Payment card industry: the basics for merchants

From Financial Consumer Agency of Canada

To accept credit or debit card payments from your customers, you will need to establish a contract for payment processing services. A basic understanding of how the payment card system works will help you organize your business and choose a payment service provider that meets your needs.

In Canada, there are currently six major payment card networks: American Express Canada, Discover, THE EXCHANGE, Interac, MasterCard Canada and VISA Canada. Each of these operators sets rules to participate in its network. All of the networks have agreed to comply with the Code of Conduct for the Credit and Debit Card Industry in Canada, which aims to ensure that merchants receive clear information about the costs of accepting credit and debit cards and includes several rights for merchants.

To participate in these networks, merchants need to establish a contract with a payment service provider, such as an “acquirer”,  which will provide the merchant with access to payment card networks. Before accepting an agreement with a payment service provider, take the time to shop around and review the terms of the proposed agreement carefully, so that you have a clear understanding of your obligations. 

There are two main ways of making arrangements for payment processing services:

1. Dealing directly with an acquirer

There are several acquirers operating in Canada that offer all of the equipment and services you need to accept payments by credit or debit card. Many acquirers will also offer you some options, such as whether to buy, rent or “lease to own” the point-of-sale terminals that you will need.

If you choose to go this route, you will likely have a single contract for all services, unless you choose to arrange some services elsewhere.

Note:  American Express offers merchants the option of dealing directly with it, or arranging for payment processing through a payment service provider.

2. Dealing with an independent sales organization (ISO) 

Independent sales organizations generally sell processing and related services offered by acquirers and other parties.  ISOs may operate in a number of different ways.

For example:

  • An ISO may be a sales agent for an acquirer that offers full processing services.
    In this model, the merchant will have a contract with the acquirer that covers all services. As a sales agent, the ISO is generally paid by the acquirer. Once the contract is accepted, the merchant may receive regular statements and other communications either from the acquirer or the ISO, depending on the acquirer’s business model. The merchant should inquire as to which of these parties to contact if questions or issues arise.
  • An ISO may offer some services related to payment processing, such as point-of-sale terminal leasing or maintenance, as part of its own business and may have relationships with other suppliers to offer merchants the other processing services. 
    In this scenario, the merchant may have contractual obligations to each of the payment service providers.

If your arrangements include services from more than one provider, the organization with which you are dealing must give you a document that clearly summarizes key information about your obligations to each payment service provider, such as in an information box at the beginning of the agreement.

Refer to the commisionner's guidance on Increased disclosure and cancellation of contracts without penalty.

You must have the opportunity to review this document before you sign or agree to the contract. Read it carefully to be sure you understand your obligations to each of the companies with which you are doing business.

Whether you sign a contract with an acquirer directly or with an ISO, the provisions of the Code of Conduct for the Credit and Debit Card Industry in Canada will apply. 

Learn more about merchant rights under the Code of Conduct.

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