Anatomy of Swipe
tags :
Book #
Helped me alot in understanding Fintech and banking domain By Ahmed Siddiqui
Why I read this? #
Suggested by Saeed Al Nahdi
Summary and Highlights #
Overview #
Debit vs Credit card transaction #
Dual-Message Transaction or Signature Transaction #
more cost, credit card does this. Debit card uses single message
Message one
Authorization
Message two
Clearing that happens at night by the merchant, including tips if any.
Transaction fees #
network assessment fee + interchange fee
Network Assessment Fee #
- Percentage of transaction which payment network takes from Merchant
This depends on
Location Merchant
merchant type
Type of Card
Transaction Mode PIN transaction Signature Transaction Online
These are governed by payment network in very large rate tables.
Interchange Fee #
The percentage of fee that Payment Network leaves with Issuing Bank for every transaction.
Glossary #
Merchant Acquirer #
Acquirer Processor #
Acquiring Bank #
Issuing Bank #
Bank that underwrite the user by giving them a bank account, debit card, and potentially access to credit facilitates and a credit card.
Examples #
- Citibank
- Wells Fargo
- Any Bank (these days)
Issuer Processor #
Authorization #
Happens at the moment of the swipe, dip or tag at the payment terminal.
After successful authorization, amount in the card holder’s account goes down by the transaction amount and the status will be changed to “pending”
swiping #
the card’s magnetic strip is slid across the card reader
Dipping #
the card’s chip is inserted into the card reader
Tapping #
the card, mobile phone, or smartwatch is tapped on a contact-less terminal
Entering it #
Typing it into a web browser to buy something online.
Clearing #
Can also be called as Capture.
Happens towards the end of the day for most merchants and will factor in tips, transaction reversals (double charge), and returns.
This is merchant confirming that the transactions are valid and these funds are ready to be moved or “settled”
In case of online transactions the clearing typically happens when goods are shipped. this is why transaction may be in “pending” state for longer time.
Settlement #
is the actual movement of money from cardholder’s bank account, issuing bank, to the merchan’t bank account.
This movement happens via Fedwire as instructed by the payment network
Happens generally on the following business day.
Chargeback #
Cashback #
Payment Network #
Payment Facilitator #
OCR of Images #
2023-06-21_21-00-29_screenshot.png #
ACQUIRER PROCESSOR ISSUER PROCESSOR MERCHANT BUCKS OF STAR BNCKS . STAR - 0 COFFEE NETWORK S L L B ACQUIRING BANK ISSUING BANK
2023-07-02_12-01-17_screenshot.png #
BAU E TAT VISA INT VISA Acquirer Processor Consumer Issuer Merchant Merchant shows wares to Consumer Consumer hands card to Merchant Card swiped and details sent to acquiring processos And.on.toVisa. Anti-fraud, black- list checks,AML etc. Authorisation - Approve / Deny Instruction sent to issuer bank Ack sent to Merchant Money sent to Acauia Acquirer bank settles with Merchant Consumer pays bill Payment flow via Visa network
2023-07-02_12-25-02_screenshot.png #
EMMET DIPPED HIS DEBIT CARD AT THE PAYMENT TERMINAL, WHICH TOOK THE INFORMATION OFF OF THE CARD AND TRANSMITTED IT SECURELY TO THE PAYMENT TERMINAL'S ACQUIRER PROCESSOR, VIA THE INTERNATIONAL STANDARDS ORGANIZATION (ISO) 8583 PROTOCOL. AUTHORIZING
2023-07-02_12-45-04_screenshot.png #
CLEARING BUCKS CF STAR CLOSED TODAY'S TRANSACTIONS $12,768.55 CLEAR TODAY'S TRANSKATIONS COFFEE a MONEYBIN L mastercard. $12,768.55 "c 8 BUCKS OF STAR BANK
2023-07-02_12-47-19_screenshot.png #
SETTLEMENT MO MONEYENG NALABLE 899425 PENDING 45.75 Bucks of Star THRIETRS $12:50 Theater $30.50 Gas 5 MONEYBIN a U MONEYBIN Voive E 8 9 BUCKS OF STAR BANK