Published On: July 27, 2017

The credit card, a seemingly simple 3.37″ wide x 2.13″ high piece of plastic, in fact carries immense value for Canadian consumers. It contains a user’s confidential information, dictates their purchasing power, and its management affects the holder’s credit rating. The almighty credit card has thus become an indispensable item in our wallets and everyday lives. It’s only prudent to carry and use a credit card regularly in order to build a financial profile and fund necessary purchases without the need for cash up front.  Most Canadians apparently agree as 95% of adults have at least one credit card, and credit card transaction volumes continue to surge year after year – now being applied regularly for purchases at lower price points below $10.

Credit Card Transaction Facts

Here are some interesting facts related to credit card transaction statistics for the Canadian market.

Card ownership

  • 5 million Visa and MasterCard cards (combined) are in circulation in Canada
  • The average number of credit cards per Canadian adult was 2.2 in 2016 (including Visa, MasterCard and American Express)
  • 72% of Canadians carry at least one credit card that has a rewards program, and for 82% rewards are considered a priority when selecting a credit card
  • The minimum age for Canadian primary or secondary cardholders is 18 years of age, but in Nova Scotia, Newfoundland and New Brunswick it is higher at 19 years of age

Contactless credit card transaction volume and circulation

  • In 2016, more than 95 percent of credit cards in Canada supported contactless payments, and 50 percent of Canadian debit cards were contactless – this number only continues to grow as virtually all new cards being issued support contactless
  • 9 million Canadian adults made contactless payments in 2016
  • Almost 100% of Canadian adults have some form of Contactless payment at their disposal

Credit card debt

  • 58% of Canadians pay their credit card balance in full each month, so for them the interest rate is zero
  • Credit card debt accounted for approximately 5 percent of total household debt as of December 2016
  • The average Canadian owed $3,954 in credit card debt as of Q3 2016, which was an increase from $3,946 in Q4 of 2015

Customer satisfaction

  • The Financial Consumer Agency of Canada (FCAC) received a total of 1,247 consumer enquiries/complaints regarding credit cards in 2016, which was down from 2,113 in 2015
  • Of these enquiries, 727 were complaints regarding credit cards, down 18.04 per cent from 887 in 2015. The reduction in complaints is attributable to the technology becoming more user-friendly, dependable and secure.

Mobile and Online Banking

  • About 76% of Canadians owned a smartphone in 2016, up from 68% in 2015
  • 85% of Canadians used a mobile banking app to pay bills in 2016, compared to 65% in 2014
  • 52% of Canadians use their smartphone’s mobile banking app as their main method for depositing cheques, compared to the two previous years where it was 0 percent
  • In 2014, 23% of Canadians didn’t think they would be using cash in 2024, and 54% anticipated no longer using cheques

Different Types of Credit Card Transaction Processes

The three most popular credit card brands used by Canadian consumers are Visa, MasterCard and American Express.

Let’s take an in-depth look at how Visa , MasterCard and American Express work in terms of their respective credit card transaction processes.

First we need to understand the participants that go into the procedure.

  • Cardholder – an authorized user of a credit card
  • Merchant – any business that accepts Visa/MC/Amex as payment
  • Acquirer – a financial institution that works with merchants to accept credit cards.

An acquirer may also contract with third party processors to provide processing services, or with banks

  • A card issuer – is a financial institution that maintains the cardholder relationship. It issues the credit card and contracts its cardholders for billing and payment of transactions
  • A Payment Facilitator (PF) – can enter into a contract with an acquirer to provide payment services to a merchant

How Visa Credit Card Transactions Operate:

Let’s examine the key players who are involved in Visa credit card transaction.

  • Visa Inc – Visa works with financial institutions that issue Visa cards and/or contract with merchants to accept Visa cards for payment. The role of Visa Inc. includes producing cards, promoting the brand and setting the rules and regulations that govern the processing of the cards.
  • VisaNet – Visa’s retail electronic payment system, VisaNet, is a complex ecosystem that includes:
  1. An authorization system which allows card issuers to approve or reject individual credit card transactions
  2. A clearing and settlement system that processes transactions electronically between acquirers and issuers and ensures:
    • Visa credit card transaction flows from acquirers to issuers for posting to the cardholders’ accounts
    • Payments for Visa credit card transactions are processed from issuers to acquirers to be credited to the merchant accounts

To outline the Visa credit card transaction process, the following sequence must occur:

  1. The Visa cardholder inserts their credit card into the chip-reading device / swipes the card through a magnetic-stripe reader / taps the card against the Visa payWave compliant reader
  2. Merchant enters the transaction amount and/or sends an authorization request to the acquirer
  3. Acquirer electronically sends the authorization request to VisaNet
  4. If the Network is VisaNet, it will pass the request to the card issuer
  5. Card issuer provides an online response
  6. VisaNet forwards the card issuer’s authorization response to the acquirer
  7. Acquirer then forwards the response to the merchant
  8. Merchant receives the response and completes the transaction.
  9. The acquirer credits the merchant’s account with the deposit and submits the transaction to Visa
  10. VisaNet facilitates the settlement and pays the acquirer
  11. The bank posts the transaction to the customers’ accounts and sends them their bill reflecting the transaction amount

MasterCard’s credit card transaction system works similarly to Visa’s but the terminologies they use are different: Transactions are processed through the MasterCard Worldwide Network called the Global Clearing Management System (GCMS) and the MasterCard Settlement Account Management (S.A.M.) system.

Everything else basically works the same as Visa credit card transaction process.

Lastly, American Express’s credit card transaction system works completely different from Visa and MasterCard in that American Express serves as both the acquirer and issuer of its transactions (but nowadays, AmEx does allow banks to issue their cards).

The transaction begins when the merchant sends an authorization request to American Express. AmEx then sends back a response (approval or a decline) which the merchant uses to determine whether or not to complete the transaction.

Here are the steps:

  1. The merchant obtains authorization from cardholder to process the transaction
  2. Merchant submits charge for settlement
  3. AmEx settles with merchant
  4. Cardholder receives the amount paid in a statement from the bank

The Relationships between MONEXgroup and Credit Card Transaction Security

As a national merchant services Canada provider with over 15 years of experience, MONEXgroup has partnered with businesses of all sizes and types and delivered diversified payment processing platforms to enhance their daily business operations. What makes MONEXgroup stand out is the time our Sales Representatives spend on explaining how payment processing works for every credit card transaction to our merchants and systems implemented to ensure they receive their funds the next day. Our Sales Reps will take the time to educate our merchants on the types of fees and procedures that are necessary to complete a credit card transaction and see the funds deposited. We have earned our merchants’ trust because we are always transparent with our fees and services.  Best of all, our merchants are offered with very competitive rates, top-notch payment solutions and the latest technologies in the payments industry.

When partnering with the number one payment processor in Canada; MONEXgroup will increase your efficiency and quality of service and lower the related costs. Request a Cost Comparison Analysis today.

Author: Lindsey Lu, Marketing Communication Specialist, MONEXgroup
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