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Visa - transaction flow

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In more than 150 countries, the customers of 21,000 Visa Member financial institutions world-wide engage in approximately 100 million transactions per day, in dozens of currencies, using thousands of different VISA® products from cards to mobile devices. These transactions involve more than one billion VISA cards world-wide initiating US$2.4 trillion in payments annually. Most of these transactions are carried electronically over the Visa processing network, known as VisaNet System.

A Transaction in Two Stages
There are two parts to every transaction. First, a customer presents a VISA product, usually a credit card, to a merchant, who needs immediate authorization of the transaction. Second, at the end of the day, the merchant needs to receive the funds for the transaction via its acquiring financial institution and ultimately from the customer’s issuing financial institution. The specifics will vary depending on transaction type, complexity, technology, and processing services - but the typical flow is illustrated below.

How a Typical Purchase is Made: Authorization at the Point-of-Sale
1. A customer presents a VISA card at ABC Store.

2. ABC uses an electronic terminal or the telephone to request an authorization from its financial institution (DEF Merchant Services).

3. DEF must verify to see if the account is valid and has sufficient funds. It sends an authorization request message, including account and transaction details, through VisaNet to GHI Bank, the bank that issued the VISA card to the customer (the issuer).

4. GHI reviews the request and makes a decision to approve or decline the request. GHI’s response message is sent back through VisaNet via DEF Merchant Services to ABC Store.

The entire purchase process typically takes less than two seconds to complete. And, during the first half of 2003 approximately 3,500 worldwide transactions were processed by VisaNet, per second.

To further enhance this already very efficient network, VisaNet offers a Stand-In Processing service where it processes transactions when the cardholder’s bank is unavailable to process the transaction.

How the Merchant Gets Paid: Clearing and Settlement
1. At the end of the day, ABC Store delivers all its sales draft information to DEF Merchant Services.

2. DEF credits the account to ABC Store for the net amount of all its sales. This is how ABC Store obtains its funds from a customer’s purchase.

3. Next, DEF's processing center creates an electronic version of all drafts for all the merchants it supports, including ABC Store. The electronic drafts, which may include transactions from numerous VISA accountholders in various countries, are sent through VisaNet to one of Visa's data centers.

4. Visa routes these drafts to the financial institutions of the VISA accountholders-for instance, this customer’s transaction is sent to the issuer, GHI Bank. Visa consolidates all transactions for each issuer into an electronic file that includes currency conversions, fees, net settlement amounts, and required reporting information.

5. GHI's processing center receives the file and prepares the transactions for posting to its cardholders’ accounts.

6. GHI Bank transfers all the funds owed that day by its cardholders to a settlement bank, which is responsible for delivering the funds to the merchant acquirers such as DEF Merchant Services. This is how DEF gets paid for the amount it paid ABC Store in step #2.

At the end of the billing period, GHI Bank produces a statement for the customer. This is how GHI settles with the customer.

The benefits that Visa brings to its Member financial institutions, buyers and sellers through the convenience and speed of electronic transactions can be attributed to the highly reliable VisaNet System. VisaNet is the world's leading processing system, deliveriing secure, reliable payments – anytime, anywhere, any way, on any type of device.

September 23, 2004 at 08:02 AM in Financial Services | Permalink | TrackBack (25) | Top of page | Blog Home