Create a Professional Credit Bill Format for Administration Effortlessly

Credit bill format for Administration

hello in this short video we are going to see the payment processing system for credit and debit cards and specifically focusing on the credit cards so before we start the video let's see some of the key terms which would be useful in understanding the flows later issuer the bank which issues the credit card or a debit card that is the issuer bank or a financial institution specifically for credit card when you apply for a credit card the financial institution will check your credit history income debt to income ratio and based on your profile of the profiling which we do based on these parameters they will approve a specific credit limit and they will issue or deny a credit card for you okay so that's what is a issuer acquirer are the backbone of merchant processing like they are the ones which provide the point of sale devices to the to the merchants and they facilitate the process of payment processing we will see them in detail in a bit companies that provide credit and debit card transactions on behalf of merchants okay that's is that is what is called acquirered and these are the prime or major acquirers which are there so if we read the definition acquirers act as intermediaries between the merchants and the credit card networks facilitating the authorization capture and settlement of transactions now credit card networks so credit card networks all these networks are credit card networks Visa Maestro Master rupee discover American Express so they are intermediaries between issuing bank and the acquiring Bank okay between the acquirers and the financial institution which has issued the card and we will see them in the flow and then we will understand what they help us to facilitate and they are also called International Payment Systems rupay is a domestic one from India but Visa Mastercard American Express they are international and that's where sometimes they're being referred as International Payment Systems as well so when a card holder makes a purchase with a credit or debit card the transaction information is how it is transmitted it is transmitted using the credit card network from the acquirer to the issuer bank okay and issuer is going to approve or decline the transaction based on multiple parameters which we are going to see in a bit okay so this is the first step so when you swipe your card or when you go to online uh retail store and you make a purchase First Step which is done is the authorization whether you are eligible to make the purchase or not okay that's the authorization part of it card holder swipes a card or makes a payment on the online e-commerce side and the information is sent to the acquirer from there it goes via the IPS to the issuer and issuer will approve or deny the request based on multiple conditions which we are going to see in a bit so and the card holders wipe the card the information went here and uh via the acquirer IPS the the Visa and the merchant sorry B visa and the MasterCard it went to the issuer so from here to here IPS is going to provide the network connectivity and the safety of the data so IPS like a Visa Master rupee they are going to facilitate that and this information is is gone to the issuer the bank which issued the card so they are going to have all the information about this specific card holder so from the card holder information they are going to find whether it's a genuine card whether the card holder is identity is genuine whether sufficient funds are there credit limit is still the the amount is within the credit limit card is not block listed so these are the some of the things which they are going to check before they authorize the transaction and once this authorization is done the fund in the card are blocked okay so that's what happens on the authorization so once this authorization is done the Second Step you would understand or think that is the payment of the money to the merchant but it is it is not a stepwise process it happens in batches and which we are going to see in a bit so the next step is clearing so clearing is basically precursor to settlement settlement is where the final funds go to the merchant but before the settlement there is a clearing process wherein how much amount has to be settled is agreed okay so these parties which are involved in the transaction they share the details which we are going to see in a bit so yes so the merchant is going to start the clearing process they will send the acquirer will send the clearing file having all the details of the transactions and then the IPS is going to notify the financial transaction information to the issuer so the clearing messages which are flowing which we see here flowing they contain only data so no settlement or no money settlement or money transfer is not happening right now they are agreeing on the payment details but they are not settling or transferring any funds yet so the settlement or the transfer of funds process is called settlement and that's what happens here uh so while clearing the process clearing is the process of exchanging transaction data the actual exchange of funds is a separate process called settlement okay and they are happening in batches these funds are exchanged daily between acquirers and issuers for the net value of the clear transactions so whatever was cleared net value means if there are multiple things which were done on batch so all the amounts will be trans cleared or settled together so because it is done in the big batch of multiple transactions which happen they are settled together so what is the process again issuer is going to send issuer is a bank or industry which is holding the account they are going to transfer the funds ing to the clearing file which was received earlier and IPS will transfer the fund ing to the reconciliation file to the acquirer and acquirer is going to credit the funds to the Merchant's account so these are the three processes so if we see the specific example of MasterCard so MasterCard has also explained these processes in their website so how they explain they explain like this so this is the authorization card holder is swiping his card MasterCard it goes via the merchant POS where he swipes to the acquirer and on the MasterCard Network it has gone to the issuer issuer is checking whether it's a genuine card right card holder money available not block listed all these information it is sending back and here the card holder is notified whether the transaction is approved or denied then what happens then this clearing happens as a batch process they do a six cycles per day and these files are being transferred with transaction information currency conversion information and with the interchange and service fee calculation so what is interchange and service fee there is another video which I'll link in the end of my this specific video wherein these fees which are being charged are explained in detail now the final settlement process and what is happening in the settlement process is settlement advertisement which is basically informing that this is a settlement which is happening details of the settlement and one more thing which we see here is the settlement bank so it's an intermediary Bank wherein the amount is being transferred from the issuer to the settlement and finally to the acquirer okay so so that's the intermediary bank and uh that's the process explained by MasterCard so if we see the full flow one over time at the merchant the customer makes a purchase the purchase is authorized okay by the issuer authorization is done and then they agree on the the there is a clearing process wherein you agree on what funds have to be transferred and finally the transfer of funds are done from issuer this you can see the dollar sign so the money is being flowing from issued to the settlement Bank to the acquirer and from the acquirer they are being credited to the merchant account so Merchant is receiving the money not immediately but during the clearing process or the settlement process they get the money and the money is also debited from the cardholder account so that's what is happening here so that's the process if you want to see how much you know charges or what kind of charges are being being levied by acquirer or this IPS then you can see another video which I'll link here thank you very much