How Credit Card Processing Works - Transaction Cycle & 2 Pricing Models

[@stephaniehale946]

*You are the man. It's sad that most of the people from outside the payment industry don't understand, even at a high-level, the ecosystem of payments. Everyone knows Visa and MasterCard, but no one knows what they do and how they make money. For the majority of the people, it's just a logo on their card. These companies, both networks and merchant acquirers/payment processors, are very profitable. These are essentially technology companies with very low overhead and highly scalable business. I briefly worked for Vantiv/Worldpay and had a time of my life learning about the industry. Thank you for this awesome educational video. You should charge your own interchange for doing this video. :)*

[@Bancardsales]

Thanks for the comment. I appreciate it. I'm sure you did learn a lot working for Vantiv and Worldpay. Charging my own interchange would be great, btw! As you said, I'd be a lot more profitable if I could! Haha. Are you still in the business or doing are you doing something different? - Brian

[@stephaniehale946]

I work for MasterCard now. I work in IT in the areas of product and project management. Most of my experience, 7+ years, has been in payments, banking, and FinTech (Financial Technology).

[@Bancardsales]

Very cool. I'd welcome a conversation any time if you'd like to talk. Thanks again. - Brian

[@msmoneyboss2532]

this is the kind of video that people should be watching instead of those which will actually teach you to keep on spending your money

[@Bancardsales]

Thank you. Glad you enjoyed it!

[@АлекАндонов-ж3у]

This is the kind of video that students should watch in school

[@daveyvane]

yes! You should be a professional advice giver.

[@somebodyelse9323]

Thank you for breaking it down and explaining how this all works! I've tried for 20 years to get a handle on the fee models, processors vs interchange, and the overall process. This video does a nice job of breaking it down and then summing it all up!

[@brdane]

I would love to see an inside look inside the buildings that contain the mainframes/hardware that does the actual payment processing... what a powerful moment it would be to be present in the same room as a big box that controls part of the world. I had an interview for a Software Engineer position at MasterCard (didn't get the position) and the interviewer worked on the payment-processing portion of the code... he told me that while there was a lot of new code being added to its process, there was original 50-year old code still being used to process the payments... a surreal thing to think about and it would had been even more surreal to see the code first-hand.

[@KingsleyOkeze]

Wow.

[@brysonwalker7633]

THIS GAVE ME PTSD. I struggled through accounting in college and all the "show me how" videos next to the problem set WAS THIS VOICE. Accounting is a whole world I never expected to have so much trouble learning, like my instructor said, it's like learning an entire new language...

[@abderrahimboudaden1613]

MAN !!! YOU'RE NOT THE ONLY ONE HAHA, AND BTW THAT WAS SUCH A WISE TALK !

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[@TheGrmany69]

And this is finances... lol just kidding, it's truly an intricate language.

[@4pillarsvictoria17]

Great video! Understanding how credit card processing works can help people to be more aware of purchases using their cards.

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[@faizanashraf1367]

Wow great I am also working in a banking sector and this info is very useful for daily business

[@Anonymous-tq2iu]

Thanks buddy you really helped me a lot for my accounting homework

[@Anonymous-tq2iu]

The sequence of payment flows in a credit card transaction was actually quite hard to understand. Luckily I have found your video.

[@DarylSkinner]

How dose it work when you pay credit card company back does the money go back into one big bank account

[@RonnieRukus]

I own a merchant services company and have been in the industry for a while, and I feel like this video is subtly (or intentionally) steering people towards tiered pricing. First, the example given is a Visa Rewards 1 card with an interchange rate of 1.65% and 10 cents per transaction. There's no company in the world that classifies that card as a qualified card. 99 times out of 100 qualified cards are only card-present debit cards - and oftentimes they're specifically regulated debit cards. Tiered pricing is advantageous to the merchant services provider because there's no transparency or accountability. They sell it to merchants based on its simplicity, but I've yet to ever find a merchant that was better off on tiered pricing and I've been doing this a LONG time.

[@Bancardsales]

Great point Jaron. Keep in mind that video was publish a while ago now, and tiered pricing was a lot more prominent back then compared to now. The demo rate in the video was just an illustration to demonstrate how the two rate programs behave. I'm not trying to sway anyone to one structure over the other in the video. No matter what interchange rate you argue for, it all comes down to effective rate that the merchant pays at the end of the month. With that, I hear your point and it's one I've heard many times in the comments section. Additionally, there are a LOT of merchants are more than happy with flate rate pricing (a variation of tiered pricing) ah la Square or Stripe nowadays so it goes without saying that despite flat rate pricing being more $$%, price and cost are not the end all be all. Service, software/hardware, ease of use, etc... are all legit and viable considerations in using one processor over the other :) Thanks for watching and if you have any other questions or ever want to chat, hit me up at www.brianmanning.co/call

[@nagessonarrow6463]

I got good explanetion about merchant,processer card,bank account online

[@karlscantlebury9035]

Excellent video !

[@Bancardsales]

Thank you. Thanks for watching !

[@nonexistent229]

But how these information goes from one point to another? I mean by which type of connection are they?Is it LAN,WAN,or connected by satellite,wireless,wired, or what? Please help!!!!!!!

[@OldTown_Workshop90]

im sure its not wired xd

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[@calvinbarajas5144]

Awesome video, thank you.

[@Bancardsales]

Thanks Calvin and thanks for warching !

[@jffsmth330]

Good info. Quick question: do "processors" typically include the physical card reader used in POS transactions? Or is it common to mix card readers amongst processor service companies?

[@Bancardsales]

It's a mix. Typically the terminal manufacturers build the hardware so that they can integrate with all the processors. Some processors do build their own software to be installed on the hardware. So both scenarios are present.

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[@jasonrichter7693]

I've worked in this industry forever and I never once seen a 3 tier statement that could not be easily beaten by interchange pass through, even assuming that the processor is not lying about where the card falls in the tier system. Interchange pass through would still dominate all 3 tier rates, Why?, The most popular card have the lowest rates, in tier 1 that would be 0.95-1.03% cost so if you have 1.75% tier1 your being robbed. It's that simple.

[@Bancardsales]

+Jason Richter -> Jason, I appreciate your feedback. Whether it's interchange plus, tier based, blended rate or fixed rate pricing, it ALL comes down to the effective rate that the merchant pays and that's really the important part of the pricing discussion in this video. Thanks for watching and commenting! :)

[@jasonrichter7693]

Nope. Sounds like your a company that sells 3-tier you all say that same thing, you know it's a lie. Your not fooling anyone except merchants who don't know better.

[@ffrob2001]

I looked on the web page for the merchant account guide but I cant find it. Maybe im not looking in the right places. Can you please leave a link to it or tell me where to look. Thank you for the video.

[@nikolajsrubaniks9720]

what is a processor in this video, give me please an example?

[@HT-vd4in]

I think companies as VISA, MasterCard or American Express

[@ramlovesu1]

first data/acculynk/worldpay --- in USA

[@bengabu]

Excellent explanation!

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[@kunalrai7577]

Really Nice and Clear video. Please keep it up...

[@Bancardsales]

+kunal rai thank you and glad you liked it. Thanks for watching.

[@gabrielsevillano5283]

great video !! three thumbs up !!

[@PaulFidika]

Here today because I'm building a Solana-based alternative to this entire system

[@solidfuel0]

Any updates?

[@TheGrmany69]

Interesting enough but I still wonder, do Mastercard and Visa credit and debit card networks operate internationally? One sees these e-wallets that sent you cards, like Payoneer, but I have been wondered since my very first inquiries on this subjects if they process the transactions right through automatically disregarding if the merchant is in China or Bangkok. This is quite the obscure subject even in English, don't even bother in Spanish (believe me), and it's mainly because there is so much lingo to learn about.

[@spy_net806]

What is the prossesor?Is it the prossesor in the card reader or is it another computer who is comunicating with the card reader?

[@believer0001]

Nice vid 👏👏👏

[@Bancardsales]

Thank you and thanks for watching!

[@gasymotivation5453]

Thank you very much, I'm very interested about your video

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[@MrCwalkerify1]

What’s an example of a payment processor? Thanks in advance

[@chandanborasi7077]

Nice explanation

[@Bancardsales]

+Chandan Borasi >> thanks for watching!

[@siddharthsingh5829]

Thankyou so much...😊😊😊

[@antoniok.smithsmith3749]

I just try virtuous payments, they are one of the best credit card processing companies in Canada?

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[@mamounalsabouni8005]

Very important info, but why I have to pay fees on transactions from my account in every action? 💳💵💶💰🤔

[@Bancardsales]

That's just how the rates work. (Short answer) detail explanation, watch this: kzbin.info/www/bejne/d6TIi5yllrOVa9U

[@kellykitkat40]

So, interchange is a function of which card the customer uses..

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[@paulhudson9696]

be careful if you paid with payment aggregator. Search information about payment processor company on the web or use a popular payment system like Amazon Payments, Orangepay, Dwolla, Stripe.

[@ravikatiyar5284]

who is processor here ? someone please thanks in advance

[@NasdaqLee]

+ravi katiyar Visa and MasterCard have their own huge processor networks in the world.

[@eds9384]

Visa and MC are card networks. There is a separate class of companies referred to as processors that are not mentioned individually by name in this video.

[@hdayal]

eds9384 -

[@zachmoser33]

Visa Processes most credit card transitions in the us for all networks

[@jamesthomas1436]

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[@fuertefarmer5583]

Great video liked and subscribed. How does it work for a small business (not a bank) who issues credit cards? Do you need to go through a bank for accessing the network?

[@Ro_Yoshi]

7 Year Olds Buying Robux be like: Haha Credit Card Bill Go Brrrr...

[@MrCwalkerify1]

What’s an example of a processor?

[@Itsmal20]

Great presentation! How does or what software is used by Credit Card Processing companies to determine the qualifications of the transaction? I.e, How would the software identify when a Business card or reward card is used to properly category the transaction into the "Non-Qualified" category? I know the Bank Identification Number (BIN) is crucial in the process.

[@Bancardsales]

Thanks for watching! Interchange is the governing set of rules/rates in the merchant account industry. Interchange is a rate table that all merchant account processors have to adhere to. When a card is accepted at the point of sale device, the bank that issued that card is "called" and thus matched with an interchange category that holds a specific rate. With tier based pricing, each processing company sets their own qualified, mid-qualified and non-qualified rates so the "qualification" (i.e. the rate charged) can vary from processor to processor.

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[@anotheperspective]

thanks much for the video i want to run an online store and i wish to know more about payment methods. please i want to find out, does one need two separate merchant bank accounts to create visa and MasterCard or we can create it with one bank account? Also lets say one has just the the visa card will it matter if customer is paying through any other card?

[@sandeeppatidar9641]

Great Video with point to point explanation... #merchantstronghold

[@apachaapacha2969]

Excellent stuff,Based on the same principle ,How can one price on e-commerce merchants?

[@Bancardsales]

The pricing principles apply to retail and ecommerce merchant accounts. If you would like to schedule an appointment with me to talk about your situation, please head over to www.bancardsales.com/contact-us

[@horstseehofer9300]

Thanks for this very good video! I`ve got just one question left, so according to your video it is okay to give out the credit card details (card number and security code) over the phone in order to make a payment?

[@Bancardsales]

+Horst Seehofer -> It's okay to process credit cards over the phone. It's NOT okay to store the credit card in a paper file, or on company computers/servers. Glad you enjoyed the video!

[@kanhubharati6320]

I'm here after 7 years 🙂

[@Bancardsales]

Way to go! 👍

[@hardlyconfused3541]

Good explanation, however, does not cover American Express which is different from Visa/Master. How about China Union Pay?

[@Bancardsales]

What would you like to know about Amex?

[@hardlyconfused3541]

I heard Amex processing is different from visa/master.

[@Bancardsales]

What would you like to know about AMEX? There are similarities and differences but the differences are subtle. lmk.

[@stephaniehale946]

The major difference, for the most part, is American Express issues its own cards as well. You can go to its website and apply for a credit card. You can't do that in case of Visa and MasterCard, except certain travel cards. Credit cards and debit cards with Visa or MasterCard logo are issued by your traditional banks, such as Bank of America, they also issue American Express credit cards.

[@deesmith7218]

It still doesn't specify how it literally travels

[@KatiesCrystalGoodies]

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[@nothingtoseehere449]

Woah this is complex just wanted to add Payment for my website probably have to watch a couple times

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[@vipinpandey2225]

It's really good video...i would like to request you can you make a video chargeback process....ist cb and 2nd cb....if possible.

[@Bancardsales]

Thanks for watching. Coincidentally a chargeback video series is in the works right now. I'll probably have three to four videos that will be launching in the upcoming weeks that will be all about the chargeback process and how to avoid them. Stay tuned :-)

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[@binsabose5576]

where is the 1.79% coming from ?

[@Bancardsales]

Are you referring to the sample transaction @5:28? If so, it's just a sample qualified rate that was chosen for the purpose of illustrating the difference between tier based pricing and interchange plus.

[@Bancardsales]

+Binsa Bose >>> the 1.79 is just a sample rate used for comparison. It could easily be 1.85 or 1.9. It was just used to demonstrate the differences between tear and interchange Plus pricing programs. Thanks for watching :-)

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You are obviously reading from a sheet. It would have been better if you slowed down and took a breath.

[@Bancardsales]

You are correct about the script :) (this was one of my first videos posted years ago) Anyway, the info is still accurate! Thanks for watching !

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Thanks for warching! Remember you can always adjust the speed on your KZbin player!

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[@K.s.c.s]

Aap normal me nahi bol sakte kya voice ka satyanas kar diya

[@lolLeslylol]

I hate Banks. Its my money and i dont need u to process it

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But the merchant is a scammer

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[@Bancardsales]

Thanks for watching!

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