The Anatomy of the Swipe: Making Money Move

Key Term: Independent Sales Organization (ISO) An ISO is granted a license to sell Merchant acquiring services from a Merchant Acquirer such as Wells Fargo or Chase Paymentech.

Merchants will typically want to keep their chargeback rates below 1 percent. Once a Merchant gets close to 1 percent or goes over, it needs to work to bring that percentage down or risk losing their ability to accept card-based payments through their Merchant Acquirer. The card networks place stringent rules on their Merchant Acquirers to make sur

Key Term: Clearing The term “Clearing” is used primarily by Issuers, but can also be referred to as “Capture” by Merchant Acquirers. Clearing happens toward the end of the day for most Merchants and will factor in tips, transaction reversals, and returns. This is basically the Merchant confirming these transactions are valid and that these funds ar

Key Term: Settlement Settlement is the actual movement of money from the cardholder’s bank account, the Issuing Bank, to the Merchant’s bank account, the Acquiring Bank. This movement of money typically happens via Fedwire as instructed by the payment networks.

Key Term: Issuer Processor The Issuer needs a technology provider that can connect with the payment networks. Usually, the Issuer Processor will have a piece of hardware in their data centers and a fast network connection directly to the payment networks to approve or decline a transaction. Sometimes, the Issuer may have built this technology in-ho

Stripe is a Gateway and gives you application program interfaces (APIs) and tools that enable you to Take payments—that is, if you have a website that sells coffee beans from all over the world, you could use Stripe to accept payments on your website. Marqeta is an Issuer Processor and has tools and APIs that allow you to Make payments—that is, you

Dual-Message Signature transaction with his debit card. Referred to as a Dual-Message transaction or a Signature transaction because, typically, an Authorization (message One) happens at the time of swipe—which was the process discussed above. This is then followed up with a Clearing (message Two) that happens in bulk at the end of the night—which

Key Term: Payments Facilitator (PF or PayFac) This is a layer on top of a Merchant Acquirer. Payments Facilitators can typically onboard Merchants very quickly and offer out-of-the-box hardware and software to enable a Merchant to start accepting card-based payments quickly.

Key Term: Payment Service Provider (PSP) A PSP is an aggregator of payment methods. It allows a website operator to get paid via debit cards, mobile wallets, and financing schemes.