Credit Card Transaction Process

Credit Card Transaction Process

We do not think much about what goes into making the credit card process work. Simply insert a credit or debit card into a machine, and a few seconds later, the transaction is complete. However, behind this convenient payment option, the procedure involves multiple stages and vendors working together.
As a business owner, there are multiple options and ways to process credit cards. Many of these options depend on what type of business you are in, such as retail, restaurant, lodging, or online E-commerce. The following diagram is a simplified explanation of how the credit card transaction process works with Visual Matrix.




Before looking at each intermediary, let's look at two definitions:
- The Merchant Services describes the range of services, hardware, and software products that allow merchants to accept and process credit or debit card transactions.
- A Merchant Service Provider is anyone that provides the services, hardware, or software needed to process credit cards. Visual Matrix is technically a merchant service provider since our software is used to process credit cards. However, that is not its only role or function.  

Although Hotels will need multiple service providers (up to 6 or 7 different accounts with different companies) to process credit cards, some service providers provide all the services needed (outside the Visual Matrix role), making it easier for hotels to manage.
Visual Matrix does not know who the hotels use for every Merchant Services. VM only connects with the platform/gateway and does not store the processor information.

The Merchant (the Hotel via Visual Matrix)
A Merchant is a person or company that sells goods or services and accepts credit cards as a method of payment. In our case, the one selling the goods and services is the hotel.
Hotels have two main ways of collecting credit card payments: a credit card terminal or a point of sale (POS). Even though Visual Matrix is technically a PMS, the credit card industry refers to any software or system that can process credit cards as a POS. Because of this, some processors and other merchant service providers may refer to Visual Matrix as a POS.
Visual Matrix's role is to provide the hotel with a way to send authorizations, charges, refunds, and other credit card transaction requests to the hotel's processor. Visual Matrix does not process translations itself and is not the Merchant.

The Plateform/Gateway (Shift4/MerchantLink, Elavon or Fortis Pay)
The Platform is a service used to send transaction requests from Visual Matrix to the processor across the platform's network. These networks are extensive and provide connections with multiple different processors allowing the hotel to have many options when it comes to choosing one.
Platforms are like the Postal Service: they only send messages back and forth from one location to another. They do not write the message or edit the message in any way during the transaction process. 
Visual Matrix is currently connected to the following platforms: Shift4 (including MerchantLink), Elavon and Fortis Pay.

The Acquirer/Processor
Processors are systems that work with banks and card networks to help Merchants accept and process credit card payments. They verify transaction details, ensure funds are available, and perform certain anti-fraud checks. They are the middleman between the Merchant and the Issuing Bank.
When the hotel requests a credit card authorization, they use Visual Matrix to send the request to the Processor. The Processor then sends the message to the guest bank verifying if the guest has enough funds to complete the transaction.
There is almost an endless number of processors. Some are part of large banks, and some are independent. Chase and Bank of America both have payment processing systems. While First Data is one of the larger processors that is not part of a bank.

The Card Networks
There are four primary companies that have credit card networks for payment processing: Mastercard, Visa, American Express, and Discover. They are by far the most used networks/card types in the united states, and worldwide (Visa and MasterCard are the most accepted worldwide). However, there are other "lesser-known" card networks. Visual Matrix can process the following types of cards: Visa, MasterCard, American Express, Discover, Diners Club, JCB  (Japan Credit Bureau). Merchants (hotels) must choose what type of credit cards to accept. Some hotels will accept every type of card Visual Matrix can process, while others may only choose Visa and MasterCard. This is generally because of the fees each network charges to execute the transaction.
Because of this, some credit card processors will set up hotels (merchant) by default not to process American Express. The hotel may not be aware of this when they first use the Visual Matrix Credit Card interface and attempt to process an Amex card. This will result in an error or decline message. If this happens, the hotel's processor would need to turn ON American Express entitlements (the hotel needs to tell their processor they want to accept Amex cards).
Some financial institutions such as American Express and Discover can function as both the credit card network and the card's issuing bank. In this case, Amex and Discover will handle both roles in the credit card transaction process. 
On the other hand, Visa and MasterCard do not issue their own branded cards. They only perform the credit card network role in the transaction process. Other banks use these networks for their own credit cards.

The Issuing Bank (the Guest Bank)
Credit Card networks pass transaction requests between the processor and the card's issuing bank.  

The Merchant Account
A Merchant Account is a special type of bank account that allows to securely accept credit and debit cards. It stores the transaction totals between the business and the individual card-issuing banks.
It is not like a traditional bank account where money is moved in and out. A Merchant Account is a business account/relationship with a Processor, where the Processor provides funds to the Merchant account in advance. These funds are stored in the Merchant Account for typically 1-2 business days before they are transferred to the Hotel's (Merchants) Business Bank Account. The processor then waits to receive the actual payment from the issuing bank, typically at a much later date. Without a Merchant Account, it would take a lot longer for the hotel to receive payments from the issuing bank.
Even though the Processor and Merchant account are two different services, hotels will often use the same service provider for both. This makes it easier and may save on fees. There are alternatives to using a Merchant Account to process credit cards like PayPal, Square or Stripe who are typically used for individual use, eCommerce sites, or small businesses.

The Acquiring Bank (Hotel Business Bank Account)
This is the account from which bills are deducted, payroll is managed, and where the merchant account deposits the funds from credit card sales. The Merchant Accounts only deposit funds into a Business bank account, they do not deposit funds into a regular bank account. 
​

Require assistance with that article?

- One transaction or all transactions?
- Have you contacted your processor for a voice auth? 
- What's the confirmation number? 
- Status of the reservation? 
Providing responses to the following questions in your ticket could expedite your resolution.

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