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In order for the buyer to be able to pay the merchant for the goods or services purchased from him using a credit card, there must be a payment system within which such an operation will be carried out. In general terms, such a system can be represented as a set of entities that have entered into an agreement that they are ready to carry out mutual settlements among themselves on a non-cash basis, using certain mechanisms and observing the established rules. In this article, I want to dwell in detail on the subjects of the payment system.
So, the payment system that uses a plastic card as a means of payment includes the following groups of entities:
Card Issuers.
Cardholders or Cardmembers.
Merchant Account Providers-MAP service providers.
Outlets or merchants accepting plastic cards (Merchants).
Processing centers (Transaction Processing Clearinghouse).
The issuer of a plastic card (Card Issuer)
A credit card issuer is the organization that issues a plastic card, that is, provides it for use by its customers. Banks, financial organizations, large store chains and a number of other organizations can act as issuers. The overwhelming majority of credit cards are issued by banks, so it would be advisable to generally talk about bank cards.
The bank that issues the credit card is called the Issuing Bank. The issuing bank is the guarantor of the fulfillment of all payment obligations arising in the process of using the cards issued by it. The card remains the property of the bank throughout the entire validity period, and the bank's client receives the card only for use and is only the cardholder.
Before providing the client with a plastic card, the bank checks the financial position and creditworthiness of the client. In principle, the procedure for obtaining a card is reduced to the procedure for opening an account. Therefore, very often it is possible to receive a card at a bank where a client has already opened an account on preferential terms, and sometimes even free of charge. The bank account on which all card transactions are carried out is called a card account. If a bank account is opened, then the issued card may be linked to it, or it may be necessary to open a separate card account, which will account for all transactions with the card. If the customer does not have an account with the issuing bank, it is mandatory to open a card account.
When a plastic card is issued to a client, its personalization is carried out - identification information is applied to the card (name of the owner, card number, card expiration date, etc.), encoded identification information is entered on the magnetic tape.
Within the framework of the payment system, the issuing bank undertakes to pay the invoices of the outlet (merchant) for payment for goods and services purchased by the bank's client using the card issued to him by this bank. In turn, the issuing bank debits the corresponding amount from the card account of the cardholder.
The issuing bank may also periodically send the cardholder an extract from the card account indicating all operations performed during the reporting period, as well as the amounts and terms of repayment of the debt to the bank (if any).
The owner of a bank card (Cardholders or Cardmembers)
The owner of a bank card can use it as a payment instrument and make non-cash payments for goods and services offered by merchants participating in the payment system (outlets). Also, the cardholder can get cash in the ATM network (ATM network), working with cards (supporting the standards) of the system in which a particular card is issued. Read more about the types of cards and their capabilities in the article "Types of plastic cards".
Merchant account provider (MAP)
Just want to digress and understand the terminology of the word "Merchant account". This term in English can be used in two meanings. In a narrow sense, a Merchant account is a special merchant account with a bank. This account is credited with funds withdrawn from credit cards of buyers as payment for goods or services purchased by them. And then the Merchant account can be translated into Russian as a merchant account or a trading account.
In a broad sense, a Merchant account means a holistic mechanism for accepting payments from customers' credit cards. In this case, the concept of Merchant account includes both a merchant account and the whole range of services for accepting payments from a credit card (provision of hardware for accepting credit cards, authorizing cards, making settlements with the card issuing bank, crediting money to the merchant's trading account etc.). In this sense, the concept of Merchant account has no established analogue in the Russian language, and therefore, most often either the original name (Merchant account) is used, or - in the Russian transcription "Merchant account". In this article, we will focus on the use of the term "Merchant account". (Both options are used on our site).
So, who are the providers of the Merchant accounts? First of all, these are, of course, banks. Within the framework of the payment system, the banks in which the seller opens a merchant account, and which are engaged in servicing the outlet, are called Acquiring Banks. Acquiring banks are responsible for the full range of services to ensure the acceptance of cards for payment at retail outlets.
Among these services, we can note the already mentioned services for the provision of hardware and software products for accepting credit cards, processing merchants' requests for card authorization, conducting mutual settlements with the card issuing bank, crediting funds to the merchant's trading account. Also, these are services such as distributing among their clients lists of cards for which operations are suspended or terminated (distribution of stop lists). This is work with documents: receiving, sorting and sending documents in electronic and paper form.
It should be noted that one bank can be both an acquirer and an issuer at the same time. In general, within the framework of the payment system, there may be one or more settlement banks, in which (s) member banks of the system open correspondent accounts. Such a scheme serves to speed up settlements between acquirers and issuers.
Banks very carefully and meticulously check applicants for obtaining a Merchant account. First of all, the merchant's credit history is studied. After all, the bank assumes a number of risks associated with the provision of a Merchant account. These are, for example, the risks associated with non-provision or incomplete provision of goods and services by the merchant, if they have already been paid for with the buyer's credit card. The risk that the buyer will pay with a stolen credit card, etc. Therefore, the bank must be sure of the merchant's reliability and that in case of problems, the merchant will be able to settle with the bank.
In connection with these risks, banks establish rather strict conditions for those wishing to have a Merchant account and it is not so easy to get it. And for small companies and especially companies engaged in sales on the Internet, obtaining a Merchant account in a bank is becoming a serious problem. Banks are very wary of sales that do not involve the physical presence of credit cards (such types of sales, except for online trading, include sales by telephone and by mail - Mail Order and Telephone Order, MO / TO). And often banks refuse to small, newly created companies in opening a Merchant account for accepting credit card payments via the Internet and MO / TO.
There is another problem. The undisputed leaders in the provision of Merchant account services for the Internet (as well as the leaders in Internet trade) are banks and companies from the USA and Western Europe. And the banks of these countries often do not want to contact foreign companies.
What is the way out? After all, most of the companies wishing (and already trading) in the network are medium and small companies, and companies registered outside the leading countries of network trading also want to use the possibilities of the World Wide Web and sell goods and services through the Internet around the world.
As you know, demand creates supply. And on the network you can find hundreds of sites that are ready to offer virtual merchants services for organizing a Merchant account. These sites belong to another type of Merchant account providers, different from banks. Most often, in information sources on topics related to the Merchant account, you can find the following generalized name for such companies - Independent Service (Sales) Organizations (ISOs) - independent service (trade) organizations. There is also such a name: Merchant Credit Card Brokers - brokers providing a Merchant account for accepting credit cards. On our website we call them "Merchant account intermediaries".
Intermediaries in the provision of a Merchant account for a higher cost of services and a number of restrictions imposed on the merchant are ready to solve problems associated with trading on the Internet, with the "non-resident" origin of companies, with the sale of so-called high-risk goods and services, and others. ...
According to the mechanism of work of intermediaries, the Merchant account can be divided into two types. The first type is intermediaries who conclude agreements with a number of banks and are representatives of these banks for the provision of Merchant account services. Such an intermediary brings the merchant to such a bank, which is ready to deal with small companies (with different credit histories) and is "normal" about trading on the Internet. For the bank, the intermediary acts as a customer search agent (Finder).
Having received a certain percentage for his activities, the intermediary "leaves the scene" and the merchant then works directly with the bank. A portion of the reseller service fees are passed on to the merchant as a higher fee for hardware and software for accepting credit cards on the merchant's website. Also, for these purposes, a special fee may be charged - an application fee (something like a fee for concluding a contract) or some other deductions.
When working with the second type of intermediaries, the merchant is not required to open his own Merchant account. The intermediary conducts all operations for payment by card through the Merchant account he has (opened in his name). First of all, it should be noted that such a scheme is used only in Internet commerce. And it is this type of intermediary that can offer services for non-American companies and is ready to work with merchants selling high-risk goods and services (adult, casino, etc.). But at the same time, requirements are tightened, risk funds are formed, money transfers are delayed.
In general terms, the procedure for paying for goods on the Internet through an intermediary is as follows: an Internet merchant places buttons on his web pages, for example, with the inscription "Pay";
if a visitor to such a page decides to purchase the product described on the web page, he clicks on this button;
the link located in the HTML code of the button transfers the client to the intermediary's server, to the Internet merchant's page specially created by the intermediary;
the client enters the details of his card in special fields (fills out the form), and after pressing the button to confirm the payment, he automatically returns to the website of the online merchant;
using special software products, the intermediary, firstly, ensures the security of the client's data on his server, and secondly, determines from which Internet provider the client came;
using the received data and the existing Merchant account, the intermediary requires the acquiring bank to credit a certain amount of money to his trading account;
After receiving the money into his trading account, the intermediary transfers the money to the bank account of the Internet merchant whose client made the payment.
At the same time, the merchant DOES NOT HAVE access to the data of the client's cards!
We will describe in more detail the services of all merchant account intermediaries in our future articles. Follow the newsletter!
Point of sale, merchant
Point of sale (merchant) is a trading or service company that has joined a payment system in order to provide an opportunity for its customers to pay by credit card. As already mentioned, in order to be able to accept payment by credit cards, the merchant must either open a Merchant account with the bank, or use the services of an intermediary without opening his own Merchant account.
Having received his Merchant account, the merchant gets the right to accept credit cards of this system for payment for his goods and services. The merchant may submit documented requirements to the acquiring bank to credit funds to his trading account for goods sold using credit cards. The merchant is subject to the obligation, in cases stipulated by the agreement, to authorize the cards (through the acquiring bank or through the processing center) and the obligation to keep confidential information about the customers' credit cards. The rest of the rights and obligations of the merchant are clearly stipulated in the agreement for opening a Merchant account.
Processing center (Transaction Processing Clearinghouse).
In large payment systems, acquiring banks often conclude agreements and delegate most of the technical functions to specially created banks or banking associations to service organizations - processing centers.
The processing center is responsible for round-the-clock authorization of card payments. It can also be assigned the function of preparing the final data for settlements between banks, members of the payment system, as well as the function of compiling and sending stop lists for traders to traders.
To perform these functions, the processing center maintains its own database of cardholders and members of the payment system. In large payment systems, several processing centers can be created, usually on a regional basis.
Plastic, banking, payment, club, discount, identification, embossed, non-embossed, credit, debit, ATM, magnetic, smart, individual, corporate, family, VISA, MasterCard, American Express, Diner Club, standard, gold, electronic - these and many other words you can find in a phrase with the words card and card. Let's try to understand all this variety of types of cards and cards.
So, all these types of cards are plastic cards. They are made from a special plastic, and the vast majority of these cards come in a standard size of 2.125 "x 3.375" (approximately 53.9 x 85.6 mm) and a thickness of 0.039 (~ 0.76 mm).
Plastic cards can be classified according to a number of parameters. One of the main parameters is the purpose of the card. Plastic cards can be divided into bank cards (sometimes they are called payment cards), identification, club and discount cards.
Bank cards are intended for non-cash payment for goods and services by the cardholder, as well as for receiving cash from his bank account in special ATMs almost anywhere in the world. This type of cards is of the greatest interest, since it is these cards that are mainly used both for making purchases on the Internet and in offline trade. These cards will be discussed in more detail below.
The identification card is designed to regulate employee access to certain premises or access to perform certain operations on the equipment.
Club and discount cards are issued by individual organizations, associations, clubs and are distributed among the members of these organizations. The owner of such a card can receive a discount on goods or services purchased at certain retail outlets.
As a carrier of electronic information, payment cards are divided into cards with a magnetic stripe and cards with a chip (microchip). The former are called magnetic cards, the latter are called smart cards, smart cards, chip cards.
The magnetic card contains the owner's data and information about which bank to contact to write off the required amount for a product or service. That is, the card does not contain information about the amount that is on it. A smart card stores encrypted information about the amount stored on it.
Magnetic cards are the most common today. But, according to experts, smart cards are the future. Recently, there has been a significant increase in the use of smart cards as a means of payment.
Cards can also be divided according to the method by which identification information is applied to the card (name of the card holder, card number, card expiration date, etc.) This information can be applied in embossed font (embossed) with a special embosser device, and then the card is called embossed ... Identity information is burned on non-embossed cards and, as a rule, these cards are intended for electronic use only (for example, VISA Electron).
Bank cards
Let's go back to bank cards. A bank plastic card usually contains the following information:
on the front side of the card the name of the owner, card number, card expiration date, logo of the card issuing bank, logo of the payment system are printed. On some cards, as one of the means of protection against counterfeiting, a hallogram is applied.
on the back of the card there is a place for the cardholder's signature, a magnetic stripe, sometimes a photograph of the owner and logos of ATM networks in which the card can be cashed.
The card number consists of 16 digits: the first six - the code of the issuing bank (Issuing Bank); the next nine - the bank card number (card account number); the last digit is the check digit.
According to their functional characteristics, bank cards are divided into credit and debit cards. A credit card allows its owner to receive a certain loan when paying for goods or services, the cost of which is higher than the balance on the bank account linked to the card (card account). The issued loan must be repaid within a certain period. The loan can be repaid from an insurance deposit, which is made by the client when opening a card account with the bank, or by crediting the account with money deposited by the cardholder in cash or by money transfer.
The owner of a debit card will be able to pay for the purchase of goods and services, as well as receive cash from ATMs only within the limits of the amount on the card account. In the United States, credit cards prevail, in Western Europe, debit cards make up the majority of all payment cards.
Credit Cards
I would like to draw your attention to the fact that the term "credit card" can be used in a broader sense. Very often all types of bank cards are understood as "credit cards", that is, the concept of "bank card" is replaced by the concept of "credit card". In this generalized sense, the concept of a credit card can be found in many print and online publications. On our site also, unless otherwise indicated by the context,
Both credit and debit cards can be individual and corporate. Individual cards (Customer cards) only for individuals, corporate cards - only for companies (organizations). The corporate card is tied to the company's account and can only be issued to an employee of the company. Such a card can be limited by the company and then the cardholder is set a limit on the use of funds from the company's account. If the limit is not set, the cardholder can dispose of the entire amount of the company's account (linked to this card).
As part of the classification of cards into individual and corporate, family cards can be distinguished as a separate type. They are issued as individual cards only to individuals, but also as separate corporate cards can be issued for each family member of the card account holder. At the same time, a limit on the use of funds is usually set for the credit cards of family members.
Bank cards can also be divided into payment systems or card associations (Card Associations) within which the cards are serviced. The most common in the world are the cards of the following major systems: VISA, EuroCard / MasterCard and American Express (AMEX). One card can be supported and serviced by only one payment system.
It should be noted that some payment systems can only issue cards of a certain type. For example, American Express and Diners Club only issue credit cards, while other lesser known systems (especially those that only work within one country) do not risk getting involved with credit cards and only issue debit cards. The world leaders VISA and EuroCard / MasterCard issue and support both credit and debit cards.
I also want to note such a feature of credit cards of different systems as their division into classes. VISA has two main classes - Classic and Gold. MasterCard - Standart and Gold, American Express - Mass and Gold. The choice of a credit card of one class or another significantly affects the amount of the insurance deposit made upon receipt of the card. Otherwise, the difference between classes is mainly down to the issue of prestige. In addition to the main classes, cards of the Platinum, Silver, Basic and some others classes can also be issued. Corporate cards are allocated to a special type of cards. And recently, such cards have been divided into Business cards (cards for small businesses) and Corporate cards directly.
Within each of these classes, cards can be divided into a number of subclasses. More details about this division and the difference between one or another class or subclass of cards can be read directly on the websites of the companies issuing cards.
Another type of cards issued within the framework of payment systems is electronic cards. Such cards are available in many payment systems. In VISA, for example, it is VISA Electron, in MasterCard - Maestro. As noted, these cards are non-embossed and intended for electronic use only. With such a card, you can get cash at ATMs, and you can pay for goods and services with them only in retail outlets equipped with special electronic terminals. There are electronic cards that are intended only for cash withdrawal from ATMs, for example, the Cirrus card in the MasterCard system.
And in conclusion, let's figure out what ATM cards mean. ATM is an abbreviation from English Automatic Teller Machine (sometimes they are also called Automatic Banking Machine (ABM) or Payment Banking Machine (PBM)) that is ATM. All bank cards, with rare exceptions, can be called ATM cards, since they are all serviced by ATMs and you can use them to get cash.
That, in general, is all that concerns the classification of plastic cards. If you want to know how cards work within a payment system, read the article
===============
What is an issuing bank?
What is an acquiring bank?
What is authorization?
What is Internet Acquiring?
How is online payment protected from fraud?
What is an issuing bank?
Issuing bank - the bank that issued the plastic card.
What is an acquiring bank?
Acquiring bank (acquirer) - a bank that carries out payments with plastic cards. The acquiring bank has a processing server connected to closed banking networks Visa, MasterCard / EuroCard, UnionCard, etc. The bank uses this server to authorize the card and then make the payment.
What is authorization?
Authorization is the procedure by which the issuing bank checks whether the buyer's card account has enough money to pay for the selected purchase. For authorization, the bank turns to closed banking networks that service the card.
What is Internet Acquiring?
Internet acquiring is a general term for accepting payments by plastic cards via the Internet.
How is online payment protected from fraud?
The card details are transmitted over the Internet in encrypted form. The acquiring bank is the guarantor of the payment.
So, the payment system that uses a plastic card as a means of payment includes the following groups of entities:
Card Issuers.
Cardholders or Cardmembers.
Merchant Account Providers-MAP service providers.
Outlets or merchants accepting plastic cards (Merchants).
Processing centers (Transaction Processing Clearinghouse).
The issuer of a plastic card (Card Issuer)
A credit card issuer is the organization that issues a plastic card, that is, provides it for use by its customers. Banks, financial organizations, large store chains and a number of other organizations can act as issuers. The overwhelming majority of credit cards are issued by banks, so it would be advisable to generally talk about bank cards.
The bank that issues the credit card is called the Issuing Bank. The issuing bank is the guarantor of the fulfillment of all payment obligations arising in the process of using the cards issued by it. The card remains the property of the bank throughout the entire validity period, and the bank's client receives the card only for use and is only the cardholder.
Before providing the client with a plastic card, the bank checks the financial position and creditworthiness of the client. In principle, the procedure for obtaining a card is reduced to the procedure for opening an account. Therefore, very often it is possible to receive a card at a bank where a client has already opened an account on preferential terms, and sometimes even free of charge. The bank account on which all card transactions are carried out is called a card account. If a bank account is opened, then the issued card may be linked to it, or it may be necessary to open a separate card account, which will account for all transactions with the card. If the customer does not have an account with the issuing bank, it is mandatory to open a card account.
When a plastic card is issued to a client, its personalization is carried out - identification information is applied to the card (name of the owner, card number, card expiration date, etc.), encoded identification information is entered on the magnetic tape.
Within the framework of the payment system, the issuing bank undertakes to pay the invoices of the outlet (merchant) for payment for goods and services purchased by the bank's client using the card issued to him by this bank. In turn, the issuing bank debits the corresponding amount from the card account of the cardholder.
The issuing bank may also periodically send the cardholder an extract from the card account indicating all operations performed during the reporting period, as well as the amounts and terms of repayment of the debt to the bank (if any).
The owner of a bank card (Cardholders or Cardmembers)
The owner of a bank card can use it as a payment instrument and make non-cash payments for goods and services offered by merchants participating in the payment system (outlets). Also, the cardholder can get cash in the ATM network (ATM network), working with cards (supporting the standards) of the system in which a particular card is issued. Read more about the types of cards and their capabilities in the article "Types of plastic cards".
Merchant account provider (MAP)
Just want to digress and understand the terminology of the word "Merchant account". This term in English can be used in two meanings. In a narrow sense, a Merchant account is a special merchant account with a bank. This account is credited with funds withdrawn from credit cards of buyers as payment for goods or services purchased by them. And then the Merchant account can be translated into Russian as a merchant account or a trading account.
In a broad sense, a Merchant account means a holistic mechanism for accepting payments from customers' credit cards. In this case, the concept of Merchant account includes both a merchant account and the whole range of services for accepting payments from a credit card (provision of hardware for accepting credit cards, authorizing cards, making settlements with the card issuing bank, crediting money to the merchant's trading account etc.). In this sense, the concept of Merchant account has no established analogue in the Russian language, and therefore, most often either the original name (Merchant account) is used, or - in the Russian transcription "Merchant account". In this article, we will focus on the use of the term "Merchant account". (Both options are used on our site).
So, who are the providers of the Merchant accounts? First of all, these are, of course, banks. Within the framework of the payment system, the banks in which the seller opens a merchant account, and which are engaged in servicing the outlet, are called Acquiring Banks. Acquiring banks are responsible for the full range of services to ensure the acceptance of cards for payment at retail outlets.
Among these services, we can note the already mentioned services for the provision of hardware and software products for accepting credit cards, processing merchants' requests for card authorization, conducting mutual settlements with the card issuing bank, crediting funds to the merchant's trading account. Also, these are services such as distributing among their clients lists of cards for which operations are suspended or terminated (distribution of stop lists). This is work with documents: receiving, sorting and sending documents in electronic and paper form.
It should be noted that one bank can be both an acquirer and an issuer at the same time. In general, within the framework of the payment system, there may be one or more settlement banks, in which (s) member banks of the system open correspondent accounts. Such a scheme serves to speed up settlements between acquirers and issuers.
Banks very carefully and meticulously check applicants for obtaining a Merchant account. First of all, the merchant's credit history is studied. After all, the bank assumes a number of risks associated with the provision of a Merchant account. These are, for example, the risks associated with non-provision or incomplete provision of goods and services by the merchant, if they have already been paid for with the buyer's credit card. The risk that the buyer will pay with a stolen credit card, etc. Therefore, the bank must be sure of the merchant's reliability and that in case of problems, the merchant will be able to settle with the bank.
In connection with these risks, banks establish rather strict conditions for those wishing to have a Merchant account and it is not so easy to get it. And for small companies and especially companies engaged in sales on the Internet, obtaining a Merchant account in a bank is becoming a serious problem. Banks are very wary of sales that do not involve the physical presence of credit cards (such types of sales, except for online trading, include sales by telephone and by mail - Mail Order and Telephone Order, MO / TO). And often banks refuse to small, newly created companies in opening a Merchant account for accepting credit card payments via the Internet and MO / TO.
There is another problem. The undisputed leaders in the provision of Merchant account services for the Internet (as well as the leaders in Internet trade) are banks and companies from the USA and Western Europe. And the banks of these countries often do not want to contact foreign companies.
What is the way out? After all, most of the companies wishing (and already trading) in the network are medium and small companies, and companies registered outside the leading countries of network trading also want to use the possibilities of the World Wide Web and sell goods and services through the Internet around the world.
As you know, demand creates supply. And on the network you can find hundreds of sites that are ready to offer virtual merchants services for organizing a Merchant account. These sites belong to another type of Merchant account providers, different from banks. Most often, in information sources on topics related to the Merchant account, you can find the following generalized name for such companies - Independent Service (Sales) Organizations (ISOs) - independent service (trade) organizations. There is also such a name: Merchant Credit Card Brokers - brokers providing a Merchant account for accepting credit cards. On our website we call them "Merchant account intermediaries".
Intermediaries in the provision of a Merchant account for a higher cost of services and a number of restrictions imposed on the merchant are ready to solve problems associated with trading on the Internet, with the "non-resident" origin of companies, with the sale of so-called high-risk goods and services, and others. ...
According to the mechanism of work of intermediaries, the Merchant account can be divided into two types. The first type is intermediaries who conclude agreements with a number of banks and are representatives of these banks for the provision of Merchant account services. Such an intermediary brings the merchant to such a bank, which is ready to deal with small companies (with different credit histories) and is "normal" about trading on the Internet. For the bank, the intermediary acts as a customer search agent (Finder).
Having received a certain percentage for his activities, the intermediary "leaves the scene" and the merchant then works directly with the bank. A portion of the reseller service fees are passed on to the merchant as a higher fee for hardware and software for accepting credit cards on the merchant's website. Also, for these purposes, a special fee may be charged - an application fee (something like a fee for concluding a contract) or some other deductions.
When working with the second type of intermediaries, the merchant is not required to open his own Merchant account. The intermediary conducts all operations for payment by card through the Merchant account he has (opened in his name). First of all, it should be noted that such a scheme is used only in Internet commerce. And it is this type of intermediary that can offer services for non-American companies and is ready to work with merchants selling high-risk goods and services (adult, casino, etc.). But at the same time, requirements are tightened, risk funds are formed, money transfers are delayed.
In general terms, the procedure for paying for goods on the Internet through an intermediary is as follows: an Internet merchant places buttons on his web pages, for example, with the inscription "Pay";
if a visitor to such a page decides to purchase the product described on the web page, he clicks on this button;
the link located in the HTML code of the button transfers the client to the intermediary's server, to the Internet merchant's page specially created by the intermediary;
the client enters the details of his card in special fields (fills out the form), and after pressing the button to confirm the payment, he automatically returns to the website of the online merchant;
using special software products, the intermediary, firstly, ensures the security of the client's data on his server, and secondly, determines from which Internet provider the client came;
using the received data and the existing Merchant account, the intermediary requires the acquiring bank to credit a certain amount of money to his trading account;
After receiving the money into his trading account, the intermediary transfers the money to the bank account of the Internet merchant whose client made the payment.
At the same time, the merchant DOES NOT HAVE access to the data of the client's cards!
We will describe in more detail the services of all merchant account intermediaries in our future articles. Follow the newsletter!
Point of sale, merchant
Point of sale (merchant) is a trading or service company that has joined a payment system in order to provide an opportunity for its customers to pay by credit card. As already mentioned, in order to be able to accept payment by credit cards, the merchant must either open a Merchant account with the bank, or use the services of an intermediary without opening his own Merchant account.
Having received his Merchant account, the merchant gets the right to accept credit cards of this system for payment for his goods and services. The merchant may submit documented requirements to the acquiring bank to credit funds to his trading account for goods sold using credit cards. The merchant is subject to the obligation, in cases stipulated by the agreement, to authorize the cards (through the acquiring bank or through the processing center) and the obligation to keep confidential information about the customers' credit cards. The rest of the rights and obligations of the merchant are clearly stipulated in the agreement for opening a Merchant account.
Processing center (Transaction Processing Clearinghouse).
In large payment systems, acquiring banks often conclude agreements and delegate most of the technical functions to specially created banks or banking associations to service organizations - processing centers.
The processing center is responsible for round-the-clock authorization of card payments. It can also be assigned the function of preparing the final data for settlements between banks, members of the payment system, as well as the function of compiling and sending stop lists for traders to traders.
To perform these functions, the processing center maintains its own database of cardholders and members of the payment system. In large payment systems, several processing centers can be created, usually on a regional basis.
Plastic, banking, payment, club, discount, identification, embossed, non-embossed, credit, debit, ATM, magnetic, smart, individual, corporate, family, VISA, MasterCard, American Express, Diner Club, standard, gold, electronic - these and many other words you can find in a phrase with the words card and card. Let's try to understand all this variety of types of cards and cards.
So, all these types of cards are plastic cards. They are made from a special plastic, and the vast majority of these cards come in a standard size of 2.125 "x 3.375" (approximately 53.9 x 85.6 mm) and a thickness of 0.039 (~ 0.76 mm).
Plastic cards can be classified according to a number of parameters. One of the main parameters is the purpose of the card. Plastic cards can be divided into bank cards (sometimes they are called payment cards), identification, club and discount cards.
Bank cards are intended for non-cash payment for goods and services by the cardholder, as well as for receiving cash from his bank account in special ATMs almost anywhere in the world. This type of cards is of the greatest interest, since it is these cards that are mainly used both for making purchases on the Internet and in offline trade. These cards will be discussed in more detail below.
The identification card is designed to regulate employee access to certain premises or access to perform certain operations on the equipment.
Club and discount cards are issued by individual organizations, associations, clubs and are distributed among the members of these organizations. The owner of such a card can receive a discount on goods or services purchased at certain retail outlets.
As a carrier of electronic information, payment cards are divided into cards with a magnetic stripe and cards with a chip (microchip). The former are called magnetic cards, the latter are called smart cards, smart cards, chip cards.
The magnetic card contains the owner's data and information about which bank to contact to write off the required amount for a product or service. That is, the card does not contain information about the amount that is on it. A smart card stores encrypted information about the amount stored on it.
Magnetic cards are the most common today. But, according to experts, smart cards are the future. Recently, there has been a significant increase in the use of smart cards as a means of payment.
Cards can also be divided according to the method by which identification information is applied to the card (name of the card holder, card number, card expiration date, etc.) This information can be applied in embossed font (embossed) with a special embosser device, and then the card is called embossed ... Identity information is burned on non-embossed cards and, as a rule, these cards are intended for electronic use only (for example, VISA Electron).
Bank cards
Let's go back to bank cards. A bank plastic card usually contains the following information:
on the front side of the card the name of the owner, card number, card expiration date, logo of the card issuing bank, logo of the payment system are printed. On some cards, as one of the means of protection against counterfeiting, a hallogram is applied.
on the back of the card there is a place for the cardholder's signature, a magnetic stripe, sometimes a photograph of the owner and logos of ATM networks in which the card can be cashed.
The card number consists of 16 digits: the first six - the code of the issuing bank (Issuing Bank); the next nine - the bank card number (card account number); the last digit is the check digit.
According to their functional characteristics, bank cards are divided into credit and debit cards. A credit card allows its owner to receive a certain loan when paying for goods or services, the cost of which is higher than the balance on the bank account linked to the card (card account). The issued loan must be repaid within a certain period. The loan can be repaid from an insurance deposit, which is made by the client when opening a card account with the bank, or by crediting the account with money deposited by the cardholder in cash or by money transfer.
The owner of a debit card will be able to pay for the purchase of goods and services, as well as receive cash from ATMs only within the limits of the amount on the card account. In the United States, credit cards prevail, in Western Europe, debit cards make up the majority of all payment cards.
Credit Cards
I would like to draw your attention to the fact that the term "credit card" can be used in a broader sense. Very often all types of bank cards are understood as "credit cards", that is, the concept of "bank card" is replaced by the concept of "credit card". In this generalized sense, the concept of a credit card can be found in many print and online publications. On our site also, unless otherwise indicated by the context,
Both credit and debit cards can be individual and corporate. Individual cards (Customer cards) only for individuals, corporate cards - only for companies (organizations). The corporate card is tied to the company's account and can only be issued to an employee of the company. Such a card can be limited by the company and then the cardholder is set a limit on the use of funds from the company's account. If the limit is not set, the cardholder can dispose of the entire amount of the company's account (linked to this card).
As part of the classification of cards into individual and corporate, family cards can be distinguished as a separate type. They are issued as individual cards only to individuals, but also as separate corporate cards can be issued for each family member of the card account holder. At the same time, a limit on the use of funds is usually set for the credit cards of family members.
Bank cards can also be divided into payment systems or card associations (Card Associations) within which the cards are serviced. The most common in the world are the cards of the following major systems: VISA, EuroCard / MasterCard and American Express (AMEX). One card can be supported and serviced by only one payment system.
It should be noted that some payment systems can only issue cards of a certain type. For example, American Express and Diners Club only issue credit cards, while other lesser known systems (especially those that only work within one country) do not risk getting involved with credit cards and only issue debit cards. The world leaders VISA and EuroCard / MasterCard issue and support both credit and debit cards.
I also want to note such a feature of credit cards of different systems as their division into classes. VISA has two main classes - Classic and Gold. MasterCard - Standart and Gold, American Express - Mass and Gold. The choice of a credit card of one class or another significantly affects the amount of the insurance deposit made upon receipt of the card. Otherwise, the difference between classes is mainly down to the issue of prestige. In addition to the main classes, cards of the Platinum, Silver, Basic and some others classes can also be issued. Corporate cards are allocated to a special type of cards. And recently, such cards have been divided into Business cards (cards for small businesses) and Corporate cards directly.
Within each of these classes, cards can be divided into a number of subclasses. More details about this division and the difference between one or another class or subclass of cards can be read directly on the websites of the companies issuing cards.
Another type of cards issued within the framework of payment systems is electronic cards. Such cards are available in many payment systems. In VISA, for example, it is VISA Electron, in MasterCard - Maestro. As noted, these cards are non-embossed and intended for electronic use only. With such a card, you can get cash at ATMs, and you can pay for goods and services with them only in retail outlets equipped with special electronic terminals. There are electronic cards that are intended only for cash withdrawal from ATMs, for example, the Cirrus card in the MasterCard system.
And in conclusion, let's figure out what ATM cards mean. ATM is an abbreviation from English Automatic Teller Machine (sometimes they are also called Automatic Banking Machine (ABM) or Payment Banking Machine (PBM)) that is ATM. All bank cards, with rare exceptions, can be called ATM cards, since they are all serviced by ATMs and you can use them to get cash.
That, in general, is all that concerns the classification of plastic cards. If you want to know how cards work within a payment system, read the article
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What is an issuing bank?
What is an acquiring bank?
What is authorization?
What is Internet Acquiring?
How is online payment protected from fraud?
What is an issuing bank?
Issuing bank - the bank that issued the plastic card.
What is an acquiring bank?
Acquiring bank (acquirer) - a bank that carries out payments with plastic cards. The acquiring bank has a processing server connected to closed banking networks Visa, MasterCard / EuroCard, UnionCard, etc. The bank uses this server to authorize the card and then make the payment.
What is authorization?
Authorization is the procedure by which the issuing bank checks whether the buyer's card account has enough money to pay for the selected purchase. For authorization, the bank turns to closed banking networks that service the card.
What is Internet Acquiring?
Internet acquiring is a general term for accepting payments by plastic cards via the Internet.
How is online payment protected from fraud?
The card details are transmitted over the Internet in encrypted form. The acquiring bank is the guarantor of the payment.
