Swipe, Tap, and Go: The Journey of Your Card Payment

The swipe of a card has become a necessary component of our daily transactions in today's fast-paced world. Card payments are quick and easy, but they also cover a complex, well-organized procedure that makes sure your money gets where it needs to go on time and safely. But after you use your card at a merchant's location, what exactly happens? Let's piece together this financial puzzle one step at a time.

Let's get to know the main players before we start the process:

  1. Merchant: The company or person that is providing you with the goods or services.
  2. Point of Sale (POS) Terminal: This machine starts the transaction by reading the card data.
  3. Acquirer: The bank that the merchant uses to process card transactions is the acquirer.
  4. Network: Organisations that transport transaction data, such as Visa or Mastercard.
  5. Issuer: The bank that issued your card is the issuer.
  6. Cardholder: You are the one! The payment journey is started when you choose to make a purchase with your debit or credit card.

How does the transaction happen?

Step 1: Initial Card Swipe

When you swipe your card through the merchant's POS system, your transaction trip officially starts. To acquire your card information, the terminal reads the magnetic stripe or chip on your card.

Step 2: Authorization of the Transaction

As soon as your credit card information is taken, the POS terminal sends it to the merchant's acquirer. After obtaining this information from the acquirer, the card network forwards it to your bank (the issuer) for approval. Your bank confirms there are sufficient funds or credit in your account before determining whether to approve or deny the transaction.

Step 3: Authorization Response

The issuer relays the authorization response to the acquirer, who then transmits it to the merchant's terminal, via the card network. This response lets you know whether the transaction has been accepted or rejected. When your purchase is successful, the terminal prints a receipt.

Step 4: Batch Submission

The merchant delivers a batch of all the day's authorized transactions to the acquirer for processing at the close of business.

Step 5: Clearing and Settlement

The batch is sent to the card network by the acquirer for clearing. To route the transactions to the appropriate issuing banks for settlement, the card network sorts the transactions. The acquirer then puts the funds for these transactions, less any relevant fees, into the merchant's account after receiving them from the issuers.

Step 6: Reconciliation and reporting

The merchant checks for discrepancies after reconciling the funds received with the day's transactions. Statements that summarise the transactions are sent to the merchant and you, the cardholder, giving a clear record of all transactions for that period.

The card swipe is a doorway to a complex, secure, and efficient world of digital transactions. Every time you swipe your card, numerous entities work tirelessly behind the scenes to ensure your payment is processed smoothly. Understanding this process not only demystifies the card payment system but also enhances our appreciation of the modern-day payment marvels that fuel our everyday commerce.


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