Who's who in card payments

The Role of Merchant Acquirers, Card Schemes and Card Issuers in the UK

When you make a payment with a credit or debit card, there are a number of different organisations involved in processing the transaction. These include the merchant acquirer, the card scheme, and the card issuer.

The merchant acquirer is the financial institution that works with merchants, in our case travel agents or tour operators, to accept credit and debit cards. The acquire collect the payments from the cardholder's bank and then send the funds to the merchant.

The card scheme is an organisation that sets the rules for how credit and debit cards are used. Card schemes also provide the infrastructure that allows merchants and cardholders to connect with each other. The most well-known card schemes in the UK are Visa, Mastercard, and American Express.

The card issuer is the bank or financial institution that issued the credit or debit card to the cardholder. The issuer is responsible for managing the cardholder's account, including processing payments, setting spending limits, and issuing refunds.

When a cardholder makes a payment with a credit or debit card, the following steps take place (I have skipped some authorisation and fraudechecks for simplicity)

  1. The merchant swipes the card or enters the card details into a payment terminal or the cardholder enters their own details in a form.
  2. The information from the card is sent to the merchant acquirer
  3. The acquirer sends the information to the card scheme.
  4. The card scheme sends the information to the card issuer.
  5. The card issuer authorises the payment and sends the funds back to the card scheme.
  6. The card scheme sends the funds back to the merchant acquirer.
  7. The merchant acquirer sends the funds to the merchant.

The merchant acquirer and the card issuer each charge a fee for processing card payments. These fees are known as scheme fees and interchange.

Scheme fees are charged by the card scheme to the merchant acquirer. These fees cover the costs of operating the card scheme, such as fraud prevention and marketing.

Interchange is charged by the merchant acquirer to the card issuer. This fee covers the costs of processing the payment, such as authorisation and settlement.

The amount of scheme fees and interchange charged for a card payment varies depending on the type of card, the amount of the transaction, and the merchant's location.

Written by
Will Bicknell
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