Евгений Войнов (tritankista) wrote in lj_live,
Евгений Войнов

Payments Gateways explained

There are 2 components to every credit card transaction: a buyer and a seller or, easier, a debit and a credit. In its Basic form, creditcard payments are just fundamental credits and debits, but the complex routing of intermediaries involved makes this the most trustworthy and secure source for international payments.

Cardholders are issued a credit card, with a particular credit limit, by their card Issuing Bank, which registers with Mastercard or Visa to circulate cards to their bank customers. The Merchant, similarly, applies to receive credit card transactions at their store or Website from a bank Acquirer, which registers with MasterCard and Visa to permit their merchants to accept credit card transactions for payment.

Issuers typically contract with a third-party processor to manage their credit card programs, which includes issuing the plastics and managing the card-transaction exchanges/settlement to the Card Associations. Acquirers, similarly, work with a third-party processor to set up merchant accounts and manage the reconciliation of sales, refunds and chargeback transactions performed at their stores, online or retail. First Data is a well-known third-party processor for both Issuers and Acquirers.

When a card is inserted through a shop terminal or cash register, the data held on the magnetic strip is registered by the terminal and reformatted along with the payment info to the Bank. Most point-of-sale terminals are linked via a landline to their Acquiring Bank. If it's a wireless transaction terminal, then a  WAP server, is used to route the payment to the Acquirer.

At the end of business the merchant settles their point-of-sale terminal or cash register and sums their sales for the day.

The Card Associations perform a financial reconciliation, which calculates the total debits for each Issuing Bank by BIN and the total payments credits for each Acquiring Bank Merchant. The totals for each Issuer and Acquirer are then posted to the applicable bank's clearing accounts, with Visa and MasterCard, and reports identifying individual transactions for that day are provided to the third-party processor for their respective banks.v

Whatever front-end system or hardware is utilized to acquire the card payment, the back-end authorization and settlement process remains the same on a worldwide basis.


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