Merchant Processing 101

If your business is not accepting card payments, you could be missing out on a lot of additional sales and revenue. Credit cards and other payment cards not only increase consumers' buying power and impulse purchasing, but also most often result in a higher average sale amount than cash transactions.

Credit card processing is divided into the categories of issuing and acquiring. Issuing is the act of granting credit cards with credit limits to consumers. Acquiring is the act of granting credit card processing to merchants who want to sell goods and services by this payment method. National is a tier one direct payment processor - or acquirer - that works in conjunction with major payment card associations such as Visa, Mastercard, and American Express. National also offers integration Discover, Diners Club, and debit cards to process all of your payment card transactions.

While it is almost definitely a boon to your bottom line, credit card processing is subject to a number of necessary fees, regulations, and requirements. National wants to help you to become fully educated on the merchant service industry, the credit card process, and how to best navigate all of the options involved with accepting payment cards and other non-cash payments.

A credit card transaction involves a number of participants and activities, from the initial card swipe to the payment that is ultimately provided to the merchant. The following diagram depicts the credit card process from start to finish and outlines the players involved.

Payment Card Processing Participants

This is the entity that provides businesses with a merchant account, which extends a line of credit to the merchant, and processes the transmission of payment data that is necessary to authorize and settle payment card transactions. On the front end, the processor deals with immediate card authorization, connectivity to card associations, and network authorization. On the back end, the processor receives and forwards settlement batches to the issuing banks within a scheduled time frame, and to the merchant's bank account when a batch settles.

Card Association (Visa, Mastercard)

The payment card associations are a network of issuing banks and acquiring banks that process payment cards of a specific credit card brand. The associations are responsible for the maintenance of the worldwide transaction clearing and settlement systems that process billions of transactions daily. These organizations also set and enforce industry regulations and develop products to increase card usage.

Issuing Bank (Chase, Citi, Capital One)

An issuing bank is a financial institution that offers card association branded payment cards directly to consumers. When it comes to credit cards, the issuing bank is the entity that extends a line of credit to the cardholder. Issuers are also responsible for maintaining rewards programs that drive card usage.

Payment Gateway (, USAePay)

These entities act as the front-end connection to the card associations. Payment gateways transfer payment data from the merchant to the issuing bank and processor as required. Payment gateways support most eCommerce software, shopping-carts, point of sale systems, banks, processors, and merchant types.

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