An authorization system through which card issuers can approve or reject individual Visa card transactions.Part of Visa’s retail electronic payment system, VisaNet is a conglomerate of systems that includes: Visa also manages the world’s biggest retail electronic payments network, which facilitates the flow of transactions between acquirers and issuers. develops card products, promotes the Visa brand and sets the rules and regulations that govern the processing of payments involving the company’s cards. Visa is now a publicly-traded company, which works with financial institutions that issue Visa cards (the card issuers) and / or contract with merchants to accept Visa cards for payment (these are the acquirers). The participants in Visa’s card transaction cycle are the same as the ones listed above, with two additions: Now let’s take a look at each of the big payment systems. Settlement is a process through which a card issuing bank exchanges funds with a processing bank to complete a cleared transaction. Capture is the process of collecting and organizing information of credit and debit card transactions for submission for settlement. Clearing and settlement occur simultaneously. Clearing is a process through which a card issuer exchanges transaction information with an processing bank. Authentication is done by utilizing various fraud prevention tools, including Address Verification Service (AVS) and Card Security Codes ( CVV2, CVC 2 and CID). Authentication is the process of establishing the validity of the credit or debit card account information provided by the customer. Authorization is the process by which the card issuer approves or declines a card transaction. The processing of card payments may vary depending on the particular procedures employed by the issuer, acquirer or merchant but they all involve the following stages: A service provider can be any third party that provides a service used in the card payment transaction process: point-of-sale (POS) terminals, payment gateways, web hosting, SSL certificates, shopping carts, etc. Both organizations have developed payment systems to facilitate the processing of transactions between member banks. The Credit Card Associations of Visa and MasterCard are member-owned associations of banks that govern the issuing of Visa and MasterCard cards and the acquiring of Visa and MasterCard card transactions. Merchant is a business or a non-profit organization that has contracted with an acquiring bank or a merchant processor to accept card payments. Payment processors must be registered with Visa and MasterCard and must identify on all of their marketing materials, including their websites, the name of their bank partner. Payment processor is an organization that has contracted with an acquiring bank to provide merchants with card payment processing services on behalf of the acquirer. They can also, and that is the case most of the time, contract with third parties to provide some of these services. Acquiring banks (also called acquirers, processing banks or merchant banks) are financial institutions, members of Visa and MasterCard, that contract with merchants to enable them to accept debit and credit card payments for their products and services. Card issuers are financial institutions that are members of Visa and MasterCard, which issue payment cards on behalf of the two Credit Card Associations and contract with their cardholders for the terms of the repayment of transactions. Cardholder is an authorized user of a credit or debit card. The full transaction cycle is represented in the diagram below. Every credit card transaction is the result of a series of interactions among several participants. Let’s get started.Ĭredit Card Transaction Processing Basics Finally, I will go over the card acceptance process itself and the specific actions you need to take every time a card is presented to you for payment. So first I will give you a generic overview of the card transaction process and then I will show you how each of the biggest card systems work. Broadly, they all function in a similar fashion, but each one of them has its unique features. Today I will review the basic framework of the system and the major components of payment processing, which will help you understand how they affect the way you do business.īefore we begin, it is important to understand that there are multiple payment systems, into which you will participate, one for each brand of payment cards you accept. By accepting credit and debit cards at your store or website, you become an integral part of the payment system which is why it is important that you understand the card transaction process: what it is, how it works and who else participates in it.
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