I'd like to add a thing or two about the settlement process with card networks. In step 4 of the Clearing and Settlement flow, networks such as Visa operate a bit differently in some regions.
For domestic transaction in Brazil, for example, the issuing banks have no direct contact at all with the acquiring banks.
Every day Visa sends the clearing files to the issuing banks, that must process and make the funds available. At the same time, it executes the settlement order through a clearing house.
In this process, Visa automatically calculates the fess and net values, then debits money from the issuers and credits the netted amount for the acquirers.
This is a special clearing operation only available for the card networks, regulated by the central bank and only available in a single clearing house.
Hey on the authorization graphic....I believe #2 should be: "the POS terminal sends the transaction to the card network" How else would the message get sent to the acquiring bank if the network isn't involved? I just think the graphic should represent the network earlier on in the transaction because that's my understanding of it. Do you disagree?
Just discovered you guys and it's a great deep dive @Alex! I wrote a merchant payments explainer on LinkedIn a couple of years ago and I believe fintech is an area that still needs more explainers like this! Feel free to check out my version and would love to collaborate on a fintech explainer in the future: https://jasshah.substack.com/p/fintech-rr-x-under-the-hood-merchant-payments
Very useful! thank you for the clear info & process diagrams.
I have a question related here; when is the chargeback should be applied and where it should be positioned in case of a fraud cases (as example using a stolen card for online purchases) --> ? (What are the advices to the merchants to avoid chargeback and how?) ? And why the the chargebacks are applied on the merchant although in many cases it's not his fault but the card holder who didn't stopped his stolen card ?
Merchant needs to notify system of what payment it expects to receive. Otherwise malicious code could be done by the client which might reduce the price of the order before sending it to the system. The qr code generation is simply visual id of the merchants expectation in the system. I guess the whole image generation could happen on merchants hardware.
Great content as always! Thanks a lot.
I'd like to add a thing or two about the settlement process with card networks. In step 4 of the Clearing and Settlement flow, networks such as Visa operate a bit differently in some regions.
For domestic transaction in Brazil, for example, the issuing banks have no direct contact at all with the acquiring banks.
Every day Visa sends the clearing files to the issuing banks, that must process and make the funds available. At the same time, it executes the settlement order through a clearing house.
In this process, Visa automatically calculates the fess and net values, then debits money from the issuers and credits the netted amount for the acquirers.
This is a special clearing operation only available for the card networks, regulated by the central bank and only available in a single clearing house.
I pray that we never stop receiving such great learning contents from you.
What's the difference between acquiring bank and merchant bank. Is it should not be the same please guide me about this?
Hey on the authorization graphic....I believe #2 should be: "the POS terminal sends the transaction to the card network" How else would the message get sent to the acquiring bank if the network isn't involved? I just think the graphic should represent the network earlier on in the transaction because that's my understanding of it. Do you disagree?
Just discovered you guys and it's a great deep dive @Alex! I wrote a merchant payments explainer on LinkedIn a couple of years ago and I believe fintech is an area that still needs more explainers like this! Feel free to check out my version and would love to collaborate on a fintech explainer in the future: https://jasshah.substack.com/p/fintech-rr-x-under-the-hood-merchant-payments
Very useful! thank you for the clear info & process diagrams.
I have a question related here; when is the chargeback should be applied and where it should be positioned in case of a fraud cases (as example using a stolen card for online purchases) --> ? (What are the advices to the merchants to avoid chargeback and how?) ? And why the the chargebacks are applied on the merchant although in many cases it's not his fault but the card holder who didn't stopped his stolen card ?
With reference to payment using QR:
Can't this be simplified further?
The workflow I am thinking is:
1. Merchant generate QR code with necessary details like Order Id, Sender Id and Amount etc in the application itself.
2. Client scans this QR and this QR informs client about transaction details.
3. After this usual payment flow works and if payment is made it is marked as success.
Basically the question is why to generate QR in a separate server and bring in one round trip of network call?
Merchant needs to notify system of what payment it expects to receive. Otherwise malicious code could be done by the client which might reduce the price of the order before sending it to the system. The qr code generation is simply visual id of the merchants expectation in the system. I guess the whole image generation could happen on merchants hardware.
Great content as always. But for debit card case are the steps remains the same?
Thanks you guys !