visa u s a mastercard discover and american express amex are the four major network systems in the u s payment card industry visa and mastercard are o

When a consumer uses a Visa card or a MasterCard to pay for goods or services, the accepting merchant relays the transaction information to the acquirer bank with which it has contracted. The acquirer bank processes and packages that information and transmits it to the network (Visa or MasterCard). The network then relays the transaction information to the cardholder’s issuing bank, which approves the transaction if the cardholder has a sufficient credit line. Approval is sent by the issuer to the acquirer, which relays it to the merchant. American Express and Discover are not joint membership associations; each is a vertically integrated, for- profit entity that combines issuing, acquiring, and network functions. Amex and Discover deal directly with consumers (by issuing cards) and with merchants (by acquiring and processing transactions). When a consumer makes a purchase with an Amex card, for example, the merchant contacts Amex directly, and if the customer has sufficient credit available, Amex approves the sale. Amex then pays the merchant directly while retaining a percentage— usually 2.73 percent.