Payments 101
Step by step of payment authorization
1) Cardholder makes purchase 2) merchant captures cardholders info and submits to acquirer 3) acquirer processes card info, identifies payment network, and trasmits card and transaction details. The numbers on a credit card provide instructions on where to route the transaction 4) Payment network (MC) receives card/transaction details, identifies associated issuer, and trasmits details to issuer 5) issuer receives request from payment network and tests for risk, a fraudulent transaction, and fund availability. they then either approve or decline transaction. 6) issuer sends approval back through mastercard 7) if transaction is approved, mastercard receives approval and sends it to acquirer 8) acquirer sends approval to merchant who either completes or declines transaction with cardholder
Payment Gateway
An intelligent application that routes payment transaction, often from shopping car/terminal to processors. An internet based service that transports credit card information from a computer terminal or web site to a credit card processor, where it can be verified and processed.
Processing Fees
Authorization,. clearing and settlement, switch and connectivity fees - domestic and cross-border (3.4 billion)
Payment facilitator
Company that provices merchants the ability to accept electronic payments more quickly than working with an acquirer. A payment facilitator holds a master merchant agreement with an acquirer and boards merchants under their master agreement.
Independent Software Vendor
Company that provides software solutions that aid in managing different functions of a business operation. Generally they specialize their solutions to a specific merchant vertical often times at a granular level.
Mastercard's four main revenue sources
Domestic assessments Cross border voilume fees Transaction processing fees other revenue
Cross border
Volume based fees charged to issuers and acquirers where merchant country and cardholder country are different (2.8 billion)
Domestic assessments
Volume-based fees charged to issuers and acquirers where merchant country and cardholder are the same (3.8 billion)
Payment processors
a data processing company that contracts with ISOs to provide communication and processing systems that connect with the payment network for authorization, clearing, and settlement services.
What are the numbers on a credit card
first digit identifies card network. 2 and 5=mastercard next five to six digits are bank identification number (BIN) remaining digits, except the last digit, are the cardholders account number last digit is used to verify that the card is real and helps avoid issues with misentering a card number.
The four players in the four party model
merchants acquirers (merchants bank) issuers cardholder
Which cards earn the most revenue for mastercard.
It depends on how they're used. Those that are used more cross-border create more revenue. In ascending order : 1) Pin debit 2) prepaid 3) Consumer credit and signature debit 4) Commercial credit
Other revenue
Mastercard advisors consulting services, fraud tools or processing services (1.3 billion).
Independent Sales Organizations (ISOs)
Merchants / an organization whose primary mission is a merchatn sales function and may provide some limited additional functions such as back-office customer services.
step by step of payment settlement
Settlement happens after authorization and involves the transferring of funds. 1) merchant submits a batch of transactions at the end of the day to the acquirer 2) acquirer receives the batch of transactions from merchant and sends total amount due to the payment networks 11) payment networks send the batch of approved transactions to respective issuers 12) issuer posts transaction to the cardholders statement 13) payment networks send net settlement amounts for acquirer and issuer to sponsor banks. networks also notify a & i of settlement value 14) the sponsor bank facilitates the exchange of funds between the acquirer and issuer 15) acquirer trades funds to the merchants bank account.
