RESEARCHING THE CREDIT CARD INDUSTRY The student is free to e.docx

RESEARCHING THE CREDIT CARD INDUSTRY:
The student is free to engage in research of the credit card
industry using any medium and/or forum the student chooses, as
long as the student acquaints himself/herself with the
terminology used, the workings of the industry and the
processes and interrelationships of the types of organizations
that are vital to the process. Suggestions as to where the student
may begin his/her research and some key terms are included
herein below. Regardless of the manner or technique of research
used by the student, it is expected that before the student
engages in any meaningful undertaking of Phase I that the
student become familiar with the process generally used in the
credit card industry, the terminology used therein, and with the
fictious company information used for this semester’s project
prior to any undertaking of Phase I.
Specifically, the student should be familiar with the function or
role of parties mentioned in the terminology document.
INTRODUCTION TO SUPERIOR CARD PROCESSOR, INC.
(SCP), AND TO “YOU” THE NEW HEAD OF THE IG
PROJECT MANAGER FOR THE INFORMATION
GOVERNANCE PROJECT DESIGN AND DEVELOPMENT
TEAM
Superior Card Processor, Inc., (“SCP”) is a new, startup Credit
Card Processing company that has been in business for
approximately two (2) years. Its principal place of business and
original processing center is located in Louisville, Kentucky. In
the past two years, SCP has opened 6 additional remote credit
card processing centers, one in each of Indiana, Ohio,
Tennessee, Florida, Texas and California.
SCP offers services and competitive rates similar to those
offered by its competition, the larger and well established credit

card processors such as Flagship Merchant Services and First
Data Merchant Services. SCP offers credit card processing
solutions to retail merchants as well as on-line merchants
engaged in e-commerce. Services offered to merchants who
accept credit cards from their customers include but are not
limited to selling and/or leasing point of sale (POS) terminals
and peripherals with built in security, wireless and mobile point
of sale (POS) terminal solution that can be carried by the
mobile merchant to accept payments anywhere the merchant
does business for so long as the merchant has access to the
internet, and on-line solutions for merchants engaged in e-
commerce. Superior Card Processor, Inc. advertises that it
offers state-of-the-art security and compliance packages
designed to insure the merchant is best equipped to safeguard
its data and that of its customers.
SCP also services Merchant Banks who handle Merchant deposit
accounts and has an option whereby the Merchant Bank can
contract with SCP and the Merchant Bank act as a middleman in
placing SCP’s terminals with its Merchant depositors. In those
cases, the “discount” fee charged to the Merchant by both SCP
and the Merchant Bank is negotiated between SCP and the
Merchant Bank, who enters into an agreement with the
Merchant to bind it to the agreement between SCP and the
Merchant Bank.
Depending on the contract terms negotiated between the
Merchant Bank and SCP either the Merchant Bank or SCP will
be responsible for installing the POS terminal for merchants
maintaining a physical presence, or the web based application
for e-commerce merchants. When the Merchant accepts a credit
card from its customer it forwards the transaction, customer and
credit card information directly to SCP using the POS terminal
or web application. SCP will then determine which of the credit
card associations will be involved, and will forward the details
to the Issuing bank for that particular credit card association.
The Issuing Bank will then either approve the transaction or
decline it. The Issuing Bank’s decision regarding whether to

approve the transaction is then forwarded back to SCP, who
provides that information to the Merchant. This process takes
only a minute or so, and is referred to as Authorization.
Assuming the credit card transaction is approved, the customer
receives his goods or services paid for with the credit card, and
the Merchant accepts the Issuing Bank’s promises to pay the
Merchant for the goods or services sold to the customer by the
Merchant, less its interchange fee, and SCP’s discount fee, and
the Merchant Bank’s discount fee. Subsequent to the
transaction, and generally within the next day, the Issuing Bank
will deduct its interchange fee and forward the balance of the
customer’s purchase price to SCP. SCP will deduct its own fee
called a “discount”, and will likewise deduct the Merchant’s
Bank’s discount fee. It will deposit the Merchant Bank’s fee
into the Merchant Bank’s account earmarked for those funds
and at the same time will deposit the net proceeds from the
customer’s purchase into the Merchant’s bank account held by
its Merchant Bank.
Monthly, SCP will generate reports for the Merchant Bank, the
Merchant, and for each of the Credit Card associations (Visa,
MasterCard, Discover, etc.) providing both detailed and
summary data for the merchant transactions that it processed for
the period.
SCP’s organizational structure includes a Board of Directors,
Chief Financial Officer, Chief Executive Officer, President and
Vice-President. The Vice-President answers to the President,
the President to the CFO and CEO, who in turn are accountable
to the Board of Directors. Housed in its principal office in
Louisville, is the Small Merchant Department, Large Merchant
Department, and Corporate Merchant Department. These are
divided because of the different compliance requirements for
each. Each the Small, Large and Corporate Merchant
Departments have a departmental manager and chief compliance
officer. Each of these three departments are responsible for
receiving, processing, storing, sorting, analyzing, and
forwarding information regarding the Merchant transactions on

to the Issuing Bank and for receipt, storage, processing, sorting,
analyzing and forwarding the Issuing Bank’s authorization or
non-authorization of Merchant credit card transactions on to the
Merchant. These three departments are also responsible for
deducting SCP’s discount fee and each Merchant Banks’ fee and
for depositing the Merchant Bank fee into is account, and the
Merchant’s net proceeds into its account. These three
departments are also responsible for issuing monthly reports for
the Merchant, Merchant Bank, Credit Card Associations, and
Issuing Bank detailing and summarizing the transactions for the
period There is a Merchant Product Department responsible for
sales and shipments of the POS terminals. There is a Web
Hosting Department responsible for installing and training for
Merchants engaged in e-commerce. There is the Merchant
Banking Department who is responsible building and
maintaining relationships with Merchant Banks. The Research
and Development Department is tasked with responsibility to
insure that all technology offered to SCP’s Merchants remain
state-of-the-art and employ cutting edge technology. There is a
PCI DSS Compliance Department that is responsible for
insuring that SCP remains PCI DSS compliant. There is the IT
Department responsible for traditional “IT” related functions
and for data security and encryption. There is a Risk
Management Department. In addition there are the traditional
functional units or departments that are present in traditional
organizations, including but not limited to the Human Resources
Department, Accounting Department, in-house Legal
Department, and a catch-all Other Services Department.
All Merchant accounts and corresponding Merchant Bank
account is divided up and managed by either the principal office
in Louisville, or is assigned to one of the six (6) remote
locations depending on the Merchant’s location or geographic
region. None of the six remote locations are
as large as the principal office location in Louisville. The
remote locations house only the three departments responsible
for processing Merchant transactions, i.e., the Small Merchant

Department, Large Merchant Department, and Corporate
Merchant Department. For web based e-commerce Merchants,
the account is assigned to either the main office or a remote
processing site depending on the physical location of the on-line
Merchant’s Merchant Bank. There will be three departmental
managers at the remote sites, a site manager and Human
Resources Department.
In this scenario, you are an employee of Superior Card
Processor, Inc., and have been since it first opened for business.
Prior to accepting the position at SCP as the Chief Information
Officer responsible for the IT department in the area of data
encryption and security, you worked for approximately 15 years
at one of the commercial banks now serviced by SCP. Initially
you were employed as a teller for the bank while you were in
college earning your BS degree with a double major in Business
and Finance, and in Information Science and Technology. Upon
graduation from college, you became a loan officer for about 6
months, until a position came open in the IT department, where
you worked for the rest of your banking career, until accepting
a position in IT with SCP two years ago.
Over the past 2 years SCP has grown rapidly and in response to
the changing demands and needs of its Merchant customers. The
Board of Directors and President and chief executive officers
have expressed concerns that during this period of rapid grown
that potentially SCP has not addressed comprehensive
information governance of its Merchant customers or the
Merchant’s customer’s credit card information. You have also
had some of the same concerns in your capacity as Chief
Information Officer for IT. A meeting was recently convened
and attended by the CFO, CEO, President, Vice-President, Head
of Risk Management, in-House legal counsel, and yourself
where the topic of SCP’s lack of a comprehensive, enterprise
wide Information Governance Plan or Program was addressed. It
was the consensus of the group that the lack of an information
governance program or plan has contributed to breaches in
security resulting in disclosure of what should have been

protected customer credit card information, and merchant
information. In addition, there were concerns expressed by
those present at the meeting that SCP has not been responsive to
legal holds on customer and/or banking information, which has
led to delays in the legal department responding to legal
discovery requests. Further, there have been incidents where
SCP did not retain information for as long as it should have,
resulting in sanctions by the Courts for its inability to respond
to legal discovery requests. Other times, SCP had retained
potentially damaging information that legally it could have
disposed of but did not. As the result of a legal discovery
request for that information, SCP was required to turn it over,
which led to sanctions and adverse affects that could have been
avoided. This is evidence of the fact that SCP does not have a
legally defensible data retention and disposal plan in place.
During the meeting there was a consensus that a comprehensive
enterprise wide Information Governance Program or Plan was
needed at SCB. To that end, it was decided that an Information
Governance Team would be assembled to design and implement
the IG program enterprise wide at SCP. A motion was made by
SCP’s President that you serve as the Project Manager for the
IG Design and Development Team. You have agreed to accept
the position. The remaining embers of the IG design and
development team have not been selected yet.
T
he student is free to engage in research of the credit card
industry using any medium and/or forum
the student chooses, as long as the student acquaints
himself/herself with the terminology used, the
workings of the industry and the processes and interrela
tionships of the types of organizations that

are vital to the process. Suggestions as to where the student may
begin his/her research and some key
terms are included herein below. Regardless of the manner or
technique of research used by the
student, it is
expected that before the student engages in any meaningful
undertaking of Phase I that
the student become familiar with the process generally used in
the credit card industry, the
terminology used therein, and with the fictious company
information used fo
r this semester’s project
role of parties
mentioned in the
terminology document.
(SCP), AND TO “YOU”
THE
NEW HEAD OF THE IG PROJECT MANAGER FOR THE
INFORMATION
TEAM
Card Processing company that has
been in business for approximately two (2) years. It
s principal place of business and original

processing center is located in Louisville, Kentucky. In the past
two years, SCP has opened 6
additional remote credit card processing centers, one in each of
Indiana, Ohio, Tennessee, Florida,
Texas and Californi
a.
offered by its competition, the larger and
well established credit card processors such as Flagship
Merchant Services and First Data Merchant
Services. SCP offers credit card processing solutio
ns to retail merchants as well as on
-
line merchants
engaged in e
-
commerce. Services offered to merchants who accept credit
cards from their customers
include but are not limited to selling and/or leasing point of sale
(POS) terminals and peripherals
with b
uilt in security, wireless and mobile point of sale (POS)
terminal solution that can be carried by
the mobile merchant to accept payments anywhere the merchant
does business for so long as the
merchant has access to the internet, and on
-
line solutions for
merchants engaged in e
-
commerce.
Superior Card Processor, Inc. advertises that it offers state
-
of
-

the
-
art security and compliance
packages designed to insure the merchant is best equipped to
safeguard its data and that of its
customers.
SCP also services
Merchant Banks who handle Merchant deposit accounts and has
an option
whereby the Merchant Bank can contract with SCP and the
Merchant Bank act as a middleman in
cases, the “discount” fee charg
ed to
the Merchant by both SCP and the Merchant Bank is negotiated
between SCP and the Merchant
Bank, who enters into an agreement with the Merchant to bind it
to the agreement between SCP and
the Merchant Bank.
Depending on the contract terms negotiated
between the Merchant Bank and SCP either the
Merchant Bank or SCP will be responsible for installing the
POS terminal for merchants maintaining
a physical presence, or the web based application for e
-
commerce merchants. When the Merchant
accepts a credit c
ard from its customer it forwards the transaction, customer and
credit card
information directly to SCP using the POS terminal or web
application. SCP will then determine
which of the credit card associations will be involved, and will
forward the details
to the Issuing bank

for that particular credit card association. The Issuing Bank will
then either approve the transaction
The student is free to engage in research of the credit card
industry using any medium and/or forum
the student chooses, as long as the student acquaints
himself/herself with the terminology used, the
workings of the industry and the processes and
interrelationships of the types of organizations that
are vital to the process. Suggestions as to where the student may
begin his/her research and some key
terms are included herein below. Regardless of the manner or
technique of research used by the
student, it is expected that before the student engages in any
meaningful undertaking of Phase I that
the student become familiar with the process generally used in
the credit card industry, the
terminology used therein, and with the fictious company
information used for this semester’s project
role of parties mentioned in the
terminology document.
(SCP), AND TO “YOU” THE
NEW HEAD OF THE IG PROJECT MANAGER FOR THE
INFORMATION
TEAM
Card Processing company that has
been in business for approximately two (2) years. Its principal
place of business and original

processing center is located in Louisville, Kentucky. In the past
two years, SCP has opened 6
additional remote credit card processing centers, one in each of
Indiana, Ohio, Tennessee, Florida,
Texas and California.
offered by its competition, the larger and
well established credit card processors such as Flagship
Merchant Services and First Data Merchant
Services. SCP offers credit card processing solutions to retail
merchants as well as on-line merchants
engaged in e-commerce. Services offered to merchants who
accept credit cards from their customers
include but are not limited to selling and/or leasing point of sale
(POS) terminals and peripherals
with built in security, wireless and mobile point of sale (POS)
terminal solution that can be carried by
the mobile merchant to accept payments anywhere the merchant
does business for so long as the
merchant has access to the internet, and on-line solutions for
merchants engaged in e-commerce.
Superior Card Processor, Inc. advertises that it offers state-of-
the-art security and compliance
packages designed to insure the merchant is best equipped to
safeguard its data and that of its
customers.
SCP also services Merchant Banks who handle Merchant deposit
accounts and has an option
whereby the Merchant Bank can contract with SCP and the
Merchant Bank act as a middleman in
cases, the “discount” fee charged to
the Merchant by both SCP and the Merchant Bank is negotiated
between SCP and the Merchant
Bank, who enters into an agreement with the Merchant to bind it
to the agreement between SCP and

the Merchant Bank.
Depending on the contract terms negotiated between the
Merchant Bank and SCP either the
Merchant Bank or SCP will be responsible for installing the
POS terminal for merchants maintaining
a physical presence, or the web based application for e-
commerce merchants. When the Merchant
accepts a credit card from its customer it forwards the
transaction, customer and credit card
information directly to SCP using the POS terminal or web
application. SCP will then determine
which of the credit card associations will be involved, and will
forward the details to the Issuing bank
for that particular credit card association. The Issuing Bank will
then either approve the transaction
THE PLAYERS IN CREDIT CARD PROCESSING:
Terminology
“Cardholder” or “Consumer” or “Retail Customer” – These are
generally the three different names by which the same
individual may be referred. This is the private citizen or
business who has applied to an “Issuing Bank” for credit in the
form of a major credit card such as MasterCard, Visa, Discover,
Bank of America, or American Express, and who have been
approved and issued a major credit card from the “Issuing
Bank”. These Cardholder or Customers are the individuals or
business who purchase goods and services from the retailer with
the major credit card that has been issued it to them.
“Merchant” – This is a retail (sometimes wholesale) vendor or
seller. It may also be a on-line vendor engaged in e-commerce,
selling goods on the internet. The Merchant sells goods and
services to the Cardholder, Consumer or Retail Customer and
allows the Consumer to purchase the goods and services with
his major credit card. The Merchant with the brick and mortar
physical location will have a one or more forms of point of sale
(POS) terminal in his place of business that will capture the

relevant information for the credit card purchase made by the
Consumer. The same is true for the on-line merchant, as the
website will be set up in a way to capture the same information.
“Merchant Bank” or “Acquiring Bank” – This is a commercial
bank, credit unions and other financial institutions who holds
deposit accounts (checking accounts) for its Merchant
customers/depositors is referred to as a Merchant Bank or an
Acquiring Bank. The Merchant Bank offers an additional
service to its Merchant customer/depositors by “handling” its
Merchant customer’s credit card purchases. That is, the
Merchant will have a checking account with the Merchant Bank
whereby the Merchant Bank accepts (in the form of a direct
deposit into its Merchant’s bank account) payment from an
“Issuing” bank who has extended credit to the Consumer in the
form of a credit card that the Customer can use to make his/her
purchases. When the Merchant allows its Customer to purchase
goods and services with a credit card, the actual payment for
those goods and services are received by the Merchant a few
days later in the form of a direct deposit into the Merchant’s
bank account with its Merchant Bank, after certain fees are
deduced by the different “players” who are involved in the
processing of the credit card transaction between the Consumer
and Merchant.
As you might expect, Merchants are not limited to accepting
credit cards from Customers who hold only one of the major
credit cards. Consider your own experience in the real world. If
you walk into a merchant’s store or make a purchase from a
merchant on-line, you generally have the option to make your
credit card purchase with either Visa, Discover, Bank of
America or MasterCard (and less frequently American Express).
“Credit Card Processor” - A Credit Card Processor is a
organization that process credit cards for Merchants and
Merchant Banks when the Merchant and Merchant Bank accepts
more than one of the major credit cards (i.e. Visa, MasterCard,
Bank of America, Discover, etc.). There is a
growing number of Credit Card Processors in the credit card

industry today. At the time the Merchant decides to allow its
Customers to make credit card purchases and before the POS
terminal is installed at the Merchant site, or the website
activated to accept credit card payments, the Merchant must
make a determination as to which of the many credit card
processors it will engage for the purpose of processing its credit
card purchases. The different credit card processors offer
varying terms and rates, and the Merchant is advised to compare
the pros and cons of contracting with one credit card processor
over another. Once the credit card processor has been selected
the Merchant will receive his POS terminal and a contract will
be signed between the credit card processor, Merchant and
Merchant Bank.
Alternatively, it is possible that the Merchant will not have an
option as to which Credit Card Processor will handle its credit
card purchases. When the Merchant’s own Merchant Bank is
responsible for selling or leasing the POS terminal to the
Merchant, most likely the Merchant bank has already researched
the services and rates offered by the different Credit Card
Processors and has contracted with one Credit Card Processor to
handle all of its Merchant Bank credit card transactions, and
therefore all of its Merchant depositor transactions. In that case,
the Merchant’s credit card sales will be processed by the Credit
Card Processor selected for it by its own Merchant Bank. In this
case also, a contract will be entered into between the Merchant
and its Merchant Bank that sets forth the terms and rates
charged to the Merchant for the Credit Card Processor and for
the Merchant Bank’s services.
Either way, the Merchant will receive a monthly statement from
the Credit Card Processor detailing the individual transactions
that were processed by that Credit Card Processor, and the fees
deducted by the different “players”. Furthermore, the
Merchant’s Merchant Bank will disclose the amounts of money
deposited into the Merchant’s account each month as the result
of the Merchant’s credit card sales for the period.
The number of Credit Card Processor is growing rapidly. This is

a big business. There are organizations that routinely rate the
quality and comparative rates of the major Credit Card
Processors in the credit card industry. A few of the more highly
rated Credit Card Processors include Flagship Merchant
Services, Quantum Electronic Payments, ProMerchant, North
American Bancard, and Leaders Merchant Services. The
services and rates offered by each has been tailored by the
individual credit card processor to include features that it
believes will attract more Merchants and/or Merchant Banks.
See for example, https://www.comparisun.com/best-credit-card-
processing.
“Credit Card Associations”- The Credit Card Associations are
the major credit card brands such as are the card brands such as
Visa, Mastercard, Discover, Bank of America and American
Express. The card associations act as a clearinghouse for their
respective card brands and also serve as governing bodies of
payments processing. These card associations set what is
referred to as the interchange rates and the qualification
guidelines. Further, they act as an arbiter between Issuing
Banks and Acquiring Banks. Sometimes these Credit Card
Associations are referred to as “Networks”.
“Issuing Banks” - These are the commercial banks, credit
unions, and other financial institutions that issue debit and
credit cards to Cardholders through the card associations. The
Issuing Bank
is not to be confused with the Merchant Bank/Acquiring Bank.
When a Consumer applies for a major credit card (like Visa or
MasterCard) he/she is applying to the Issuing Bank for credit.
THE TRANSACTIONS: Terminology
“Authorization” – This is the process whereby the Consumer is
able to complete a purchase from a Merchant using his credit
card. When the Consumer presents his major credit card (issued
to him by the Issuing Bank), the Merchant will capture the
Customer’s credit card information from the information stored
for the card presented, and this combined with the information
concerning the transaction is sent to the Credit Card Processor

via the POS terminal (or in the case of on-line purchases
through the information captured by the webpage). The Credit
Card Processor will forward the information to the Issuing Bank
to determine whether it appears the Consumer is the actual
authorized purchaser for the credit card presented, whether the
purchase amount is within the credit card limits, whether
charges are allowed to the card or whether there has been a hold
put on the card or it suspended or revoked for nonpayment, or
other reasons. The Issuing Bank will make the determination as
to whether to approve or decline the credit card purchase, with
that information transmitted back to the Merchant via the same
channel. The description herein is the simplified explanation of
how Authorization works. Its takes only seconds.
“Settlement and Funding” – The Merchant wants to be paid for
the goods or services it sold to the Consumer with just the
swipe of his credit card, and no money changing hands. The
Merchant will send information regarding the authorized
transactions to the Credit Card Processor it has contract with.
This can happen with “Batch” processing where they sent this
information periodically for a batch of number of credit card
transactions, or it can happen at the time the authorization has
been completed. There was a time when this took place
automated overnight. More often today, it occurs at the time of
authorization. Either way, upon receipt of this information the
Credit Card Processor passes these details to the appropriate
Credit Cared Associations, who communicate the appropriate
information to the Issuing Banks in their network. The Issuing
Bank will then charge the Cardholder’s account for the amount
of the transactions. The Issuing Bank then transfers appropriate
funds for the transactions to the Merchant Bank, minus its fees
for processing the transaction. This fee charged by the Issuing
Bank is referred to as the “Interchange Fee”. The Merchant
Bank (Acquiring Bank) deposits the funds into the Merchant
account, minus its fee (referred to as a “discount”). There was a
time when Settlement and Funding took days, sometimes a week
or more. Today, the process is sometimes completed overnight

with the Merchant receiving payment into his account the day
following the credit card sale to the Consumer.
ADDITIONAL INFORMATION/RESEARCH THAT WILL
ASSIST THE STUDENT:
The above information is intended to provide the student with a
general introduction to the concept of credit card processing and
the terminology used in the industry. Loosely, you can apply
this same concept to “debit cards” as to credit cards. Please
don’t get bogged down in the minutia surrounding the
difference between credit card processing and debit cards.
The student is invited to conduct his/her own independent
research for a more complete understanding of the process.
Below is a sampling of just a few informational videos, blogs
and
websites that explain how credit card processing works. These
links are provided merely for your convenience and are not
required viewing.
There is a utube video that is about 12 minutes long that
provides fairly good information in an understandable form can
be viewed at https://www.youtube.com/watch?v=nRzTaWZ6ebs.
Careful with this one. It may overly simplify the process and
does not make the distinction between the credit card processors
and the credit card associations.
Another useful video you may want to view is
https://www.youtube.com/watch?v=avRkRuQsZ6M. With this
one focus on the transaction cycle and don’t get bogged down
with the calculations for pricing (Example, the interchange
processing model).
Also consider viewing a useful blog at
https://blog.payjunction.com/credit-card-processing-diagram/
BY CHRISTINA LAVINGIA ON AUGUST 14, 2018
Further is https://wallethub.com/edu/credit-card-
transaction/25511/
Somewhat useful might be https://www.vantiv.com/payment-
processing/how-credit-card-processing-works
Independent of the student’s research concerning just “how” a

credit card transaction is processed, and the parties involved,
the student will want to consider who or what organization or
group is responsible for regulation in the industry, for
information governance of the highly confidential and sensitive
data, and the related standards and accountability involved. A
working knowledge of this information is important to the
quality of the student’s research project. Hint: In that regard the
student should consider researching Payment Card Industry
Data Security Standards (PCI DSS), and the related information
gleaned therefrom. This will provide the student with a wealth
of relevant information for the research project.
Once the student has familiarized himself/herself with the
concepts related to credit card processing, standards
organizations and governance of information in the industry the
student is then ready to familiarize himself/herself with the
introduction to the “hypothetical/fictious” organization for
which the student will serve as Project Manager in the design
and implementation of an Information Governance Plan or
Program for that organization.
Thereafter, upon having an understanding of the credit card
processing industry, standards organizations, and
accountability, combined with a familiarity of the fictious
organization that has employed the student as Project Manager,
the student is prepared to move on to Phase I of the research
project.
Terminology
“Cardholder” or “Consumer” or “Retail Customer”
–
These are generally the three different
names by which the same individual may be referred. This is the
private citizen or business who has
applied to an “Issuing Bank” for credit in the form of a major

credit card such as MasterCard, Visa,
Discover, Bank of America, or American Express, and who
have been approved and issued a major
credit card from the “Issuing Bank”. These Cardholder or
Customers are the individuals or business
who purchase goods and services from the retailer with the
major credit card that has been issued it
to them.
“Mercha
nt”
–
This is a retail (sometimes wholesale) vendor or seller. It may
also be a on
-
line
vendor engaged in e
-
commerce, selling goods on the internet. The Merchant sells
goods and services
to the Cardholder, Consumer or Retail Customer and allows the
Consume
r to purchase the goods and
services with his major credit card. The Merchant with the brick
and mortar physical location will
have a one or more forms of point of sale (POS) terminal in his
place of business that will capture the
relevant information for
the credit card purchase made by the Consumer. The same is
true for the on
-
line merchant, as the website will be set up in a way to capture
the same information.

“Merchant Bank” or “Acquiring Bank”
–
This is a commercial bank, credit unions and other
fina
ncial institutions who holds deposit accounts (checking
accounts) for its Merchant
Acquiring Bank. The Merchant Bank
offers an additional service to its Merchant customer/depositors
by “handling”
its Merchant
customer’s credit card purchases. That is, the Merchant will
have a checking account with the
Merchant Bank whereby the Merchant Bank accepts (in the form
of a direct deposit into its
Merchant’s bank account) payment from an “Issuing” bank wh
o has extended credit to the Consumer
in the form of a credit card that the Customer can use to make
his/her purchases. When the Merchant
allows its Customer to purchase goods and services with a
credit card, the actual payment for those
goods and services
are received by the Merchant a few days later in the form of a
direct deposit into
the Merchant’s bank account with its Merchant Bank, after
certain fees are deduced by the different
“players” who are involved in the processing of the credit card
transact
ion between the Consumer
and Merchant.
credit cards from Customers who hold

only one of the major credit cards. Consider your own
experience in the real world. If you walk into a
merchant’s store
or make a purchase from a merchant on
-
line, you generally have the option to make
your credit card purchase with either Visa, Discover, Bank of
America or MasterCard (and less
frequently American Express).
“Credit Card Processor”
-
A Credit Card Processo
r is a organization that process credit cards for
Merchants and Merchant Banks when the Merchant and
Merchant Bank accepts more than one of the
major credit cards (i.e. Visa, MasterCard, Bank of America,
Discover, etc.). There is a
Terminology
“Cardholder” or “Consumer” or “Retail Customer” – These are
generally the three different
names by which the same individual may be referred. This is the
private citizen or business who has
applied to an “Issuing Bank” for credit in the form of a major
credit card such as MasterCard, Visa,
Discover, Bank of America, or American Express, and who have
been approved and issued a major
credit card from the “Issuing Bank”. These Cardholder or
Customers are the individuals or business
who purchase goods and services from the retailer with the
major credit card that has been issued it
to them.

“Merchant” – This is a retail (sometimes wholesale) vendor or
seller. It may also be a on-line
vendor engaged in e-commerce, selling goods on the internet.
The Merchant sells goods and services
to the Cardholder, Consumer or Retail Customer and allows the
Consumer to purchase the goods and
services with his major credit card. The Merchant with the brick
and mortar physical location will
have a one or more forms of point of sale (POS) terminal in his
place of business that will capture the
relevant information for the credit card purchase made by the
Consumer. The same is true for the on-
line merchant, as the website will be set up in a way to capture
the same information.
“Merchant Bank” or “Acquiring Bank” – This is a commercial
bank, credit unions and other
financial institutions who holds deposit accounts (checking
accounts) for its Merchant
Acquiring Bank. The Merchant Bank
offers an additional service to its Merchant customer/depositors
by “handling” its Merchant
customer’s credit card purchases. That is, the Merchant will
have a checking account with the
Merchant Bank whereby the Merchant Bank accepts (in the form
of a direct deposit into its
Merchant’s bank account) payment from an “Issuing” bank who
has extended credit to the Consumer
in the form of a credit card that the Customer can use to make
his/her purchases. When the Merchant
allows its Customer to purchase goods and services with a
credit card, the actual payment for those
goods and services are received by the Merchant a few days
later in the form of a direct deposit into
the Merchant’s bank account with its Merchant Bank, after
certain fees are deduced by the different

“players” who are involved in the processing of the credit card
transaction between the Consumer
and Merchant.
credit cards from Customers who hold
only one of the major credit cards. Consider your own
experience in the real world. If you walk into a
merchant’s store or make a purchase from a merchant on-line,
you generally have the option to make
your credit card purchase with either Visa, Discover, Bank of
America or MasterCard (and less
frequently American Express).
“Credit Card Processor” - A Credit Card Processor is a
organization that process credit cards for
Merchants and Merchant Banks when the Merchant and
Merchant Bank accepts more than one of the
major credit cards (i.e. Visa, MasterCard, Bank of America,
Discover, etc.). There is a

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