My Merchant Account Blog

The Players in an E-Commerce Transaction

Thursday, January 08, 2009

When you get a merchant account, you usually let the merchant account provider know what card types (Visa, American Express, MasterCard, JCB, Discover, etc) you would like to accept.  This usually permits the e-commerce merchant to accept any cards that display this logo, even debit cards (you might need to check something on your merchant account application for the debit cards).  Accepting these cards, credit / debit, and at least Visa / MasterCard, will allow you to sell to most everyone.

If you start to think about accepting credit cards, you might only be familiar with your merchant account provider, the electronic payment gateway, and the consumer.  However, there are a few more companies involved in the transaction.  We will take a look at some of the companies and their function in a (Visa) e-commerce transaction.

E-Commerce Merchant

An e-commerce merchant is an authorized individual / company of certain card associations (Visa, MasterCard, American Express, Discover Financial Services, JCB, etc. for services or products.

Cardholder

An authorized individual / company that has a card with one of the card association logos on it.

Issuing Bank

This is a financial institution that maintains the (Visa) cardholder's relationship while also issuing (Visa) cards and contracts to cardholders for repayments of transactions.

Acquiring Bank

This is a financial institution that contacts with merchants to accept and process (Visa) cards for payment of services and goods.

VisaNet Processor

A member (or Visa approved nonmember) that is directly connected to VisaNet® to provide authorization, clearing, or settlements for merchants / members.

VisaNet®

This is a collection of systems that support the electronic transmission of all Visa card authorizations between acquirers and issuers and facilitates the settlement of funds.  In January 2002, First Data announced a program in which card transactions where First Data is the processor for both the card issuer and the merchant would be processed internally by First Data, without going through VisaNet®.  Visa did sue First Data but it was settled: Visa USA and First Data Corporation Agree to Settle Legal Dispute.

Merchant Servicer

This is a company that stores, processes, or transmits account numbers on behalf of a member's merchant.  Some examples include providing services as online shopping carts, electronic payment gateways, hosting facilities, data storage, authorization, and / or clearing and settlement messages.

All these companies or services help the authorization, authentication, and settlement of the transaction.

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