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how card-based payments work,
5.5 trillion dollars was transacted annually with debit and credit cards in the US alone,
Square, Jason Gardner, CEO of Marqeta, Atif Siddiqi, CEO of Branch, and Zach Perret, CEO of Plaid
Stripe is a Gateway and gives you application program interfaces (APIs) and tools that enable you to Take payments—that
Marqeta is an Issuer Processor
and has tools and
APIs that allow you to Make payments—that is, you can use Marqeta’s APIs to create the credit or debit card that would allow you to buy ...
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physical piece of plastic
a virtual card that
tokenized,
Usually, the Issuer Processor will have a piece of hardware in their data centers and a fast network connection directly to the payment networks to approve or decline a transaction.
third-party Issuer Processor to handle this. Examples include Marqeta, Tsys, Galileo, i2c.
payment gateway. This isn’t a physical machine in this instance but rather it is handled via software.
request approval of a transaction.
Chase Paymentech, Tabapay, and Fiserv.
These Payment Networks provide the rails for card-based transactions to occur.
three seconds or less,
message goes from the payment terminal to its Acquirer Processor with the amount of the transaction,
The Acquirer Processor then determines that this is a Mastercard and routes it to the Mastercard Network.
first six digits of the card, also referred to as the card’s Bank Identification Number (BIN).
modern Issuer Processors like Marqeta to understand how transactions are actually authorized and where opportunities lie.
Initiated by an Acquirer Processor Via a Gateway or Payments Facilitator
Square is not an Acquirer Processor but rather a Payments Facilitator.
modern Acquirer Processor, Tabapay.
Emmet participated in a Dual-Message Signature transaction with his debit card.
In some cases, the Authorization message (message one) can be different from the Clearing (message two) if a tip is included or some adjustment is made.
networks standardized on the ISO 8583 message. The ISO 8583 message is a very compact message and can travel quickly among the Payment Terminal, Acquirer Processor, Network, and the Issuer Processor.
Card Issuer may want to put in more sophisticated authorization rules, by looking at things such as geo-location,
further authorization decision capabilities
The term “Clearing” is used primarily by Issuers, but can also be referred to as “Capture” by Merchant Acquirers.
Settlement is the actual movement of money from the cardholder’s bank account, the Issuing Bank, to the Merchant’s bank account, the Acquiring Bank. This movement of money typically happens via Fedwire as instructed by the payment networks.
This second part of the Dual-Message transaction is referred to as clearing.
In the case of online transactions, clearing typically happens when goods are shipped. This is why you may see a transaction that you may have made online staying in a “Pending” state for a long period of time.
this point, Mastercard, via Fedwire, has moved the money out of Emmet’s bank account and into the bank account of Bucks of Star Coffee’s Merchant Acquirer.
Bucks of Star Coffee’s Merchant Acquirer then sends the money to Bucks of Star Coffee’s bank account via Automated Clearing House (ACH).
Network Assessment Fee.
Interchange Fee.
Network Sends a Settlement File to the Acquirer Processor and Issuer Processor
These rules are all governed by very large rate tables that are set by the Card Networks; that is, these aren’t things that are arbitrary or can be negotiated.
The Merchant Acquirer in many cases collects their fee at the end of the month.
Money actually moves a day or two after the swipe has occurred.
The Federal Trade Commission has set some policies for handling chargebacks on debit and credit cards,6 but ultimately, it falls on the card Issuer to make a decision as to how much liability will actually fall on the cardholder.
EMV originally stood for “Europay, Mastercard, Visa,”
Visa will then immediately send a credit transaction back to Emmet’s card. This is referred to as a provisional credit.
Katy Spade has forty-five days to respond to the chargeback request.
The Network assesses chargeback fees between $25 to $35 just to process the chargeback. This fee is applied regardless of if the chargeback is disputed or not.
The chargeback then goes into arbitration and this is where Moneybin Bank as the Issuer would then have to make the decision as to “eat the cost” or to pass it back on to Emmet.
Federal Trade Commission has capped the liability to the consumer to $50 for unauthorized spend on a credit card.
isn’t so easy for card thieves to install a “card-skimmer” device that can read the card data off of the EMV Chip.
CVV was missing, this could also put the Merchant at risk for paying for this chargeback.
