Card networks have a crucial role in merchant finances and payment processing. Banks and card networks work together to provide secure methods of payment.
When you open a merchant account, you will need to set up payment processing so that your business can accept credit cards. This is where the relationship between you, your bank, and card networks begin.
What is a Card Network?
Card networks are also known as card brands. The four primary card networks are Visa, American Express, Mastercard, and Discover. These brands are the standard for providing cards and safe transactions.
Banks are also known as card issuers. This differentiates the role financial institutions have in tending to cardholders’ accounts.
What Do Card Networks Do?
Card networks are the facilitators of transactions between businesses and card holders. They connect the merchant bank (acquirer), the merchant, the card issuer, and the card holder.
Card networks also act as the neutral party in dispute situations. They have processes in which acquirers and issuers go through to resolve discrepancies. When the two parties cannot come to an agreement, the card network acts as the arbitrator.
Essentially, card brands give businesses and banks a platform to communicate with ease and security.
The Flow of Communication in Payment Processing
The first step in payment processing is the actual transaction itself. Whether through eCommerce or a physical POS terminal, payment processing starts as soon as a purchase is authorized.
It can take a few days for payments to end up in merchant accounts. The transaction must go through multiple points of contact before finalized. This also includes any authorization holds that banks and card networks enforce.
1. The Customer and Merchant
The customer initiates a transaction through a business.
2. The Merchant to Payment Gateway
Payment gateways transfer transaction information to a merchant’s payment processor and acquiring bank. Payment gateways screen payment information to guard against fraud.
3. Acquirer to Card Network
The bank in which a business houses their merchant account is the acquirer. The acquirer receives the transaction information to then forward it to the corresponding card network. This would be the card brand that the client used to purchase from the business.
4. Credit Card Interchange
The card network processes the information. This will then mean that interchange between the acquirer and card issuing bank had been successful. The issuer will collect interchange fees from the acquiring bank.
5. Payment Completed
Completed payment processes release funds from transactions into the merchant account.
Have More Questions About Payment Processing?
Payment processing is meant to be simply, but complications can happen when multiple parties are involved. Revitpay is a high risk merchant services provider that provides easy and secure processing. Reduce your risk of fraud and lower your chargebacks with tools tailored to your unique business. Contact us today to find out how we can help you.