I have already talked about the issuing bank and the acquiring bank more than once. Probably, it's time to figure out who all these four people are. Today we'll talk about who does what in the complex structure of the payment system.
It is complex, not in the sense of "difficult to understand", but in the sense of "consisting of many elements." Therefore, we will calmly begin to understand.
First of all, let’s separate the two important roles of banks in the processing of plastic cards.
The bank that issues the card (issues it) is the issuing bank, or, as it is now more correct to say, the issuing bank. In general, there are banks that issue cards (issue, issue), but they themselves do not service any devices for accepting cards.
The bank that provides services for accepting cards (servicing POS terminals, ATMs) is called an acquiring bank, and the business for accepting cards is called acquiring. Such a bank maintains a terminal / ATM network, services it, collects ATMs, etc. Acceptance of cards via the Internet also applies here, although the word "Internet", Internet acquiring is added to the name. Generally speaking, there are banks that do not issue any cards themselves, but do business only on acquiring.
Most often, the situation is widespread when a bank does business both by issuing cards and accepting them, i.e. a typical bank is both the issuer and the acquirer. But here a variety of options are possible, I will definitely tell you about them.
Now let's see how transactions go between them and who earns what.
1. Local card program
Such a cumbersome name is a simple situation when a bank (more precisely, its card product) is not included in any payment network. This means that cards issued under such a card product can only be accepted in devices operated by the same bank. Let's say there is some ZhadiBank, and he issued ZhadiKarta. This card does not have any Visa, MasterCard, JCB, etc. logos, because this product does not belong to any payment network. Cards are issued to their holders, and ZhadiKarta holders can only be serviced at ATMs of ZhadiBank and in several stores where there are POS terminals from ZhadiBank. In the neighboring store, where SokhraniBank is acquiring (there are its POS terminals), they will not be able to accept ZhadiKarta, since SokhraniBank has no relationship with ZhadiBank.In fact, local card programs are not uncommon. For example, in one of the companies where I worked, through the local card program, they implemented part of the social. package. Acquiring agreements were signed with several nearby cafes, and employees dined in these cafes by paying with a special card. Everyone is good, by the way. My employer in this case was the acquirer (but this is not the only possible way).
Everything works very simply: ZhadiKarta is inserted into the POS terminal of ZhadiBank, ZhadiBank, upon the result of the transaction, transfers funds immediately from the account of the cardholder to the account of the Trade and Service Enterprise (TSP), in which the ZhadiBank terminal is located. Since the accounts of both the merchant and the cardholder are in ZhadiBank. No intermediaries. Any commissions that are present here (including hidden ones) go entirely to ZhadiBank.
At the dawn of the development of card technologies, there was only such an option. But, obviously, it has a number of limitations. Therefore, the next step is to agree several banks among themselves in order to process each other's transactions. In fact, in a number of cases this is still done, I will tell you a little later. Let's consider this particular case for now, we will complicate things gradually.
2. Direct agreement between the issuer and the acquirer
Let's imagine that SaveBank and ZhadiBank have agreed so that their cards can be accepted in each other's terminals. Depending on whose card is being served in whose terminal, they alternate between the issuer and the acquirer. Let's look at an example. The holder of ZhadiKarta comes to the "Black and Green" store to buy a green one. And there - what a coincidence! - the SaveBank terminal was installed. Great, you can pay. And inserts ZhadiKarta into the SaveBank terminal. From that moment on, Tristan found his Isolde. In these relations, ZhadiBank becomes an issuing bank, and SokhraniBank becomes an acquiring bank. More precisely, they, perhaps, both issue and service cards (or maybe ZhadiBank only issues, and SaveBank only serves), but in this transaction the roles are exactly that. In general, save the bank conducts the transaction, and as a result credits to the account "removed from the map . "Money is now the holder ZhadiKarty money was less, at TSP" black and green "balance increased, while SohraniBanka - reduced and SohraniBanku need to get money from ZhadiBanka Therefore.." removed from the map "the money I wrote in quotes ...Basically, ZhadiBank can have a deposit in SokhraniBank (deposit on a special account), and then SokhraniBank will automatically write off this amount in its favor. By the way, quite a viable option. Or it may be that ZhadiBank, at the request of SokhraniBank, transfers money to him through the RCC. There can be generally different interactions; I am not very well versed in accounting and economics, but I will write technically possible options somehow in a separate post.
When the holder of SaveCard comes to the Naftalin perfume shop, where ZhadiBank's POS terminals are installed, in the SaveBank transaction, it plays the role of the issuer, and in ZhadiBank - the acquirer. And everything happens as in the previous case, but Tristan and Isolde change places.
If there are any commissions under the agreement, then SaveBank and ZhadiBank share the income from them, as agreed.
If you insert SaveCard into the SohraniBank terminal, or ZhadiKarta into the ZhadiBank terminal, then the situation comes down to the first case, the interaction will be like a local card program (despite the fact that both banks are part of their own network, and maybe also to the international payment network). Those. in this case, no interaction with outside banks or organizations is required. The most profitable case for the bank, and therefore often banks make all sorts of loyalty programs in this case in order to stimulate such transactions.
V In the next part (and maybe parts), we will consider in detail the situation where the payment system is present, and what other market participants are.
V In the first part, we examined trivial cases when a bank itself accepts its own cards, and when there are two banks that have agreed among themselves to accept each other's cards.
Historically, this is how everything developed. At some point, it became clear that these mechanisms were not enough for normal operation. And the first card network appeared, from which the modern Visa and MasterCard were then born.
Let's now see how a purchase takes place in a situation where there is a payment system.
The owner of ZhadiKarta, Mr. Chichikov, comes to the Alpy store to buy a cubic meter of air. He wants to pay with JadiKarta. And in the "Alps" there is a bank terminal ITD-24, with which ZhadiBank has no direct contractual relations. But both ZhadiBank and ITD-24 are part of the Zhiza payment network and have this promoted logo on the plastic sides of their credit cards. There is a sticker on the doors of the "Alp" that the store accepts "Giza" cards.
Therefore, the buyer of a cubic meter calmly hands the cashier a card with two logos ("Zhiza" and "ZhadiBank"), and the card is inserted into the ITD-24 terminal.
The processing of bank ITD-24 receives a transaction request for a card with an unfamiliar bank BIN (Bank Identifier Number - the first 4-6 digits of the card number). The bank realizes that the card is not his. But BIN belongs to the Zhiza payment network. A member of which is the ITD-24 itself. Great, we know what to do with this transaction.
Each member of the Zhiza payment network has a special dedicated communication channel with the processing of the payment network. And through this channel, ITD-24 forwards the request to Zhiza. Zhiza looks at this request and sees that she sold the BIN card to ZhadiBank, which means that ZhadiBank must authorize the payment.
Zhiza's processing forwards the request to ZhadiBank's processing. ZhadiBank sees: oh, this is my card. It belongs to the citizen Chichikov, who has a corresponding account. And there is just enough money in the account. ZhadiBank blocks the required amount on the account (makes a hold, hold). And it forms the answer that there is enough money (in other words, it authorizes the transaction). This answer is sent to Zhiza.
Zhiza sends him to processing ITD-24, which has been waiting for this answer for a long time. So, now ITD-24 sees: ZhadiBank has confirmed the possibility of payment, which means there will be money. ITD-24 sends confirmation to its terminal, which still has JadiKarta installed. The terminal happily prints a confirmation receipt. The payment actually took place. A satisfied customer takes away his cubic meter of air, and our actors move on to the second act.
After ITD-24 received confirmation through Zhiza from ZhadiBank, and through its Alpam terminal confirmed the payment, ITD-24 must credit the purchase amount to Alp's account (transfer the buyer's money to the seller). Thus, the buyer of a cubic meter remains with the goods, the Alps with the proceeds, and between the banks it is still necessary to make mutual settlements.
I am now talking about the so-called. Dual-message transaction that occurs in two stages. The first stage is everything that I described, and in the second act settlements take place between ITD-24 and ZhadiBank. They happen again, not directly, but through Zhiza. First - the exchange of the second phase of messages (clearing, clearing). And then - already mutual settlements through the special settlement bank of Zhiza.
The fact is that Zhiza is a payment system (payment network), and its technical task is to forward transactions, route them. She is not involved in moving money. The money is transferred by the appropriate bank (owned by Giza). ITD-24 and ZhadiBank have corresponding accounts in this Jiza-bank, on which there are corresponding deposits. Here, ordinary mutual settlements take place, as if there were no card and card transaction, but simply a transfer from one account to another. As with ordinary transfers through the RCC (settlement and cash center, this is a branch of the Central Bank).
But for this settlement to occur, a second phase of the transaction, clearing, is required.
At the end of the shift, the cashier "Alp" closes the shift (according to the regulations previously agreed with ITD-24). And ITD-24 (in this case, he is an acquirer) forms a batch of messages, which he sends to Zhiza. The Alps sold a lot of cubic meters of alpine air using the cards of the Giza payment system, and the cards of various banks were processed during the day. Now we need to set requirements to all contractors. Zhiza parses a bunch of these requests and sends them to issuing banks. In our case, ZhadiBank receives a demand (presentation, presentment) for one transaction (per cubic meter of Alpine air purchased using ZadiKarta). He matches the transaction with the primary one and deducts the previously held funds from his client's account. Everything, with card transactions, that's all, further the usual banking on non-cash settlements (through Jiza-Bank). By the way, the write-off on the presentation is non-authoritative (the consent of the bank is not required), these are the terms of the contract with Zhiza.
In the next part, I plan to talk about what a single-message transaction is, as well as who and how earns on all this.
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