credit card 101

8/2/2019 Credit Card 101

1/16

1

Cr ed i t Car d I nd us t r y


2/16

2

Cr ed i t Car d Pr ocess in g -

A 1 0 Year H ist o r y

M ea t Sl ice r o r K n u ck l e Bu st e r , Pa p er

Record s, Car d Pr esent

Term ina l Dev ice , Paper Records , CardPresent

So f t w are On ly , Elect ro n i c Recor ds , Non- CardPresent

D ist r i bu t ed So f t w a re , Enc ryp t ed Reco rds ,Non -Card Pr esent


3/16

3

Th e W or ld Of Cr ed i t Car ds

MEMBER

FINANCIALINSTITUTIONS

PAYMENT NETWORK

CARD ISSUING BANK

MERCHANT BANKACQUIRING PROCESSOR

INDEPENDENTSALES ORGANIZATION

CREDIT CARD ASSOCIATIONS

CREDIT CARD PROCESSORS

MERCHANT

ACQUIRERS


4/16


5/16

5

I SO Independent Sales Organization Sells and signs-up merchantson behalf of Merchant Banks and processors.

Transac t ion - sale, purchase or transfer of money made using a

plastic card. Two types: Offline (paper imprint of card) and Online(passed by electronic communication from Merchant to Processor)

Autho r i z a t i on - request by merchant to verify cardholder credit andreserve amount of transaction (also pre-authorization)

Set t l emen t - merchant request for payment made to acquirer once

goods or services are delivered

I n t e rc hange Fee - Fee assessed to a Merchant for a transaction;determined by rules established by Association

Surc ha rge - A series of fees charged to merchants for transactionsbased on Merchants compliance with certain procedures.

Especially impacts Card Not Present Merchants. (Example isSurcharge when Address Verification not performed). Surchargesare paid by Merchant to VISA or MasterCard

Cr ed i t Card Term in o logy


6/16

6

Hos t Mode - (host capture) acquirer maintains transaction detail,usually for retail sales, settles the same day automatically

Term ina l Mode - (terminal capture) merchant maintains transactiondetail, usually for mail/phone orders, settles only after shipment,amount may change

Card Pr esent - transactions where credit card is present such as withretail, and restaurant industries

Card Not Presen t - transactions where credit card is not present suchas with Mail Order, Internet, Government, Education, Order forms,Reservation and Travel industries

Collectively referred to as Processor in this presentation (exPaymentech):-A u t h o r i z at i o n Ne t w o r k provides dial or dedicatedcommunications network, processes authorizations with issuing

banks and settlements with acquirer-Acqu i r i n g P rocessor process settlements, collect funds from -issuing banks, deposits into merchant account, billing services,reporting services, customer service. Settlement services done onbehalf of Acquiring Financial Institution(Processors also sometimes referred to as Clearinghouses orService Providers or Processing Networks)

Cr ed i t Card Term in o logy


7/16

7

Tr an sact ion Pr ocess

Web Based ApplicationsB2C & B2B (Non-card Present)

Retail ApplicationsCard Swipe (Card Present)

Mail Order Telephone OrderMOTO (Non-card Present)

MERCHANTS

Authorize

Authorized

or Denied

Settle

Get Consumer

Funds

P&L Funds

To Merchants

CARD ISSUING

BANK

MERCHANT

BANK

CREDIT CARD PROCESSOR


8/16

8

Cr ed i t Car d 1 0 1I n t e rchange Fee

CardholderPurchase

MerchantDeposit

MerchantBank

Processor

NationalAsscoiation

CardholderBank

CardholderStatement

Th e I n t e r c h a n g e f u n ct i o n e n a b le b an k s a r o u n d t h e w o r l d t oe x ch a n g e i n f o r m a t i o n , t r a n sa ct i o n s , m o n e y a n d o t h e r i t e m s o na s t anda rd and c ons i st en t bas is .

The I n t e rc hange f ee i s ass es sed t o a l l m erc han t s and i si n t ended t o com pens ate t h e ca rdho lde r s bank f o r t h e f r eep e r i o d b et w e en t h e s et t l em e n t t o t h e m e r ch a n t s b a n k f o rc ardh o lde r s pu rc hases and t h e c o ll ect i on o f t hos ea m o u n t s f r o m t h e b i l l in g s t o t h e c ar d h o l d e r


9/16

9

Cr ed i t Car d 1 0 1I n t e rchange Fee Ca lcu la t i on Exam p le

I f t h e p u r ch a se am o u n t i s $ 1 0 0 . 0 0 an d t h e

i n te rchange fee i s 1 .5% p lus 7 cen ts pe rt r ansact i on , t h e am oun t o f i n te rchange isca l cu la t ed as fo l l ow s:

$ 1 0 0 .0 0 x 1 .5 % = $ 1 .5 0 + $ .0 7 = $ 1 .5 7 ( I n t e r ch a n g e Fee)

The am oun t o f t hese fees depend on m anyfact o rs i ncl ud i ng w he th e r cred i t cards a ree lect ron i ca l ly au th o r i zed ( sw iped ) . I n recen t

years , t he i n t e rchange sys tem s have beenenhan ced t o conside r advan ced t echn o log iesw h i ch l ow er t h e r i s k o f accep t i ng f r audu len tt ransac t i ons .


10/16

10

Cr ed i t Car d 1 0 1Back gr oun d o f Paym ent Serv i ce 20 00 ( V isa )

Paym ent Serv i ce 20 00 ( PS20 00 ) i s acom prehens ive st r a tegy des igned t o ensu r econ t i nued ca rd p rog r am p r o f i t ab i l i t y by r educingr i sk , i m p r o v i n g f r a u d co n t r o l an d r e d u ci n g t h ecost o f b ack o f f i ce pr ocessing .

Gener a l Rul es :

The card i s p resen t

A s igna tu re i s ob ta i ned

A s i ng le e lect r on i c au th o r i z a t i on i s ob t a i ned

A si ng le cl ear i ng t r ans act i on ( s et t l emen t ) i s ob ta i ned

The t rans ac t i on i s c lea red w i t h i n t w o day s


11/16

11

Cr ed i t Car d 1 0 1Visa I n t e rchange Fees

Standa r d I n t e rchange Re im bur sem en t Fee ( SI RF)Ava i lab le to a l l Cus to m Paym ent Serv i ce ca tegor ies

Any t rans act i on t h a t i s NOT el i g i b le f o r i n c en t i v e

Elect ron i c I n t e rchange Re im bu rsem ent Fee ( EI RF)

Ava i lab le to a l l Cus t om Paym ent Serv i ce ca tegor ies excep ts ec u re pay m en ts and n on -s ecu r e e lect r on i c t r ans act i ons

Transact ion s m us t sa t i s f y speci f i c t im e l iness and

d a t a r e q u i r e m e n t s


12/16

12

Cr ed i t Car d 1 0 1Visa Cus t om Paym ent Serv ice ( CPS) Cat egor ies

Ret a i l ( Card Pr esent )

CPS/ Reta i l

CPS/ Re t a i l - K ey En t r y

CPS/ Re ta i l 2 ( Em erg ing Mark e t s )

Di rect Mark e t i n g ( Card No t P resen t )

CPS/ Card Not Presen t

E-Com m erce ( Card No t Presen t )

CPS/ Elect r on i c Com m erc e - Bas ic


13/16

13

Cr ed i t Car d 1 0 1CPS Cat egor y Qual i f i cat ion s

CPS/ Ret a i l

D ep o si t & c l ea r w i t h i n t w o d a y s

Sing le au th o r i z a t i on f o r each t rans act i on

Enr i ched m ess age f o rm a t ( au th & s et t l e )

Trans m iss ion o f f u l l una l t e r ed magn e t i c s t r i pe (au t h )

Use o f r e t a i n and re t u rn f i e lds (au t h & s e t t l e )Merc han t m us t be l oca ted i n US

Pur c hase w i t h i n on e ca lenda r day o f au t ho r i z a t i on

CPS/ Ret a i l 2

Em erg ing m ark e t s t o i nc l ude Gov e rn m en t , Sc hoo l s,U t i l i t y , I n s u r a n ce & Ca b le / TV


14/16


15/16

15

Cr ed i t Car d 1 0 1CPS Cat egor y Qual i f i cat io ns Con t in ued

CPS/ Card Not Pr esent

Card n o t p r esen t

Sing le au t ho r i z at i on r equest ( one rev e rs a l a l l ow ed)

Addr ess Ver i f i ca t i on Serv i ce


Sing le c lear in g t r ansac t ion

Tr a n s ac t i on d a t e ( s h i p p i n g ) m u s t b e w i t h i n 7c alenda r day s o f t he au tho r i z at i on da t e

Cl ea r i n g a m o u n t m u s t m a t ch a u t h o r i ze d am o u n t

Mark e t s peci f i c da ta p res en t ( au th & s et t l e )

Mail o rde r i nd i c a to r o f 1 , 2 o r 3

Cus tom er se rv i c e t e l ephone num ber requ i red ( s et t l e )

Use o f r e t a i n and re t u rn f i e lds (au t h & s e t t l e )


16/16

16

Cr ed i t Car d 1 0 1CPS Cat egor y Qual i f i cat io ns Con t in ued

CPS/ Elect ron i c Com m erce - Basi c

Card n o t p res en t , k ey en te red

Sing le au tho r i z at i on r eques t ( one rev e rs a l a l l ow ed)

Addr ess Ver i f i ca t i on Serv i ce


Sing le c lear in g t r ansac t ion

Tr a n s act i o n d a t e ( s h i p p i n g ) m u s t b e w i t h i n 7c alenda r day s o f t he au th o r i z a t i on da te

Cl ea r i n g a m o u n t m u s t m a t c h au t h o r i ze d am o u n t

Mark e t s peci f i c da ta p res en t ( au th & s e t t l e )

Mail o rde r i nd i c a to r o f 1 , 2 o r 3

Cus tom er s erv i c e t e l ephone n um ber , m erc han t URLor e -m a i l add res s requ i r ed ( s e t t l e )

Secur e E-c om m erc e t r ans act i on ( ECI 7 )

credit card 101

Documents