and/or MasterCard and the merchant's acquirer. Generally, such a merchant must: |
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Payment ProcessorThe processing of credit and debit cards, or more accurately, "payment processing", involves several main parties. These are: |
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| First Data is the leader in the payment processing industry, investing substantial resources and finances in technology such as internal/external system's infrastructures, telecommunications, customer service tools, marketing, research and development of products and services. Client banks depend on the FDMS® technology and economies of scale to build, retain and grow their merchant bases. FDMS handles processing for the issuer, the acquirer and the merchant, providing each with state of the art services and products. | |
