On average, it takes three seconds to process a credit card payment. In this time, several organizations must relay data and funds to each other to authorize and settle a transaction. There are six parties involved in payment processing: the customer, the merchant, the payment processor, the credit card association, the card issuing bank, and the underwriting bank. These parties work together in the payment process.
The parties: who’s involved
- The customer — In order for any transaction to occur, there must be a customer who wants to pay for a product or service with a credit card.
- The merchant — The merchant is the business or individual accepting the credit card payment. The merchant must have a system capable of processing credit card transactions.
- The credit card association — Credit card associations like Visa and MasterCard provide authorization, clearance, and settlement services. Credit card associations partner with the card issuing bank, who provides credit.
- The card issuing bank — The card issuing bank provides credit and the physical credit card to the customer. The card issuing bank also authorizes or declines the transaction depending on a number of factors, most importantly how much credit is available to that customer.
- The underwriting bank — The underwriting bank works with the payment processor to provide a merchant account. The underwriting bank takes on some of the chargeback risk of a business, and provides deposits into the merchant’s bank account. The underwriting bank is sometimes referred to as the acquiring bank