Who are the parties involved in credit card transactions?
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Accepting credit card payments is a complex process that involves numerous entities and processes working behind the scenes to ensure that transactions remain secure and that money flows to the right place.
Here are the primary parties involved:
| INVOLVED PARTY | DESCRIPTION |
|---|---|
| Merchant | A merchant is any business or vendor that sells goods or services and accepts credit and debit cards for payments. |
| Cardholder | A cardholder is the person making the purchase. It could be a consumer or another business. |
| Card brands | The card brands, also called card associations or card networks, set the standards and policies for issuers and acquirers. They also set interchange fees and assessments. The major brands include Visa, Mastercard, Discover and American Express. |
| Acquirer | The acquirer is the merchant's bank or financial institution that the card brands license to process payment transactions and settle the funds into the merchant's account. |
| Issuer | The issuer is a financial institution or entity that extends credit to a cardholder and issues a card under one of the card brands. |
| Payment processor | A payment processor is an acquirer or a third-party provider that acts as an intermediary between the issuer and acquirer that captures purchase details from the merchant, routes transactions to the appropriate network for authorization, and sends the response back to the merchant. Payment processors underwrite each merchant account on behalf of its acquiring ("sponsor") bank and manage risk and compliance. |
Other entities that may be involved in providing technology and operational services include:
| INVOLVED PARTY | DESCRIPTION |
|---|---|
| Payment gateway provider | A payment gateway is middleware technology commonly used to securely transmit online payment data to a payment processor. While mostly used in e-commerce, some gateways accept in-person payments captured on a credit card reader. Some payment gateways are independent third-party intermediaries, while others are owned and operated by an ISO or a payment processor. |
| An ISO or MSP | Registered resellers of merchant services accounts aligned with acquirers to enroll businesses in payment processing services on their behalf. Visa refers to them as Independent Sales Organizations and Mastercard calls them Merchant Services Providers. |
| Payment Facilitators (PayFac) or Payment Services Provider (PSP) | A third-party business or platform that contracts with an acquirer to provide payment services to their customers, referred to as "sub-merchants." Stripe, PayPal, and Uber are well-known examples of PayFacs. An acquiring bank sponsors the PayFac, which is the merchant of record. The PayFac receives all funds and settles respective deposits to its customers' bank accounts. |