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Card Processing - Demystified

Updated: Jul 15, 2020

Want to Learn whats goes behind when you do any card payment? Read this blog and you will be amazed at what all happens in a matter of second by the time you swipe your card at any store and receive a payment confirmation receipt.

The Players:

Let’s take a look at the players in the payment processing game.

Name - Acquirer (alias: Acquiring Bank or Merchant Bank)

Role to Play - The Financial Institution (banking accounts) that contracts with merchants for acceptance of debit and credit payment cards. The acquirer solicits, underwrites, and maintains the merchant account. They may provide the technology, and hardware which enables the Merchant to process the transaction. Registers merchants for card networks (Visa and MasterCard) and ensures that merchants originating online transactions are operating under a merchant agreement with the acquirer in accordance with the rules and technical requirements for the card network program.

Examples - PineLabs, ICICI Merchant Services, mSwipe, Paytm, etc.

Name - Aggregator / Payment Gateway

Role to Play - Aggregators allow merchants to process payments without setting up a merchant account. They bundle several merchants together and will enable them to process payments using a joint merchant account. The set-up is simple and straightforward.

Examples - Citrus, Billdesk, Instamojo, CCAvenue, PayUMoney

Name - Cardholders / Customer

Role to Play - Cardholders are consumers with credit cards used to purchase goods and services. They are approved by the issuing bank based on creditworthiness. Uses the card to pay for purchases over the internet or other PoS. The cardholder activates the card once for 2-factor authentication like 3-D secure, Verified by Visa or SecureCode by MasterCard. The account holder of the debit or credit card.

Examples - You and Me.

Name - Issuing Bank (alias: Issuer)

Role to Play - The issuing bank issues debit/credit cards on behalf of payment brands. The issuer is also responsible for card security and compensates customers for losses due to fraud. Issuers also have responsibility for the authentication experience of their cardholders.

Examples - Punjab National Bank, Bank of India, SBI

Name - Merchants

Role to Play - Merchants are business owners who are accepting payments in exchange for goods or services. Offers merchandise, software or service at a website, mobile app or so, and accepts payments from a cardholder who makes purchases over the internet.

Examples - Amazon, Raj Kirana Store, Gayatri Books

Name - Payment Brand Networks (alias: Credit Card Associations, Card Brand, or Payment Brand)

Role to Play - Payment brand networks is colloquially known as credit card and debit card companies. Their job is to govern compliance policies about their payment cards, monitor processing activity, develop new products, and oversee the clearing and settlement of transactions. In simple terms, they are Card infrastructure providers. Verifies issuer’s authentication results. Routes authorization requests to issuers and sends responses to acquirers for return to merchants.

Examples - Visa, MasterCard, RuPay

The Process:

Get Inspired, Grow & Increase your Knowledge base!!!

I hope the above information gives you some more clarity on how card payments work. I would try to explain more of such topics in the coming days. To not miss any update - subscribe now through submitting the subscription form. Do provide your feedback and suggestions on the same.


Good Luck!!

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