About Our Industry
There are two sides to the credit card business - issuing and acquiring.
Issuing
Issuers are the financial institutions that put credit cards in the hands of businesses and the general public. Canadian financial institutions are currently only allowed to issue cards of one brand, e.g., Royal Bank only issues VISA and Bank of Montreal only issues MasterCard.
Acquiring
Organizations that offer merchant accounts to retailers and other businesses are often referred to as "Acquirers" or "Merchant Service Providers". Businesses that accept credit cards from their customers as a method of payment are called "Merchants".
The Process
- The cardholder presents his or her card to the Merchant as payment for goods or services.
- The card information is entered by keying the numbers, or ‘swiping’ the magnetic stripe of the card through a reader.
- An authorization request is sent to the Issuer – is the card valid, and is there sufficient credit available to cover the cost of the transaction?
- A response is returned to the Merchant indicating whether the transaction has been approved or declined.
- If the transaction is approved, then the Merchant is provided with an authorization code and can complete the sale.
- At the end of the day, the Merchant’s credit sales are sent to the Acquirer for settlement and the Acquirer initiates the posting of a credit to the Merchant's bank account.