The payment journey, including the key players in the payment process and the stages

Short story ??: The journey ??? of paying ?? with a bank card ??.

Alia visited a specialized store that sells ?? products to purchase the latest ??. The merchant uses a point-of-sale device to provide ?? services for their product or service through the card. Model (iPhone 15). During her visit, she discovered that the price of the new ?? exceeded the amount of ?? she had with her. Therefore, she decided to use a bank ?? to complete the transaction. Alia inserted the bank ?? into the point of sale (POS) device and entered the card's ??. Within a minute, the POS device displayed a message confirming that the purchase was approved. She received her new ?? and left the store.

At the store, she wondered ?? how the merchant received ?? his money.

She approached?? her friend Wasim, ?? who works in fintech, ?? to ask about how merchants receive payments through bank cards. ??

Consider a scenario where Alia cannot locate a point-of-sale (POS) machine in a store. In such a case, she would have to go to the nearest ATM to withdraw cash. She might also need to take a taxi to get to the ATM. If she does not have her card, she may have to wait until the following day to withdraw cash directly from the bank. When paying the amount to the merchant, the merchant will deposit it in the bank either on the same day or the next day,?resulting in extra cost or loss of time in addition to the effort expended.

When someone wants to buy something from a seller, they have multiple payment choices. One of these options is to use a bank card with a secret number(PIN) associated with the cardholder's bank account. In this tale, it is noted that Alia bought a new iPhone using her bank card. Nevertheless, what happens in the background when using a bank card?

??Let us introduce you to the main participants involved in the card payment process.

• Firstly, the customer?(cardholder)?desires to purchase a product or service using a bank payment card, and in our story, it is Alia.
• Second:?Customer bank: The bank opens a customer's account and issues a card, making it the card issuer responsible for verification, known as the?(issuer bank).
• Third:?The merchant who seeks to sell a product or service provides the payment service through the card and has a point of sale (POS) device.
• Fourth, A merchant bank is responsible for opening a bank account for the merchant and providing them with a point-of-sale device that reads bank cards and facilitates payments. The bank that provides these services is the (Acquirer Bank), which collects Payment from the customer's account and deposits it into the merchant's account.
• Fifth:?A payment network is a communication network between the customer's bank?(Issuer Bank)?and the merchant's bank?(Acquirer Bank), facilitating the financial transfer process. This network is called the Payment Network/Scheme because it defines the financial rules and conditions for settlement between the participating parties. In Alia's story, the Visa network was the Payment and settlement network.

So, when Alia uses her bank card to buy the new iPhone, this is what happens.

1- Alia inserts her card, enters her PIN on the point of sale (POS) device, and confirms the payment amount.

2- The merchant's point of sale (POS) device sends a payment request to the merchant's bank (Acquirer Bank), bearing information about the card, the merchant, and the requested amount.

3- The merchant's bank (Acquirer Bank) sends a payment request to the payment network in our story Visa, loaded with the same information.

4- The payment network (Visa) identifies the customer's bank (Issuer Bank) and sends it a payment request, uploading the same information about the card, the merchant, and the requested amount.

5- The customer's bank (Issuer Bank) verifies the validity of the card, the PIN, and the available balance in the cardholder's account and accordingly approves or rejects the payment request.

6- The customer's bank (Issuer Bank) sends a message to the payment network (Visa), including the approval or rejection of the payment request.

7- The payment network (Visa) sends a confirmation or rejection message to the merchant's bank (Acquirer Bank).

8- The merchant's bank (Acquirer Bank) sends a confirmation or rejection message to the point of sale (POS) device.

9- The point of sale (POS) device displays a confirmation or rejection message to Alia and prints a receipt for her.

-->-->Paying with a bank card requires secure coordination and effective communication among the parties involved.

?I hope my explanation of this process was clear to you. ??

The primary phases of a payment transaction are three main sections:

?? Authorization, ?? Clearing, and ?? Settlement.

?? Authorization:

When the issuing bank approves a payment transaction, it is called authorization for the acquiring bank to proceed.?The issuer bank authorizes the Payment by?performing card authentication and cardholder verification, approving the transaction, and putting the funds on hold.

1. The customer goes to an authorized store to pay using their bank card.The merchants will determine the purchase amount at the point of sale device.The customer inserted their card into the point of sale (POS) device and entered their PIN.The point-of-sale (POS) device automatically verifies the card's validity and PIN(in an offline PIN scenario).
2. The transaction from the point of sale (POS) device is sent to the Acquirer bank.
3. The Acquirer bank transmits the Payment via the Payment network to the issuer bank.
4. The issuing bank verifies the customer's balance and PIN and if they are correct.

1. Once authorized by the issuing bank, the Payment record is granted, and a reference number is generated.
2. ?The Payment authorization response is transmitted through the payment network to the Acquirer bank and displayed on the point of sale (POS) device.?
3. The merchant finalizes the financial transaction.
4. The customer receives a receipt for their payment transaction.The customer can carry the product.

?? Clearing

At this stage, we focus on ensuring that the merchants receive their funds by sharing the information between the main parties.

1. At the end of each business day, the merchant sends approved authorizations. At this stage, we focus on ensuring that merchants receive their funds by sharing information between the main parties.to the acquiring bank in batches via payment software, which is sometimes embedded in the POS or accessible through a web portal.
2. The acquiring bank sends the batched information/files to the Payment network for settlement.
3. The payment network approves or rejects transactions and sends approved ones to the issuing bank.

?? Settlement.

The purpose of the clearing is to manage and process data and information, while the purpose of the settlement is to facilitate secure fund transfers.

1. The issuing bank transfers the funds to the payment network after deducting the interchange fee.
2. The Payment network deducts its network scheme fee and then pays the remaining funds to the acquiring bank.
3. The acquiring bank deducts fees from the cardholder's purchase and transfers the remaining funds to the merchant's account.
4. The issuing bank posts the transaction information to the cardholder's account.
5. The cardholder receives the statement and pays the bill.

This article provides an overview of the payment process using a bank card. It involves the collaboration of the customer, merchant, their respective banks, and the payment network. In addition, we gained knowledge about financial technical terms that help us comprehend the functioning of cards and how they streamline the payment process.

We hope this article has been informative and helpful in answering your questions. Thank you for reading. ??