2 PAYMENT METHOD PROFILES: CARD
Characteristics
Credit/Debit Functionality Debit cards can be processed as ‘credit’ in the United States (otherwise known as dual-message transactions), wherein a hold is placed on the customer’s funds for an authorized amount. In a later second message, the customer’s funds will be settled or withdrawn for the final amount, which may differ from the authorized amount. In a single-message transaction, the authorized and settled amounts are equal and therefore sent via one message. BillPay/Recurring Payments Subscription payments, bill payments, and other types of recurring transactions can be performed using a debit or credit card. For these transactions the card holder will provide their card details to the business or utility provider and authorize the use of the card for billing at regular intervals. The cardholder’s card and personal information must be stored securely for future transactions. Typically, this is done using a payment gateway or third-party service provider that adheres to Payment Card Industry Data Security Standards (PCI DSS). Third-party providers can include merchant service providers, processors, and third-party tokenization providers. Settlement Time From a processing perspective, the acquirer will transform settlement messages into ‘clearing’ transactions, which will be settled in batched or non-batched systems. In terms of batched processing, the settled transactions will be cleared to the merchant’s account as part of end-of- day or end-of-cycle processing. The timing of settlement is typically T+1, meaning the transaction will be funded to the merchant’s account one day after the transaction occurs. However, several factors can influence the timing of the funding, such as bank holidays, weekends, and the card type (i.e., four-party vs. three-party card networks). Authorization The card transaction authorization process is dictated by the four-party card model, whereby the authorization request is sent from the merchant terminal to the acquirer, to the network and then to the issuer for an authorization decision, which is then sent via the same chain in reverse. Authorization standards are set by the card networks. Card offers authorization flexibility for merchants, whereby services such as partial authorizations and pre-authorizations are available. This is particularly helpful for use cases such as tips, recurring or subscription transactions and industries such as airlines and hotels where there are often long lead times between payment and product/service delivery.
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