Having the intimate knowledge concerning the inside-workings of the bankcard system isn’t mandatory but then there is no hurt in knowing it. Understanding how things truly work is an effective approach, as fees are incurred at times at one or the opposite stage. The primary components in the whole process involve:
1. Key players
2. Credit card authorization
3. Credit card clearing and settlement
Credit card processing companies are so quick and well timed that within few seconds, transaction details are switchred from the terminal to a processor. Later, this info is passed by the card network to the issuing bank. As soon as all this occurs, the issuing back sends an authorization back to the processor via the network.
In the whole system, obtaining an authorization for a transaction stays the primary step. Before the sales are deposited within the bank account of the enterprise, it is critical that the authorizations are settled. Settlement and authorization are the two main processes of transaction. If ever this happens a failure be it full or partial, it leads to sales not deposited or increased costs.
The Key Players
Key players concerned in authorization and settlement embrace:
1. Buyer
2. Service Provider
3. Buying Bank
4. Issuing Bank
5. Card Associations (Visa and MasterCard)
Let’s discuss each player one by one.
1. Cardholder: This time period refers to the one who gets a credit or debit card from an issuing bank. The card is then offered to the merchants as payment for the providers or products.
2. Service Provider: Service provider is the business that is engaged within the sale of providers or products. It can be said that it is a enterprise that permits accepting credit as well debit cards.
3. Bank of the service provider: It is usually referred as an buying bank. This is because it creates and maintains accounts and enables companies to simply accept credit and debit cards. Moreover, these banks provide software and tools to accept promotional supplies, cards and other essential elements wanted in card acceptance to the merchants.
4. Issuing Bank: An issuing bank provides credit cards to the customers. It is very important know that this bank is a member of the card associations. These banks pay the banks for the sales or purchases made by their cardholders. Repaying the issuing bank as per the norms of card agreement is the responsibility of the cardholder.
5. Card Associations: As MasterCard and Visa are not banks, they function a guardian and clearing house for his or her card brand. In addition, they monitor the community of ISOs, MSPs and financial institutions that work jointly to assist credit card processing and digital payments.
This was all concerning the necessary parameters of credit card processing. To keep transparency within the credit card processing mechanism, keeping these vital factors in mind is quite helpful.
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