Presentation is loading. Please wait.

Presentation is loading. Please wait.

Credit Card Processing 101 June 2010 Confidential & Proprietary to First Data CorporationDeveloper: 10Rev 06/16/2010 V1.0 First Data Learning Organization.

Similar presentations


Presentation on theme: "Credit Card Processing 101 June 2010 Confidential & Proprietary to First Data CorporationDeveloper: 10Rev 06/16/2010 V1.0 First Data Learning Organization."— Presentation transcript:

1 Credit Card Processing 101 June 2010 Confidential & Proprietary to First Data CorporationDeveloper: 10Rev 06/16/2010 V1.0 First Data Learning Organization

2 Confidential & Proprietary to First Data Corporation. 2 Agenda I.Introduction II.Credit Card Transaction Terms III.Authorization flow IV.Clearing flow V.Settlement flow VI.Knowledge Check

3 Confidential & Proprietary to First Data Corporation. 3 Introduction The following presentation explains how credit card transactions are processed and settled. When a cardholder uses a credit card to purchase merchandise, the transaction moves through a process that involves authorization, clearing and settlement. Each step of the process involves an exchange of transaction 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.

4 Confidential & Proprietary to First Data Corporation. 4 Five Actors on the Stage Cardholder – T he consumer who owns the card. Merchant – An entity that contracts with an Acquiring Processor to originate transactions. Acquiring Processor – An entity that communicates to Visa to gain approvals to complete cardholder transactions. First Data is an acquiring processor. Visa - The largest association member. Visa is the largest payment system, enabling 14,000 financial institutions to process over $1 trillion in annual transaction volume. Issuing Bank – The financial institution who issues the credit card. For example, CapitalOne, Chase, Wells Fargo.

5 Confidential & Proprietary to First Data Corporation. 5 The Credit Card Transaction Process Step 1 - Authorization Cardholder makes a purchase using a credit card. The merchant must obtain authorization for the purchase from the bank who issued the card. Step 2 - Clearing If the transaction is approved, the next step is clearing. In this phase, the Issuing Bank obtains basic transaction data from the merchant such as the amount, date and location of the purchase. This data is then sent to the credit card issuer for posting to the monthly credit card statement. Step 3 - Settlement In the final step, settlement, the funds are collected from the Issuing Bank and transmitted to the merchant. When a consumer uses a credit card, the merchant does not receive payment at the time of purchase. The bank credits the merchants bank account. The bank then sends payment to the processor who sends the payment to Visa. The cardholder receives a monthly statement and settles with Visa for purchases made using the credit card. Lets slow down and go into detail on how this takes place.

6 Confidential & Proprietary to First Data Corporation. 6 Step 1: Authorization Flow 1.Cardholder makes a purchase using a credit card. The merchant must obtain authorization for the purchase from the bank who issued the card. 2.The merchant swipes the credit card through a POS unit 3.The POS machine sends authorization request along with card data to Acquiring Processor, e.g. First Data 4.The Acquiring Processor, First Data, routes the authorization request to Visa. 5.Visa then forwards the authorization request to the Issuing Bank. Credit Card Transaction: Authorization

7 Confidential & Proprietary to First Data Corporation. 7 7 Authorization continued. 6.The Issuing Bank verifies the authorization information then checks the account for available funds or credit and sends an approval or decline to Visa. 7.Visa routes the approval / decline to the Acquiring Processor ( F.D.). 8.The Acquiring Processor ( F.D.) sends the approval or decline to the merchants terminal. 9.The merchant completes the sale with the customer. 10.If approved, the customer is billed for the transaction on his next monthly statement. Credit Card Transaction: Authorization

8 Confidential & Proprietary to First Data Corporation. 8 Now that the cardholder has originated a purchase…. The merchant has swiped/keyed the card…. The Acquiring Processor (F.D.) has routed the authorization request to Visa… Visa has authorized that the cardholder indeed has an account... The cardholder has receipt in hand and is walking away with a purchase… How Does it All Clear? Credit Card Transaction: Authorization $$$

9 Confidential & Proprietary to First Data Corporation. 9 Credit Card Transaction: Clearing Flow What is Clearing? –Clearing is the process of posting the cardholders transaction to his/her statement. –Clearing also posts the transaction to the merchants statement. How the transaction is processed will also post to the merchants statement.

10 Confidential & Proprietary to First Data Corporation At the end of the business day, the merchant sends the sales transaction data to the acquiring processor. 2.The acquiring processor posts the sales transaction data to the merchants account. 3.The acquiring processor transmits the sales transaction data to Visa. 4.Visa sends the sales data to the Issuing Bank. 5.The Issuing Bank posts the sales transaction data to the cardholder account. How Does it Flow? Credit Card Transaction: Clearing Flow

11 Confidential & Proprietary to First Data Corporation. 11 Credit Card Transaction: Settlement Flow What is Settlement? –Settlement is the process of moving the actual funds. –This process debits the cardholders account and moved the money into the merchants account. $$$

12 Confidential & Proprietary to First Data Corporation First Data submits request to Visa. 2.Visa in turn submits request to Issuing Bank. 3.Issuing Bank funds Visa. 4.Visa in turn funds First Data. 5.First Data settles funds with Merchant. Credit Card Transaction: Settlement Flow

13 Confidential & Proprietary to First Data Corporation. 13 Summary You have just learned how credit card transactions are processed and settled. Each step of the process involves an exchange of transaction data and money that must be settled and balanced. Lets check your understanding. $$$

14 Confidential & Proprietary to First Data Corporation. 14 Knowledge Check 2. Which term best describes the clearing step? A. Approve B. Post C. Process D. Transmit 1. Which role does First Data play in the Credit Card transaction process? A. Acquiring Processor B. Association C. Issuing Bank D. Merchant 3. How many times did money change hands before the cardholder paid for his/her transaction? A.1 times B. 2 times C. 3 times D. 4 times E. 5 times Issuing Bank > Visa > Acquiring Processor (F.D.) > Merchants Account Multiple Choice: Select the best answer from the options.

15 Confidential & Proprietary to First Data Corporation. 15 Knowledge Check 2. Which term best describes the clearing step? A. Approve B. Post C. Process D. Transmit 1. Which role does First Data play in the Credit Card transaction process? A. Acquiring Processor B. Association C. Issuing Bank D. Merchant 3. How many times did money change hands before the cardholder paid for his/her transaction? A.1 times B. 2 times C. 3 times D. 4 times E. 5 times Issuing Bank > Visa > Acquiring Processor (F.D.) > Merchants Account Answer Key

16 Credit Card Processing 101 Copyright 2009, First Data Corporation. All Rights Reserved. First Data Learning Organization


Download ppt "Credit Card Processing 101 June 2010 Confidential & Proprietary to First Data CorporationDeveloper: 10Rev 06/16/2010 V1.0 First Data Learning Organization."

Similar presentations


Ads by Google