Payment Processing 101

This is an updated version of a post originally published in August 2014.

Electronic payments (credit, debit, mobile payments) are quickly displacing cash and cheques as the preferred way to pay. Cash volumes are expected to fall by 30% over the next 10 years.

As more and more consumers prefer to pay by credit and debit cards, one thing is clear: credit cards are here to stay. There are many stakeholders involved in credit card processing. Let’s take a look at the players in the payment processing game.


Name: Acquirer

(alias: Acquiring Bank or Merchant Bank)

Job – An acquirer takes on the risk of credit card processing. The acquirer solicits, underwrites, and maintains the merchant account. They may provide the technology, and hardware which enables the merchant to process the transaction.

Name: Aggregator

Job – Aggregators allow merchants to process payments without setting up a merchant account. They bundle several merchants together and allow them to process payments using a joint merchant account. The set-up is simple and straightforward.

Examples – Square, PayPal.

Name: Cardholder

Job – Cardholders are consumers with credit cards used to purchase goods and services. They are approved by the issuer based on credit worthiness.

Examples – Beyoncé, John Smith.

Name: Card brand

(alias: Payment brand, payment brand network, credit card association)

Job – Payment brand networks are colloquially known as credit card and debit card companies. Their job is to govern compliance policies pertaining to their payment cards, monitor processing activity, develop new products, and oversee the clearing and settlement of transactions.

Examples – Visa, MasterCard.

Name: Issuer

(alias: Issuing bank)

Job – The issuing bank issues credit cards on behalf of card brands. They provide consumers with credit cards, send credit card statements, and offer consumers credit. The issuer is also responsible for card security and compensates customers for losses due to fraud.

Examples – Royal Bank, Bank of America.

Name: Merchants

Job – Merchants are business owners accepting payments in exchange for goods or services.

Examples – Best Buy, Bob’s Cafe.

Name: Payment Processor

(alias: ISO, independent service organization, or merchant account providers)

Job – Payment processors negotiate processing, setup, and equipment rates, as well as set up the merchant account. They act as a middleman between merchants and acquirers. They may also provide the technology and hardware which enables the merchant to process the transaction.

Examples – Payfirma, Moneris, Elavon.

To better understand the intricacies of each player’s role in how you get paid, check out what goes on behind the scenes during a transaction.


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This is an adapted excerpt from our eBook Payment Processing 101: A Merchant’s Guide to All Things Payments. It’s your ultimate resource for understanding how you get paid. Download your free copy on the right.