Card Network vs Payment Processor: Differences Explained

Learn How and When to Use Each Type of Infrastructure.

Understanding the distinct roles of card networks and payment processors is critical for managing business costs, optimising approval rates and improving customer experience.

This knowledge is even more important when expanding into international markets, where payment infrastructure, regulations and consumer expectations can vary significantly.

What Is a Card Network?

Card networks serve as the infrastructure layer that defines rules, standards and infrastructure for how transactions are authorised, cleared and settled between issuing and acquiring banks. They also define security protocols, manage dispute and chargeback processes and support interoperability between financial institutions.

Some of the main card networks include Visa, Mastercard, American Express, Discover and UnionPay. Most card networks don’t issue cards directly to consumers (though American Express and Discover do). Their main job is creating a secure, standardised framework for transactions.

What Is a Payment Processor?

Payment processors are intermediaries that transmit transaction data between merchants, acquiring banks and card networks. They provide the technology infrastructure that facilitates payment acceptance and data flow.

When a customer initiates a transaction, the payment processor transmits payment data to the acquiring bank, which then routes it to the appropriate card network and issuing bank for authorisation. Payment processors offer technology to accept payments, including POS hardware, payment gateways, APIs for online and mobile checkout and more.

Payment processors, like Rapyd, work directly with businesses, providing services such as transaction routing, fraud prevention tools, reconciliation, reporting and customer support. While they initiate the authorisation process, the issuing bank makes the final approval decision.

For merchants, choosing the right payment processor is an important decision. It affects your transaction costs, approval rates, which payment types you can accept and which markets you can serve. As you grow globally, this choice becomes even more important for optimising your payment strategy. As both a payment processor and an issuer, Rapyd has visibility into the full transaction lifecycle, allowing us to apply our learning to optimise authorisation rates and merchant revenue.

Key Differences Between Card Networks and Payment Processors

Understanding the distinction between card networks and payment processors helps manage your payment operations effectively. Let’s break down their functions, how they interact with merchants and how their fees affect your business.

Functionality

Card networks, such as Visa and Mastercard, define the rules, standards and infrastructure that govern card-based payments. They facilitate the clearing of transaction data between issuing and acquiring banks and oversee the frameworks that support settlement processes, though the banks themselves handle the actual movement of funds.

Payment processors manage the day-to-day technical operations that allow businesses to accept card payments. They provide the hardware, software, APIs and compliance tools necessary for accepting payments in-store, online or via mobile. Processors serve as a merchant’s direct link to the broader payment ecosystem.

Interaction with Merchants

As a merchant, you typically do not engage directly with card networks. Your ongoing relationship is with your payment processor, who provides customer service, technical support, reporting tools and integrations fit to your needs.

When something goes wrong with a transaction, you contact your payment processor, not Visa or Mastercard. Companies like Rapyd offer dashboards, APIs and dedicated support teams to help you manage and optimise your payment operations.

Fee Structures

Both card networks and payment processors contribute to the total cost of accepting card payments, but in different ways.

Card networks set interchange rates, which the acquiring bank pays to the issuing bank for each transaction. They also charge assessment fees, which fund the operation of the network itself. Interchange rates and assessment fees vary depending on factors such as transaction type, merchant category (MCC), geography and card type.

Payment processors apply their own fees on top of the network-related costs. Common pricing models include:

• Flat rate (e.g., 2.9% + 30¢ per transaction)
• Interchange-plus (network interchange fee plus a fixed markup)
• Tiered pricing (sorting transactions into qualified, mid-qualified or non-qualified categories, each with different rates)

Understanding different pricing structures and how they apply to various payment types, such as one-time purchases or subscription billing models, can help you manage costs and maintain healthy margins.

How They Work Together in a Transaction

When a customer taps, swipes or enters their card details, a series of coordinated actions take place behind the scenes to approve and settle the transaction. Here’s how the process typically works:

1. The customer initiates payment by swiping, tapping or entering card details online or in a mobile app.
2. Your payment system, whether a physical terminal or digital checkout, collects the transaction details and sends them to your payment processor.
3. The processor routes the transaction through the acquiring bank to the appropriate card network (e.g. Visa, Mastercard).
4. The card network transmits the request to the cardholder’s issuing bank for authorisation.
5. The issuing bank reviews the request, checking the card details, available funds, and potential fraud indicators before approving or declining the transaction.
6. The response is sent back through the same route—from the issuer to the card network, to the acquiring bank, then to your payment processor, and finally to your point-of-sale or checkout system.
7. If approved, the transaction is completed, and the customer receives a confirmation.

Clearing and Settlement

• For in-person transactions, your system may batch approved payments at the end of the business day. For e-commerce or mobile payments, settlement is often triggered automatically in near real-time.
• Your payment processor and acquiring bank initiate the clearing and settlement process, working with the card network to exchange transaction data.
• Card networks facilitate the clearing of transactions and coordinate the settlement instructions between the banks involved.
• Funds are deposited into your merchant account, typically within 1–2 business days, depending on your provider and region.

Bottlenecks and Risks

• Network delays can affect authorisation speed, especially for cross-border transactions
• Processor outages can temporarily prevent payment acceptance
• Settlement errors can occur due to batching issues or reconciliation mismatches

Understanding this process allows you to troubleshoot problems effectively, optimise your payment setup and deliver a smoother experience to customers. Supporting multiple card networks can also build redundancy into your payment infrastructure, reducing the impact of service disruptions or regional limitations.

Platforms like Rapyd help businesses manage these challenges by offering a unified solution for accepting cards, bank transfers, e-wallets and local payment methods globally, with built-in redundancy and regional expertise.

Important Distinctions Between Card Networks and Payment Processors

Understanding the distinct roles of card networks and payment processors helps develop a customer-friendly payment strategy. This knowledge directly affects your costs, approval rates and international growth potential.

Strategic Payment Acceptance

Different card networks give you access to different customer groups. While Visa and Mastercard dominate globally, UnionPay is helpful for reaching customers in China, and JCB is popular in Japan.

Diversifying your acceptance across multiple networks expands your customer base and helps you adapt to regional payment preferences. This flexibility is particularly important for businesses serving international customers or operating in tourist-heavy locations.

Cost Optimisation

While card networks set interchange fees, payment processors apply their own pricing models and markups. Some processors may offer better rates or incentives based on transaction volume, card type or geography, resulting in significant cost savings over time.

Global Reach and Localisation

Visa and Mastercard are the leading card networks globally, making up a significant share of international ecommerce transactions. Accepting payments via these networks gives your business access to a broad customer base worldwide. Accepting local payment methods also helps in international markets. In Brazil, for example, supporting local debit cards increases approval rates, while in China, UnionPay acceptance is often necessary.

Many domestic cards cannot be used for cross-border transactions. While setting up a local entity is an option for large enterprises, most businesses benefit from localising their checkout to accept methods like bank transfers, e-wallets and cash-based networks alongside cards.

Platforms like Rapyd simplify this process by providing access to directly licensed Visa and Mastercard acquiring along with a range of local payment methods through a single integration.

Compliance and Security

Card networks create security standards, such as PCI DSS, that payment processors must follow. Choosing processors that implement these standards reduces your compliance risks and helps you adopt new security technologies faster.

Staying compliant helps avoid penalties and can unlock opportunities under evolving regulations, such as the Digital Markets Act.

Key Benefits of Understanding Payment Infrastructure

• Negotiate better terms with payment providers
• Select the right card network mix for your target markets
• Build robust, redundant payment systems
• Stay compliant with global security standards
• Deliver smooth, reliable payment experiences to your customers

Creating a Successful Payment Ecosystem for Your Business

Understanding the roles of card networks and payment processors is a strategic advantage. The right mix of partners impacts everything from approval rates to compliance, costs, and customer trust. For global businesses, the ability to localise payments, adapt to regional regulations, and quickly resolve failed transactions is crucial.

That’s where Rapyd excels. Rapyd gives you greater visibility, faster onboarding and more options for every transaction. Whether entering new markets or optimising your existing payment stack, Rapyd helps you move faster, reduce risk, and serve more customers.

Payment Solutions For Every Business

Rapyd makes accepting payments easy, whether you’re dealing with one country or operating worldwide. With card acquiring and local payment methods, checkout flows smoothly for your customers, and more revenue flows to you.

Why Choose Rapyd?

• Support for industries like eCommerce, marketplaces, digital goods, iGaming, online gaming, and more.
• Direct Visa and Mastercard acquiring in the UK, Europe, Israel, and Singapore.
• Fast onboarding and high authorization rates from a leading acquirer trusted by 250,000+ merchants.
• Support for cards, Google Pay, Apple Pay, and hundreds of payment methods.

Contact Rapyd to get started.