Figure 1                                                   How Card Acquiring Works                                       ...
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How card acquiring works

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Explained in an article for SCL here: http://www.scl.org/site.aspx?i=ed26289

Published in: Economy & Finance, Business
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How card acquiring works

  1. 1. Figure 1 How Card Acquiring Works £ 11. Netting £ Card Scheme 15b 15a 12a 12b 10 5 4 3 6 9 Acquirer’s Bank Issuer’s Card Merchant Acquirer’s Bank A/c Issuer Acquirer Bank A/c 13 2 £ 19 7 £ 17 14 £ 8b 18 16 Consumer’s Consumer/ 1 Merchant Merchant’s Current A/c Cardholder 8a Bank A/c Consumer’s Bank Merchant’s Bank Sale agreement1. Cardholder offers to pay for an item using a card; Current Account agreement2. Merchant seeks authorisation for the card payment from theacquirer; Cardholder agreement3, 4, 5, 6, 7: Acquirer/card scheme seek and obtainauthorisation from the issuer; Scheme issuing licence8a, 8b. On receipt of authorisation, merchant accepts Scheme acquiring licencecardholder’s offer to purchase item, transmits the transactiondata to the acquirer and hands goods/receipt to the cardholder; Issuer’s banking agreement9. Acquirer sends transaction data to the card scheme; Merchant services agreement10. Card scheme sends transaction data to the issuer;11. Card scheme nets-off amounts it considers are due to/from Acquirer’s banking agreementit from each issuer/acquirer;12a/b. Card scheme issues a Settlement Report to each issuer Merchant’s business banking agreementand acquirer;13. Acquirer initiates remittance of transaction proceeds tomerchant’s bank account, either gross or net of fees etc.;14. Acquirer’s bank transfers funds to merchant’s bank;15.a/b Card scheme net-settles with each issuer and acquirer(which it may do via its own bank service provider(s), whichare not shown);16. Where the acquirer settles on a gross basis, the merchantmaintains a direct debit instruction to its bank in favour ofacquirer for fees etc;17. Merchant’s bank transfers funds for fees etc to acquirer’sbank;18. Credit Card-holder initiates payment via his current accountto pay card issuer for credit card transactions;19. Current account provider pays card issuer (these entities areone and the same for debit card transactions). 1

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