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CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
Parties
Economics
Cardholder/Customer
The buyer of goods and holder of a payment card and the underlying finances. Any business that accepts payment cards for goods and services, which are then provided to cardholders. A technology provider that processes payments on behalf of a merchant client. Acquirers have an affiliated acquiring bank while standalone processors work with a banking affiliate where the merchant account resides. The technology provider over which a transaction is managed between the merchant’s acquirer and the issuer’s processor. There are both global and domestic networks in the U.S. A technology provider that processes payments on behalf of a card issuing client. An entity that issues financial accounts (i.e., lines of credit, checking accounts, etc.) and hold money in accounts for cardholders. Issuers distribute payment products (i.e., credit, debit, prepaid cards) to cardholders/ customers. Akin to an acquirer/processor, PayFacs support payment processing for several merchants and serve as the Merchant of Record. Square is an example of a PayFac. A shopping channel where multiple sellers can sell goods to reach the consumers who shop on that marketplace. Marketplaces manage payment acceptance on behalf of their sellers. Technology providers who serve as a secondary link between merchants and their acquirers to either switch transactions down a different route or enable access to additional local networks or payment types.
Cardholder Fees Processing Fees
Fees paid directly by cardholders/customers Fees that flow directly to acquirers/ processors and are paid by merchants, which include authorization and settlement costs. Chargeback management fees are negotiated with processors. Chargeback management fees are assessed by acquirers. Chargeback liability is enforced by networks via an arbitration process (where fees flow to networks). Chargeback liability sits with either the merchant or the issuer. Excessive chargeback fees and fines for being on a network fraud monitoring program flow to networks. Fees that flow to networks and are paid by merchants (via their acquirer) and issuers. These fees may include items like excessive retires, integrity fees (if auth remain open too long), cross-border fees, etc. and are based on network rules. Fees that are paid by the merchant (via their acquirer), which flow to the card issuer and are set centrally by card networks. In a 3-party scheme (AmEx and Discover), the card issuer is also serving as a network and negotiates those fees directly. Interchange fees are dependent on the type of merchant where the transaction was made (MCC code), the type of product used (credit, debit, prepaid), the level of rewards associated with the card, and the size of the merchant at which the card is used. Interchange fees can also be “downgraded” if transactions fail to meet expected data quality standards.
Merchant
Acquirer/Processor
Chargeback Fees
Network
Network Fees
Issuer Processor
Issuer
Interchange Fees
Payment Facilitator
Marketplace
Gateway/PSP
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