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Credit Card Processing OverviewNew Agent Development TrainingFirst Data Learning Organization
Copyright 2009, First Data Corporation. All Rights Reserved. Developed by: 26 Rev: 01/23/09/1.0
ObjectivesAt the end of this presentation you will be able to…
• Describe the credit card transaction, authorization and settlement processsettlement process.
• Identify the “players” involved in the transaction, authorization and settlement process.p
• Describe each player’s role in the transaction, authorization and settlement process.
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Agenda• Introduction
C dit C d T ti T• Credit Card Transaction Terms
• Authorization flow
• Clearing flow• Clearing flow
• Settlement flow
• Review• Review
• Questions
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Introduction• When a cardholder uses a credit card to purchase
merchandise the transaction moves through a processmerchandise, the transaction moves through a process that involves authorization, clearing and settlement.
• Each step of the process involves an exchange of p p gtransaction data and money that must be settled and balanced.
• This process ends when the cardholder pays for the merchandise listed on his/her monthly statement.
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Terms to Remember• Cardholder – An individual to whom a credit card
company has authorized to use its cardcompany has authorized to use its card.
• Merchant
• AcquirerAcquirer
• Visa / MasterCard Associations
• IssuerIssuer
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Terms to Remember• Cardholder
• Merchant A retailer (or any other person firm or• Merchant – A retailer (or any other person, firm or corporation) that (pursuant to a Merchant agreement) agrees to accept credit cards, debit cards, or both when g pproperly presented.
• Acquirer
• Visa / MasterCard Associations
• Issuer
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Terms to Remember• Cardholder
• Merchant• Merchant
• Acquirer – A financial institution authorized and licensed by a regulatory organization (Visa/MasterCard y g y g (Association) to accept credit cards or debit card transactions from the Merchants and submits those t ti i t th i t h di tl i di tltransactions into the interchange directly or indirectly and settles on the Merchant's behalf.
• Visa / MasterCard Associations• Visa / MasterCard Associations
• Issuer
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Terms to Remember• Cardholder
• Merchant• Merchant
• Acquirer
• Visa & MasterCard Associations Comprised of• Visa & MasterCard Associations ‐ Comprised of thousands of banks worldwide that set and maintain processing rules.
• Issuer
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Terms to Remember• Cardholder• Merchant• Merchant• Acquirer• Issuer – A member of Visa/MasterCard AssociationsIssuer A member of Visa/MasterCard Associations
who contractually issues credit cards. Usually a financial institution, such as a Citi, Chase, etc.
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Credit Card Process• Step 1 ‐ Authorization
•Obtained from the Issuer at time f hof purchase
• Step 2 – Clearing
•Transaction data sent processed through the acquirer to be sent to issuer for posting to the monthly credit card statement
• Step 3 ‐ Settlement
•Funds are paid and collected
•The Acquirer pays the merchant, q p y ,the Issuer pays the Acquirer, and the Issuer collects (bills) the cardholder
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What is Authorization?• Cardholder makes a purchase using a credit card.
Th h t t bt i th i ti f th• The merchant must obtain authorization for the purchase from the Issuer.
How does it work?How does it work?
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Authorization Flow
Cardholder
1makes a purchase using credit card
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Authorization Flow
2Merchant swipes card through a POS 2device
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Authorization FlowPOS device sends authorization 3 request along with card data to Acquirer
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Authorization Flow
The Acquirer (First Data) 4 ( )routes the authorization request to the
4Associations
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Authorization Flow
Transaction is routed to the5
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routed to the issuer5
Authorization Flow
If transaction meets criteria, Issuer authorizes 6
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transaction6
Authorization Flow
Associations
7forward the authorization response to h
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7 the Acquirer
Authorization FlowAcquirer sends approval / 8decline code to merchant’s POS device
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Authorization FlowMerchant completes
i i h9 transaction with Cardholder9
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Clearing
How does the merchant get paid?How does the merchant get paid?
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Clearing• What is Clearing?
– The exchange of transaction data between members (Acquirer & Issuer) through Interchange
P f ll i i f A i– Process of collecting a transaction from an Acquirer in the Merchant's currency and deliver it to the Issuer in the cardholder's currencyIssuer in the cardholder s currency
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Settlement • The merchant needs to be paid for the transaction
Th A i d t b id• The Acquirer needs to be paid
• The Issuer needs to be paid
• New Terms:• New Terms:
– Net Settlement = Sales Draft Amount Less Fees
– Acquiring Bank = The bank that facilitates transaction clearing and funds movement on the merchant’s behalfbehalf
How does it look?How does it look?23
Settlement Flow
1Merchant closes POS1closes POS device
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Settlement Flow
2 First Data receives t titransaction data
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Settlement Flow
3 First Data pays M h
3Merchant
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Settlement Flow
44Data sent to Associations
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Settlement Flow
5 Transaction data sent to Issuers
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Issuers
Settlement Flow
6Cardholder is billed
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Settlement Flow
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Terms to Remember• Cardholder
M h t• Merchant
• Acquiring Processor
• Visa/MasterCard (Associations)• Visa/MasterCard (Associations)
• Issuer or Issuing Bank
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Knowledge Check
What are the 3 steps to Credit Card Processing?
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Knowledge Check
What are the 3 steps to Credit Card Processing?
1 Authorization1. Authorization
2. Clearing
l / di3. Settlement / Funding
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Knowledge CheckWhich roles can First Data potentially play in the process?
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Knowledge CheckWhich roles can First Data potentially play in the process?
– Issuing Processor
– Acquiring Processor
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Knowledge Check• What step transmits the transactions to First Data to
begin the settlement process?begin the settlement process?
A. Credit card is swiped through POS device
B Terminal dials for a thori ationB. Terminal dials for authorization
C. Merchant batches out (closes) POS device
dh ld h d d b llD. Cardholder pays their credit card bill
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Knowledge Check• What step transmits the transactions to First Data to
begin the settlement process?begin the settlement process?
A. Credit card is swiped through POS device
B Terminal dials for a thori ationB. Terminal dials for authorization
C. Merchant batches out (closes) POS device
dh ld h d d b llD. Cardholder pays their credit card bill
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Credit Card Processing Overview
Thank You!Thank You!
Copyright 2009, First Data Corporation. All Rights Reserved. Developed by: 26 Rev: 01/23/09/1.0