News & Trends
Mar 14

Understanding the Players in the Payments Space

Payment processing has a language all its own. The following will offer insight to decode the nomenclature.
Merchant  is a business that sells services or merchandise and accepts credit cards as payment. The Acquirer is the bank through which the Merchant has its merchant account. For the Cardholder to do business with the Merchant, they must both belong to the same Interchange Association, e.g. Visa or MasterCard.
 
Cardholder  is the individual consumer owning the card. The Cardholder uses the card to pay for goods and services. The Cardholder (or its employer) might load the card ahead of time (Prepaid Card), or pay after receiving a statement (Credit Card).
 
Acquirer  is the bank through which the Merchant has its merchant account. Upon settlement of a transaction, the Acquirer deposits funds in the Merchant’s bank account The Acquirer’s revenue comes from the difference between the merchant discount and an interchange discount paid to the Issuer.  The Acquirer is at risk if the Merchant defaults on refunds or chargebacks.  Most major banks act in an Acquirer role.
 
Issuer  is the bank that issues the Card to the Cardholder. The Issuer pays the Acquirer for the transactions on the card, and collects payment from the Cardholder The Issuer’s revenue comes from the interchange discount plus any fees and interest paid by the Cardholder.  The Issuer is at risk if the Cardholder fails to pay their balance.
 
Interchange Association  is association of banks that allows any Merchant (customer of a member-acquiring bank) to accept a card from any Cardholder (customer of a member-issuing bank). Visa and MasterCard are the dominant interchange associations worldwide.  The interchange associations provide brand support and facilities for performing the actual transaction interchange In the case of American Express and Discover, one company plays the role of both Issuer and Interchange Association (a closed system).
Program Manager builds and manages card schemes, which are collectively called Programs. The Program Manager coordinates and controls the different entities and disciplines providing an end-to-end solution for the client, including: the Issuer, the Processor, and Card Production. The Program Manager often provides a full turnkey solution, including contact centre solutions, card and collateral design, KYC and AML verification, and other technology such as cardholder portals and mobile apps. The Program Manager defines the way a group of Cards operates: such as maximum ATM withdrawals, fees associated with usage, and limitations on how and where cards can be used.
 
Processor  is a third party company, also known as a processing network that accepts electronic credit card transactions from Merchants and processes them for an Acquirer The processor handles notifying the Acquirer of the transactions (so that funds can be deposited in the Merchant’s account) as well as transmitting the transactions to the Interchange Association An Acquirer is typically associated with just one Processor, and pays that Processor for its services.  Each Processor has a different protocol for receiving transaction information from Merchants.
 
Gateway  A third party company that accepts electronic payment transactions over the Internet, and sends them to the Processor for processing There are two types of gateway companies: ones that develop their own software such as and ones that use a third party company’s software. At times, a Processor also offers Gateway Services through a pre-configured third-party.
 
Application Developers  are the entities responsible for integrating payments into business applications. Whether custom systems or vertically-marketed products, many have found the transaction processing protocols complicated and fast-changing. Protocols are often inconsistent among different processing networks.

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