Card Swiping Secrets Unveiled: How VISA, Mastercard, and Amex Make Money Moves

 

Credit cards are now an essential aspect of our daily lives, streamlining transactions significantly. Behind the scenes, major players such as VISA, Mastercard, and American Express serve as intermediaries, guaranteeing smooth payments between purchasers and vendors. Let's explore the intricate choreography of transactions and funds that unfolds each time we swipe our credit cards at a merchant's establishment.

The Card Networks: Streamlining Transactions

When we use a credit card to make a purchase, the process involves multiple stages to ensure that funds seamlessly transfer from the buyer's account to the seller's. The central figures in this process are the card networks - VISA, Mastercard, and American Express.

Also Read: Pune Couple's Organized Cyber Blackmailing Scandal Uncovered

Authorization Flow

  • Card Issuance: Initially, a card-issuing bank provides credit cards to its clients.

  • Customer Initiation: The cardholder begins a purchase by swiping their credit card at the Point of Sale (POS) terminal in the merchant's store.

  • Transaction Processing:

    • The POS terminal forwards the transaction to the acquiring bank, the entity that supplied the terminal.

    • The acquiring bank transmits the transaction to the card network, which then relays it to the issuing bank for approval.

    • The issuing bank scrutinizes the transaction, either granting approval or rejecting it, thereby freezing the funds as necessary.

Capture and Settlement Flow

Also Read: Cyber blackmailing case: Shatrughan's bail plea rejected

  • Merchant's Transaction Compilation:

    • At the day's end, the merchant compiles all transactions and initiates the 'capture' procedure on the POS terminal.

    • The transactions are subsequently transmitted to the acquiring bank in a batch.

  • Network Processing:

    • The acquiring bank forwards the batch file to the card network, which carries out clearing for the transactions collected from various acquirers.

    • The clearing files are then dispatched to different issuing banks for verification.

  • Funds Transfer:

    • Issuing banks validate the clearing files and transfer funds to the relevant acquiring banks.

    • Acquiring banks, in turn, transfer funds to the merchant's bank.

  • Finalizing Transactions:

    • The card network clears transactions from various acquiring banks, decreasing the total number of transactions through mutual offsetting.

    • The network plays a pivotal role in facilitating communication and transactions among the banks, earning service fees in return.

Understanding this intricate process sheds light on how these card networks guarantee a seamless payment experience for both customers and merchants. The efficiency introduced by this network-based approach underscores the marvels of contemporary financial technology.

Source: https://www.the420.in/swiping-secrets-how-visa-mastercard-amex-work/


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