THE ANATOMY OF A TRANSACTION

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1) AUTHORISATION - AT TIME OF PURCHASE OR PAYMENT

Authorisation is the first step in processing a credit card. After a Cardholder enters their card details onto the Merchant's website or Card Payment Gateway, the data is submitted to the Merchant's bank, called an Acquirer, to request authorisation for the sale. The Acquirer then routes the request to the card-issuing bank, where it is authorised or denied, and the Merchant is allowed to process the sale.

1. The Cardholder provides account details to the Merchant.
2. Acquirer asks MasterCard/ Visa to determine the Issuer.
3. MasterCard/ Visa checks card security features and sends to the Issuer for approval.
4. Issuer approves purchase.
5. MasterCard/ Visa sends approval to the Acquirer.
6. Acquirer sends approval the Merchant.
7. Cardholder completes the purchase and receives confirmation of their order on screen and by email receipt.

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2) CLEARING - USUALLY WITHIN ONE DAY

The second step in clearing, which is the process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and the establishment of final positions for settlement.

1. Acquirer sends the purchase information to MasterCard/ Visa Card Network.
2. The Card Network clearing system validates information and sends purchase information to the Issuer, which prepares data for the Cardholder's statement.
3. The Card Network clearing system provides reconciliation to both the Acquirer and Issuer.

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3) SETTLEMENT - USUALLY WITHIN TWO DAYS

The final stage is settlement, whereby the funds are transferred into the Merchant's account and the cardholder is billed for the payment.

1. Issuer sends payment to the Card Network counter-party to settlement.
2. The Card Network counter-party to settlement sends payment to the Acquirer.
3. Acquirer pays the Merchant for the Cardholder's purchase
4. Issuer bills the Cardholder.

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GLOSSARY

1. Acquirer
   A bank that processes and settles a Merchant's credit card transactions with the help of a Card Issuer.
2. Cardholder
   The owner of a card that is used to make card purchases.
3. Card Network
   Visa, MasterCard or other networks that act as an intermediary between an Acquirer and an Issuer to authorise card transactions.
4. Issuer
   A financial institution, bank, credit union or company that issues or helps issue cards to Cardholders.
5. Merchant
   The business or organisation that is receiving the payment.