Everything You Need to Know About the

Payments IndustryIn Pictures!

!

In any payment transaction, there are four parties

Cardholder

Acquirer

Issuer

Merchant

(Cardholder Bank)

(Merchant Bank)

Based on these four parties there are two transaction party systems

Four Party System

Three Party System

The Four Party System

Used by Visa and MasterCard

Goods or

Services

Presents card

for payment

Bill for payment

Payment for bill

Asks for authorization

Approve/Denies transaction

and extends credit

Confirms transaction

Pays transaction fee

$The Four Party SystemThese companies make

money from transaction fees and volume fees.

!These companies DO NOT

issue cards or extend credit.

Transaction fee!and

fee based on!gross dollar volume

$Transaction fee!and

fee based on!gross dollar volume

The Three Party SystemUsed by Discover and

American ExpressGoods

or Services

Present card

for payment

Bill for payment

Payment for bill

Confirms transaction

Pays transaction fee

Note:!Issuer and

Acquirer are the same

The Three Party SystemThese companies make

money from transaction fees and volume fees.

!Plus!!

!These companies DO issue

cards and extend credit

$Card fees!and

Interest fees

$Transaction fee!and

fee based on!gross dollar volume