Understanding all the parties that work together to process a single transaction is not as straightforward as you may think. Between you and your customer are the middlemen required to successfully run transactions. Who you choose to work with can significantly impact your business's efficiency and overall bottom line. So, how does credit card processing work? These are the middlemen involved in credit card processing:
- Card Associations
- Merchant Account Providers
- Payment Processors
- Payment Gateway
- Payment Facilitators
Card Associations are the companies that create the credit card brands (Visa, MasterCard, Discover and Amex). They set rules, such as chargebacks, and create and manage Interchange. Card Associations do not directly work with businesses; they are part of the network responsible for the back-end functionality of transactions.
Merchant Account Providers oversee the sales and marketing of the products and services used to process transactions. Providers work directly with businesses and are facilitators between the Card Association’s network and your business's bank account.
Payment Processors are the technical glue that handle the transmission of transactions. They maintain the computer network that facilitates communications between your Merchant Account Provider and the banks. Processors do not directly work with businesses. They are chosen by your provider’s bank.
Payment gateways are systems that facilitate the transfer of information between a payment portal and a processor, making it easier to process transactions. They typically store records of all transactions and automate advanced features like recurring billing and batching. Gateways can work directly with businesses or through a credit card processing provider.
Facilitators have one merchant account they lend out for businesses to use. They typically do not directly deposit funds into a business's bank accounts, but will if requested. Facilitators offer an alternative option for small businesses that are just getting started or are processing low volume.
How to Navigate the Credit Card Processing Landscape
Every middleman benefits when a card is processed. The design makes your business run more efficiently, but you pay a markup for each added middleman. Steer clear of the complexity and expense by choosing an all-in-one solution: one bill, one point of contact, and one support center. Although some companies offer these end-to-end services, they are rare. Keep an eye out for an integrated solution from an all-in-one provider to ensure smooth, efficient and low-cost credit card processing for your business.
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Do you have an all-in-one Merchant Account Provider? Where does your credit card processing provider fall in the maze? Start a conversation in the comments below!