Basic scheme of transactions with a bank credit card

[Tomcat]

The main participants in card payments are:

• - Cardholder - a person who has a card or current account in the bank.
• - Issuing bank - a bank that issues bank cards, opens card accounts, provides settlement and cash services to customers when performing transactions using bank cards.
• - An enterprise of trade or services (merchant) accepts payments by bank cards as payment for its goods and services, including from different issuers.
• - Acquiring bank (acquiring bank, acquirer) - a bank that serves a trading company, makes settlements with this company for operations using bank cards, issues cash to cardholders whose issuers are other commercial banks.
• - A processing center is a company that provides information and technological interaction between the rest of the payment system participants. It possesses information about the state of card accounts of system participants, authorizes all transactions with bank cards (receives permission from the issuing bank to perform an operation), collects, processes and sends data on transactions with bank cards. The processing center can either belong to the issuing bank or be an independent organization.
• - Settlement agent - a bank that carries out mutual settlements between banks based on data received from the processing center. It credits funds to correspondent accounts of acquiring banks and debits funds from the accounts of card issuing banks.

The scheme of settlements by means of a bank card is shown in Fig. 4.1. Using a card to withdraw cash from an ATM involves going through similar stages of the scheme:

• 1. The payer provides the card to the merchant in payment for goods and services.
• 2. The terminal reads data from the card, the cashier types on the keyboard the amount paid by the cardholder.
• 3. The terminal authorizes the card by sending a request through the acquirer to the processing center and the issuer.
• 4. The issuing bank confirms the client's solvency and gives permission to execute the transaction.
• 5. The terminal debits the purchase amount from the bank card and issues a check-slip (electronic terminal receipt). This slip is signed by the bank card holder. At the same time, the cardholder receives the purchased goods and a copy of the slip. As a rule, a slip has a number of details: company identifier, the date of the transaction, the amount and currency of the transaction, a code that confirms the successful authorization of the transaction by the issuer, bank card details and the payer's signature.
• 6. At the end of each working day, the trade and service company transfers the slips, drawn up for the day, to the bank serving it, as they documentarily confirm the operations performed.
• 7. The acquiring bank checks all the slips and transfers their total amount to the current account of the merchant (minus the commission, part of which is paid to the card issuing bank).
• 8. The acquirer transmits to the processing center information about transactions using bank cards, the issuer of which he is not.
• 9. The processing center processes the information provided and brings it to the attention of the participants for their offsetting.
• 10. The settlement bank shall repay the mutual obligations of the participating banks by debiting the corresponding amount from the correspondent account of the issuing bank and crediting it to the correspondent account of the acquiring bank. The value of the settlement bank increases with the increase in the number of participants in the payment system, with the complication of mutual settlements between them.
• 11. The Issuer debits the purchase amount including commissions from its client's account. It should be noted that the bank on a monthly basis the procedure of billing (Shp?), Ie prepares a special statement for the cardholder from his card account, indicating all transactions performed during the period, as well as the amounts and terms of debt repayment (if the client used a credit bank card for settlements).