When was the last time you used your Chase card or your Capital One card? If you had to stop and think about it for a moment, you would not be alone. This is because most people do not think about the bank name on their cards.
Now, if we asked you when was the last time you used your MasterCard or Visa, you probably would be able to remember right away. This is because we often think of our cards as either being a Mastercard or Visa, not the bank’s name.
Do American Express (AMEX) and Discover work the same as Visa and Mastercard? What difference does it make for your customers or your business? If you are curious about how these different card brands work and what they mean regarding the credit card processing process, then you are in the right place.
What is a credit card network?
A credit card network, which is also called a credit card association, is essentially the credit card brand associated with the card. It could be Visa, MasterCard, AMEX, or Discover. Each network has an active role in credit card transactions and payment processing.
Each brand has an obligation with at least one other business that makes up the entire processing workflow. However, in most cases, it involves multiple businesses, such as banks and credit card processing companies.
Another way to look at a credit card network is to think about them as franchisors. Banks that issue credit or debit cards with Visa and MasterCard logos are the franchisees. The franchisors set the terms and conditions and various rules for the franchisees. They also update these terms and conditions and rules periodically.
When it comes to AMEX and Discover, the easiest way to think about these brands is they are like corporate-owned stores that deal directly with consumers. They issue their own cards and also have their own credit card network to process transactions.
How does a credit card network fit in the credit card processing process?
There are many different people and businesses involved in the credit card processing process. Each one plays an important role in the overall workflow model and includes:
- Credit Card Processors
- Acquiring Banks
- Credit Card Networks
- Issuing Banks
The generalized steps to process a credit card transaction are:
- The customer uses the card to pay for goods or services at a merchant.
- The merchant transmits the card data to their credit card processor.
- The processor sends the payment information to the acquiring bank. The processor may also be the acquiring bank.
- The acquiring bank transmits the payment request to the appropriate credit card network.
- The credit card network processes the card data and sends it to the issuing bank.
- The issuing bank verifies the available credit limit and either approves or declines the transaction.
- The approval or denial is sent to the acquiring bank. If the transaction was approved, the acquiring bank releases payment to the credit card processor.
- The credit card processor released payment to the merchant.
- The consumer pays the issuing bank directly when the credit card payment is due.
Are credit card networks and debit card networks the same?
With debit cards, there are two different types of payment processing options. If the consumer enters their PIN number to complete the transaction, then the credit card processor transmits the transaction through an ACH debit network to process the payment for the immediate release of funds from the issuing bank.
If the consumer chooses to have the transaction processed as a credit transaction, then the transaction is processed the same as a credit card transaction. However, instead of waiting for the consumer to pay the issuing bank back, the money is released from the consumer’s bank account immediately.
Is there a difference between the credit card brand and issuing bank?
Sometimes there is a difference between the credit card brand and the issuing bank. For Visa and MasterCard cards, the credit card issuer is normally a bank, such as Bank of America, Chase, or Capital One. Visa or MasterCard would be considered the brand, not the issuer, so they are different.
On the other hand, for AMEX and Discover cards, both AMEX and Discover are the issuing bank and the brand. So, there is not a difference between the two because both are financial services companies that have their own banks.
What do credit card networks do?
Besides having a hand in processing credit transactions, the credit card networks are responsible for other aspects of the credit payment card industry, as follows:
- The card networks determine interchange fees and card brand fees.
- They establish specific terms and conditions and rules that issuing banks, credit card processors, acquiring banks, and merchants must follow.
- They establish the data security standards for credit card processing.
- They maintain the computer network they build for credit card processing.
- They are responsible for monitoring, detecting, and preventing unauthorized access to the credit card processing network.
- They market their card brands to increase awareness with consumers, regardless of the bank that issues the card.
Why accept different credit card brands through your merchant services account?
More and more consumers are demanding different payment methods, from “tap-n-go” to contactless payments using their mobile devices. To be able to accommodate your customers, you need to make sure to accept the credit cards and payment methods they want the most.
How is my small business affected by the credit card networks?
Credit card networks play a major role in credit card processing fees and pricing models and in ensuring transactions are processed securely and correctly, so you can get paid when your customers pay using credit cards.
Without credit card networks, they would not be a centralized payment processing solution. Could you imagine having to have multiple merchant accounts to accept cards from different issuing banks instead of a single POS system or payment gateway for online transactions?
While you have no control over interchange fees and certain other credit card processing fees, you do have control over other costs associated with accepting credit card payments like choosing the best credit card processing company for your merchant account. To find out more about merchant accounts or to see how much we could save you on credit card processing fees, please feel free to contact Adept Payments at 888-732-3838 today!