An introduction to card processing networks

When your customer taps, clicks, or swipes to pay, it all feels incredibly simple but behind the scenes is a sophisticated system that makes that transaction possible. At the heart of this system are card processing networks, the backbone of card-based payments around the world.

In this piece, we’ll explain what card processing networks are, how they work, and why they matter to businesses of all sizes.

What is a card processing network?

A card processing network (also called a card network or card brand) is a financial organisation that creates the framework for card-based payments to happen. Think of them as the infrastructure layer that connects banks, merchants, and payment systems so money can move securely and quickly.

Familiar names in this space include Visa, Mastercard, American Express, and Discover and, globally, networks like UnionPay also play a major role.

These networks:

• Define the rules and standards for card payments.
• Provide the communications pathways that let information flow between customers’ banks and merchants.
• Ensure transactions are authorised, authenticated and settled securely.

You may hear terms like “rails” to describe this infrastructure; imagine train tracks that guide the payment from start to finish.

How card processing networks work

At a high level, every time a card payment is made, several players come into play:

1. Cardholder - the person making the purchase.
2. Merchant - the business accepting payment.
3. Issuing bank - the bank that issued the card.
4. Acquiring bank - the bank that processes payments for the merchant.
5. Card network - the system that connects all these parties and governs how the transaction flows.

Here’s what happens when a card payment is made:

• The merchant sends the payment request.
• The card network routes this request to the issuing bank.
• The issuing bank checks the transaction and either approves or declines it.
• The network then communicates the response back to the merchant.

In digital commerce, tools like payment gateways and processors work alongside the card networks to securely transmit payment data and keep everything running smoothly.

Open vs Closed Card Networks

Card networks generally fall into two categories:

Open networks

These networks allow banks and financial institutions to issue cards on their network, for example Visa and Mastercard. They don’t issue cards themselves; they provide the infrastructure and membership rules, while banks issue the cards.

Closed networks

Closed networks both operate the network and issue cards - American Express and Discover are common examples. Here, the network and the card issuer are one and the same.

Knowing the difference helps merchants choose the right payment acceptance strategy and understand processing behaviour.

Why card networks matter for merchants

Card networks are essential because they:

• Enable transactions between merchants and customers in a secure, standardised way.
• Set security and compliance requirements merchants must follow.
• Impact transaction routing, fees and settlement timing.

Because they govern many aspects of payment acceptance, understanding card networks helps businesses plan for growth, choose the right payment partners, and optimise checkout experiences.

The costs of accepting cards

Accepting card payments isn’t free, every transaction includes processing fees. These fees are charged by card networks, issuers, and processors to support the infrastructure, risk management and security they provide.

Typical costs include:

• Interchange fees - paid to the issuing bank.
• Processor fees - charged by the payment processor.
• Assessment fees - charged by card brands based on transaction volume.

While fees vary by card type and region, having a clear picture of where costs come from empowers merchants to negotiate better terms and optimise their payment stack.

Final thoughts

Card processing networks are a critical piece of the digital commerce ecosystem - they bring together banks, merchants and technology to make seamless payments possible. By understanding how they work and the role they play, merchants can build smarter, more resilient payment strategies that support growth and deliver better customer experiences.

Ready to know more about how Paymentflo can help drive and grow your online business? Get in touch and request a demo today.