Having the intimate knowledge about the inner-workings of the bankcard system is just not obligatory however then there is no harm in knowing it. Understanding how things actually work is a good approach, as charges are incurred at occasions at one or the other stage. The primary elements in the whole process contain:
1. Key players
2. Credit card authorization
3. Credit card clearing and settlement
Credit card processing providers are so quick and timely that within few seconds, transaction particulars are switchred from the terminal to a processor. Later, this information is passed by way of the card network to the issuing bank. As soon as all this happens, the issuing back sends an authorization back to the processor through the network.
In the whole system, acquiring an authorization for a transaction remains the primary step. Earlier than the sales are deposited within the bank account of the business, it is critical that the authorizations are settled. Settlement and authorization are the 2 major processes of transaction. If ever this happens a failure be it complete or partial, it leads to sales not deposited or elevated costs.
The Key Players
Key players concerned in authorization and settlement embrace:
1. Customer
2. Service Provider
3. Acquiring Bank
4. Issuing Bank
5. Card Associations (Visa and MasterCard)
Let’s talk about every 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 presented to the merchants as payment for the companies or products.
2. Service Provider: Service provider is the business that is engaged within the sale of services or products. It can be said that it is a business that enables 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 instruments to just accept promotional materials, cards and other important parts needed 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 usually 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 collectively to assist credit card processing and electronic payments.
This was all about the necessary parameters of credit card processing. To keep transparency within the credit card processing mechanism, keeping these vital points in mind is quite helpful.
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