; The transaction process of credit card
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The transaction process of credit card

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The credit card transaction process can be separated into two steps: first step to pay the authorization process, business requirements are recognized by the issuing bank or negative answer to pay the corresponding amount;

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									The transaction process of credit card



                                  The credit card transaction process can be separated into two
                                  steps: first step to pay the authorization process, business
                                  requirements are recognized by the issuing bank or negative
                                  answer to pay the corresponding amount; The second online
                                  payment solution step is the clearing and settlement process,
                                  which involves the payment of financial information exchange
                                  and the actual exchange of funds. The following were
                                  described in these two processes, as shown in a as shown:

1. pay the authorization process
This process is initiated by the merchant point of sale credit card machine. When you purchase
an item, the credit card machine to read out information recorded on the magnetic stripe of the
card behind, including credit card number and the sales amount and other information will be
sent to the merchant's business line requirements of the pay authorized. Businesses connected
line information system receives information to the Bank Card Association (CUP, Visa or Master
Card) Card Alliance, immediately transferred to the credit card's issuing bank.

The issuing bank under the credit card number, bring up the account information to which they
belong, and then decide whether to give authorization. The issuing bank's authorization decision
based primarily on the cardholder account the following aspects:
(1) pay state (with or without arrears, arrears of how long, etc.);
(2) credit status (good, bad records, etc.);
(3) Available funds (credit total by subtracting the amount);
(4) credit card is valid.

If the issuing bank considers that the above areas are no problem, but you shopping this total
amount not exceeding the available amount, the issuing bank will be issued to pay the bill
authorized. The signal along the same route back to the merchant credit card machine. Credit
card machines are authorized signal, it will immediately print out a receipt. Since then, the
closing of the transaction. If the payment gateway authorization is rejected, it may be your
purchase amount exceeds the available amount of the account, this transaction can not be
approved; and may be registered because of this card was reported missing. In this case, the
issuing bank may ask for the business "confiscation" of this credit card.

Visa and MasterCard Alliance for paying authorized system are called: BASE the I and INAS.
Typically, the banker for the authorization system need only 2 to 3 seconds.

2. the clearing and settlement process
This is the process of exchange of information and receivables within the trading system. Visa and
MasterCard Alliance for clearing and settlement systems, also have their own specific names,
respectively called: BASE II and the INET.
(1) liquidation:
The liquidation process involves only the exchange of transaction information. The business is
open every day after the closing of the point of sale system will automatically put the total
settlement of receivables on the same day, informed the merchant bank, and accounted for in a
merchant account.

However, accounted for the actual amount is less than the sales amount of this difference is
called the "merchant discount". Then, the merchant bank to the day of the balance sheet total
reported to the Bank Card Association Card Alliance then sent to the issuing bank. When the
cardholder account the payment of accumulated month, Card OK Bianxiang to cardholder to bill.
Which corresponds to the Check Clearing for the process in the traditional banking business,
involve only the exchange of information.

(2) Settlement:
   The settlement is related to the actual transaction payment amount is the process of money
changing hands. In addition to the settlement of the cardholder and card issuer month cycle,
clearing and settlement is generally the same time.

In the settlement process, business, business line, and the issuing bank must be a certain amount
of fixed costs. Credited when the merchant processing bank merchant accounts, business line to
the merchant to charge a fixed fee (ie, the merchant discount). For example, the store sells items
of $ 100, but the store in the business bank account corresponding to the actual income was only
$ 97. Which the difference of $ 3 is the merchant discount (this is assumed to be 3%). This
amount businesses paid to the merchant bank. In $ 3, is used to pay the credit card services
provided by the merchants line the other part by the business line Card Alliance paid to the
issuing bank. Furthermore, Visa or MasterCard Alliance would merchant bank reported to the
sub-report their day's total sales to the issuing bank. For example, corresponding to the
settlement amount of $ 100, business line only from the issuing bank received $ 98.5. The
difference of $ 1.5 of which is called "interchange fees". Of the total purchase 1.5% of the
amount of interchange fees paid to the issuing bank. Why business line paid to the issuing bank
this cost? This is because the issuing bank is the main bearer of financial risk in the credit card
system.

Issuing bank is exposed to financial risks:
(1) per month until the send time to the cardholder billing, billing general there are more than 20
days grace period, the issuing bank is actually to provide cardholders with an average of one and
a half short-term loans . If the cardholder is unable to timely pay the bill, the card-issuing banks
have to bear the credit risk.

(2) market risk in order to provide the above short-term loans, the issuing bank to the financial
markets up borrowing, and interest on this borrowing to the issuing bank to bring to market risk
due to fluctuations in market interest rates.
(3) pseudo-credit card risks.

Thus, in the transaction process: the interchange fee is the issuing bank as risk compensation, as
well as the proceeds of the transaction expenses. The proportion of the interchange fee is set by
the Card Alliance unified. The merchant discount is the compensation of the business line by
business line and business agreements.

Union bank card revenue from the fee of the bank card member (the issuing bank and the
business line) and approved by the fixed costs. Union of the bank card credit card payment
transaction process, a role similar to the exchange center, avoiding the direct contact of every
one merchant bank with 10 million card-issuing bank. Exploit economies of scale, standardization,
and standardization of the licensing of clearing and settlement system, greatly reducing the
transaction costs.

								
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