How Does Visa Payment Processing Work?


Quick Answer

When a customer uses a Visa credit card to make a payment, the merchant receives funds from the financial institution that provides him with his processing system, explains Visa. That institution then communicates the transaction to the customer's card issuer through the electronic VisaNet payment network to seek reimbursement.

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How Does Visa Payment Processing Work?
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Full Answer

Before a merchant's credit card system accepts a customer purchase, it sends an authorization request through VisaNet to the card issuer to determine if the customer has sufficient credit, according to Visa. If the issuer approves the transaction, the purchase is complete and, after paying the merchant's bank, the issuer posts the amount to a customer's monthly account statement.

The amount of money that a merchant receives from a transaction is less than the amount charged to the consumer, explains The New York Times. The customer's card issuer receives an interchange fee by reimbursing the merchant's payment processor only a portion of the sale amount. The processor then applies a discount rate that further reduces the amount it pays the merchant. These fees are generally calculated as a percentage of the transaction, with some institutions charging an additional fixed component. The fees vary based on the merchant's industry and customer's card type, reflecting the cost of any rewards programs and the risk of a chargeback, wherein a cardissuer reverses a transaction following a customer complaint.

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