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Transaction Process Overview
- The cardholder purchases goods or services from the merchant.
- The merchant transmits the transaction to the acquirer.
- The acquirer then submits the ticket to the issuer for payment, via the MasterCard or Visa clearing and settlement systems.
- The acquirer credits the merchant for deposits (net of chargebacks, returns, and agreed to fees -- the merchant discount).
- The issuer funds its cardholders' purchases (net of chargebacks, returns, and agreed to fees).
- The issuer bills the cardholder.
- Finally, the cardholder repays the issuer for the goods or services originally purchased from the merchant. The issuer, via the MasterCard or Visa clearing and settlement system, has already paid the acquirer transaction amount, less the interchange fee.
- From the cardholders point of view, it seems as if he or she is paying the issuer for the goods or services originally purchased from the merchant. In fact, the cardholder is actually repaying a loan from the issuer.
Functions
- Storage of paper(hardcopy) sales drafts and film cartridges
- Retrieval of items in the hardcopy retrieval and chargeback process
- Request Fulfillment
Sales Draft Storage
Both merchants and acquirer store hardcopy sales drafts or POS tape. Acquirers and merchants typically hold drafts on-site for 3 years, and hold them off-site for 7 years.
Sales Draft Retrieval Retrieval areas receive requests from issuing banks. MC/Visa regulations stipulate that a request must be fulfilled within 30 days from the date of receipt. Any request not fulfilled within that time frame can be charged back to the merchant.
Request Fulfillment
Request for all hardcopy sales drafts are fulfilled as quickly as possible for disbursement to the issuing bank. MC requires all retrieval requests be fulfilled electronically through the MasterCom electronic image process system, while Visa will allow requests to be fulfilled through the mail along with Visas Copy Request Manager System.
Chargebacks and Collections
When an issuer disputes a transactions (either at the request of the cardholder or for reasons of its own), the matter is handled through a chargeback or compliance case. In a chargeback, the issuer returns a transaction to the acquirer, and the acquirer returns the payment previously made in interchange. Chargebacks result either from cardholder disputes or from rules violations by the merchant or acquirer; they help enforce operating rules and correct transaction errors.
The initial, or first, chargeback is always initiated by the issuer. It can result from the issuer finding an error in the transaction, or it may result from a cardholder complaint. MasterCard and Visa have developed standard procedures and time frames for submitting and processing chargebacks.
The Chargeback Process
The chargeback process begins when an issuer, on its own behalf or in defense of a cardholder, returns a presentment from the acquirer. Presentment is the stage of interchange when the acquirer, via the MasterCard/Visa system, presents the issuer with the transaction information. The issuer is automatically charged for the transaction during settlement, which takes place at the same time as clearing. In other words, the issuer receives information about a transaction, for which it has already paid, and realizes that the transaction may be invalid. At this point, the issuer wishes to charge the transaction back to the acquirer.
Functions of the Acquirers
- Determine legitimacy of Chargebacks presented by issuers
- Represent all "representable" items on behalf of our merchants
- Handle Arbitration Chargebacks if the representment is disputed by the Issuer
- Forward paperwork to the appropriate area for crediting/debiting of accounts
Collection Functions
- Acceptance of incoming collections cases from Issuers
- Acceptance of outgoing collection cases from merchants
- Submit Arbitration/Compliance issues to Card Associations
- Reversal of inaccurate merchant transactions
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