Usage of credit & debit cards have become quite common after demonetisation. Earlier people preferred to pay hard cash for transactions before demonetisation, however, now cards have replaced hard cash to a great extent. But still, you may see people making payment via cash at restaurants, malls, and other places as they feel comfortable in doing so.
Have you ever noticed words such as Visa, Master, Amex or Cirrus embossed on your debit or credit card? If you don't, then take out your card and have a look. You might be wondering what this stuff is all about?
Visa, Master, Cirrus, etc., are Financial & Payment Card companies that offer authorisation services to ensure smooth flow of transactions. In simple terms, they are financial service providers and card processing networks. Having said that, these companies do not issue any card nor they impose any fee on customers but act as a mediator between customers and banks.
Let's see the role of these service providers in the process of the transaction.
It may seem easy to swipe a card and buy goods but technically the completion of transaction involves a series of steps.
For example 'A' went to a grocery store to purchase grocery, he swipes his ICICI bank Visa card on the EDC machine of HDFC Bank, and the EDC machine generates a bill
Here: 'A' is the cardholder, ICICI Bank is the card issuer, Merchant is the shopkeeper, HDFC Bank is the acquirer, and Visa is the service provider.
So what happens exactly is, whenever a customer swipes the card on the EDC machine of HDFC bank. The machine automatically gets connected with the acquiring bank with details such as the name of the cardholder, expiry date and transaction amount (HDFC bank). The acquiring bank then contacts the network or service provider (Visa) for details. The service providers again contact issuer bank (ICICI Bank) for validation of transaction amount. If ICICI bank gives approval for the transaction then the receipt, i.e., the bill will be generated from the HDFC machine.
Customer - Merchant - Acquirer bank - Network or service provider - Issuing bank
The above process is very complicated but the entire process takes place only within seconds. These service providers play a crucial role in linking cardholders, merchants and banks. If we see the above figure one can notice that the service providers collect data related to the card such as validity, blockage part (i.e., whether the card is blocked or not), credit limit, validity, etc., and sends the data back to the acquirer bank.
It also helps the merchant to claim the sum for all transactions which took place at his outlet.
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