How are my card payments processed?

Have you ever wondered how your card payments are processed?

Below outlines the steps involved in processing card payments during a transaction.

When you pay for a purchase using your card, it appears as though the transaction happens almost instantly after you have entered the PIN number. However, it’s not quite that simple and there is a complex payment process happening behind the scenes to ensure that your transaction is correctly processed. Below we consider the 5 stakeholders who are involved in the process: the cardholder, the merchant/retailer, the acquirer, the card scheme and the issuer.

Cardholder

This is the person who is holding a credit, debit or charge card that has been issued by a financial institution. You are usually asked to place your card into a chip & PIN device, tap your card (on a contactless card payments scheme) or hand it to the merchant who will process this for you. You then key in your personal PIN number to indicate that you want to proceed. An authorisation code is then sent to the merchant for the transaction on behalf of the company who issues the card and that number will appear on the receipt that you receive. The card issuer will then debit the transaction to the amount that has been issued to the cardholder’s account.

Retailer/merchant

A merchant is a person who sells services or goods to the customer (you, the cardholder). This can be done remotely, such as over the phone or online, or face-to-face in a shop.

Acquirer

A merchant and acquirer will have previously arranged an agreement to process any card payment transactions on its behalf. This agreement will also include the acquirer providing an acquirer owned terminal which is usually one of the acquirer’s own terminals. They are responsible for receiving the transaction details from this card from the terminal by the merchant and passing this onto the card issuer via the card scheme for completion and authorisation of the transaction.

Card scheme

Card schemes are organisations which control and manage the clearing and operation of card payments in accordance with card scheme rules. These card schemes bear responsibility for passing card transaction details to the issuer from the acquirer and for passing payments back to the acquirer which in turn pays the merchant. Card schemes that operate throughout the UK include Union Pay, Mastercard, Visa and American Express, to name just a few.

Issuer

The issuer is the financial organisation, building society or bank that provides payment cards (credit, debit, charge card or pre-paid) to the cardholder. They have responsibility for all the transactions that are made via cards that have been issued by them. They are therefore responsible for debiting the funds from the relevant account of the cardholder.

If you’re interested in a card payment machine to process transactions quickly and effectively, contact us today.