Credit Card Network

Credit card networks serve as the communication system that enables issuing banks and businesses to process credit card transactions efficiently. These networks are responsible for authorizing and processing credit card transactions, defining transaction terms, and facilitating the movement of payments between customers, merchants, and banks. Prominent credit card networks include Visa, Mastercard, American Express, and Discover.

There are two main types of credit card networks: open and closed, each with distinct approaches to card issuance.

Open network:

Open credit card networks permit other financial institutions to issue their credit cards to customers. The two largest open credit card networks are Visa and Mastercard.

Closed network:

In closed credit card networks, the credit card company issues the cards exclusively. The credit card network also acts as the acquirer and directly disburses funds to businesses’ banks, deducting transaction fees. Notable examples of closed credit card networks include American Express, Discover, and some store-issued credit cards.

Credit card networks connect the card issuer and the business in credit card purchases. The customer initiates payment, and the business’s payment terminal contacts the credit card network for approval. The network quickly notifies the business of the approval or denial of the transaction. Credit card networks connect the card issuer and the business in credit card purchases. The customer initiates payment, and the business’s payment terminal contacts the credit card network for approval. The network quickly notifies the business of the approval or denial of the transaction.

In summary, credit card networks serve as the essential intermediary, orchestrating the secure flow of information between the customer’s card issuer, the business, and the payment processor. Through their seamless operation, credit card networks contribute to smoother transactions, reduced fraud risk, and increased convenience for both customers and businesses alike.