Whether you're new to electronic payment transactions (message types & transaction codes) or just need a refresher,
you're in the right place. Get started by understanding the basics business view of how debit credit cards work.
Understanding a high-level view of the electronic payment transactions from a business case view of a debit or credit card transaction is essential for anybody wishing to work as a software developers (whether writing a C++ code in a financial industry) or necessary for all departments wishing to conduct e-business online.
You need to have an overview about the business behind electronic payment transactions and what payment systems software do to make you more easy understand it.
The interaction between acquirer and issuer (or sender and receiver) , the application, is accomplished by means of message exchange.
This web page (Electronic Payment Transactions) specifies the requirements for a sensible and unambiguous exchange of authorisation and related messages between the acquirer and issuer host systems. The message structure is based on ISO 8583.
This electronic payment transactions web page will cover the following:
The communication between terminals and bank network is done through rented lines, direct into the bank network
or through the switches (MasterCard and VISA).
Usually, the connection between ATMs, POSs and Acquirer Network are using private network. Other types of connections with acquirer network will use secure lines.
There are two kind of cards: Debit and Credit.
All of us are using them, but from the system point of view, the transactions done through them will have some parameters which are specific for debit or credit.
For example when we withdraw money from a debit or credit card (cash advance):
The fee is different between debit and credit. It doesn’t have an immediate financial impact on the CREDIT account.
On credit cards we have a credit limit, and are different types of credit cards like: Visa Silver, Gold, others.
We have to think about all of them when we process a transaction because there are parameters which need to be sent for approval of a transaction.
The most usual terminals used for transactions are POS and ATM.
The ATMs belong to a specific bank. Each bank will create it’s own network of ATMs. The bank customers will
use the services offered by the ATMs like:
As we can see there are different kind of actions which will need to sent specific information to the server:
The POS is associated, usually, with a merchant. A merchant allow its customers to pay with cards.
The banks and merchants have deals to support this.
The banks will get a fee or fix tax from the merchant (different deals), one case is for transactions volume.
Some big merchants, like Carrefour (supermarket chain), could have their own acquiring system.
The customers can use debit or credit cards. There are some specific types of transactions which can be done from POS:
There are specific information related to the transactions done from POS:
We have different talents, who plays different rolls, into the transaction system.
These talents are talking through the messages. Sometimes we have particular messages, like VISA only, and we have to translate them into a standard message, like HISO'93.
This picture shown above present you a general image for how a message looks.
Authorization messages -> 1100/ 1110
Financial Transaction messages -> 1200/ 1210/ 1220/ 1230
Acquirer Reversal messages -> 1420/ 1430
File Action messages -> 1304/ 1314/ 1324/ 1334
Network Management messages -> 0800/ 0810/ 0820/ 0830
The most common class messages are:
The other classes are not in the scope of this web page, but whoever is interested can find their definition
in the ISO 8583:1993 standard.
The messages in the classes:
In this section, the purpose of the each of the messages is explained.
Authorisation Request Response
Financial Transaction Request
Financial Transaction Request Response
Financial Transaction Advice
Financial Transaction Advice Response
Acquirer Reversal Advice
Acquirer Reversal Advice Response
File Action Request
File Action Request Response
File Action Advice
File Action Advice Response
Network Management Request
Network Management request response
Network Management advice
Network Management advice response
Three different situations are identified:
It is important to mention that there are some interdependencies between the last three digits of the
message type identifier;
For example, a reversal transaction shall use only advice messages (1420/1431 and 1430/1431) or notification messages (1440/1441).
Advice messages are not real time / non interactive, delivered using the SAF mechanism.
An advice is a notification about something that happened already, don’t need the approval or deny from receiver.
Notifications or supplementary information about the original authorization/ financial requests.
No advises from ATM devices. Advices are journalled: take into account on settlement.
Exceptions: There are interfaces which manage differently some specific cases. For example for some operators the fuel expense is processed as an advice but is not stored in SAF and sent directly to the Issuer or Switch.
Why do we need them? There are different deals between banks and switches and some acquirers or switches are allowed to approve or deny some transactions in specific contexts.
For example if the transaction is less then a specific amount (like €10 or £10 or $10 ) the acquirer is allowed by the issuer to approve it.
The case when the connectivity between Acquirer and Issuer is not available is also well defined and the acquirer could be allowed by the issuer to take some decisions (stand-in).
The acquirer will inform the issuer about these decisions using the Advise messages, and the Issuer will journalled them for settlement.
The Hosts or Network Switch interacts as a medium between Acquirer and Issuer.
The interaction is based on dialogues. A dialogue can be considered as a logical connection between two application entities and consists of the exchange of a request and response message.
A dialogue constitutes an application function.
Depending on their characteristics or functions, dialogues can be classified into dialogue types. The Message protocol recognises the following dialogue types:
In accordance with the dialogue type the message belongs to, a message is referred to as either "reply-expected", "inquiry" or "must-confirm" messages.
The fourth digit identifies the originator of a transaction and whether the
current transaction is a repeat of a previous transaction.
0: The Acquirer is the transaction originator.
1: The Acquirer is the originator of the repeated transaction.
2: The Issuer is the transaction originator.
3: The Issuer is the originator of the repeated transaction.
4: The Other role is the transaction originator.
5: The Other role is the originator of the repeated transaction.
A series of digits used to identify the type of transaction. P3 or Field 3 contains the Processing Code.
The Processing Code data element contains a series of alphanumeric characters used to describe the effect of a transaction on the customer account and the accounts affected.
This data element is mandatory for all messages except network management and file update messages
E-commerce transactions use transaction type (processing class) 00 (Goods and services) as processing code.
Transaction codes are the first two positions of the transaction processing code. Transaction codes are two-position values that identify the basic type of transaction being processed.
The Processing Code consists of the following three 2-digit sub-fields:
A withdrawal transaction debits an account from an ATM. In a simple term - to extract money from atm.
Transaction of type x200 (financial request) & Transaction Code = 01
A fast cash withdrawal is a withdrawal of a predetermined amount of money from a predefined account type.
This transaction reduces the account holder's selection process to one or two simple key entries at the ATM, decreasing the overall transaction time.
For example: When you want to withdraw money at ATM, first it offer you the possibility to choose some values (10, 20, 50, 100, 200).
Mobile Top-Up is to Buy phone minutes from the ATM. Internal transaction code = 0A (no ISO standard).
Initiates a deposit transaction. Deposit transactions can be of the following types:
A cash advance (Transaction Code = 01) is a service provided by most credit card and charge card issuers.
The service allows cardholders to withdraw cash, either through an ATM or over the counter at a bank or other financial agency, up to a certain limit. For a credit card, this will be the credit limit (or some percentage of it).
We can see “Cash Advance” as a withdrawal from a credit card. Cash advances generally incur a fee.
A non-currency dispense item is a non-currency withdrawal of a purchase at an ATM of a non-currency item.
As an example, to Buy tickets or stamps from an ATM.
This is a Transaction of type of 1220 (financial advice).
A specific parameters are: Items Quantity = how many. Item code
The best deal for the banks! Instead of creating their ATM networks ...
The customer is allowed to get cash from merchants when they are purchasing goods.
Debit card cashback (Transaction Code = 28) (known as "cash out" when using EFTPOS in Australia and New Zealand) is a service offered to retail customers whereby an amount is added to the total purchase price of a transaction paid by debit card and the customer receives that amount in cash along with the purchase.
For example, a customer purchasing £30.00 (or $30.00) worth of goods might ask for twenty pounds or dollars cashback.
They would pay a total of £50.00 or $50 (£30.00 + £20.00 or $30.00 + $20.00) with their debit card and receive £20.00 in cash along with their goods.
Tany customers find this a useful way to obtain cash, instead of making a separate trip to a cash machine.
The idea was originally come from that of British-based retail chain TESCO supermarket in order to reduce the amount of cash banking the stores needed to carry out, the customer service aspect being a side effect of this.
When accepting payment by debit card, merchants pay a fixed commission fee (as opposed to a percentage) to their bank or merchant service provider.
This is because the commission paid by the merchant for accepting debit cards, unlike credit cards, does not need to fund interest free credit or other incentives.
Accepting payments in cash can be costly for merchants, given that many British banks charge around 0.5% for depositing cash into a business bank account, along with the costs of transporting and insuring the cash. http://en.wikipedia.org/wiki/Cashback
Shop and pay by card from POS. It is a financial request (Transaction Code = 00).
Return a product to a store, because has a defect.
The merchant return money using a 1200 (financial request)(Transaction Code = 5D).
It is not used a reversal but a financial request with negative amount.
Adjustments are financial transactions that change the balance of cash in the cash drawer, but are not sales.
Adjustments can increase the amount in the cash drawer or reduce the balance in the cash drawer. This uses a TC – Debit Adjustment = 02 and TC – Credit Adjustment = 22
You can sometimes see a payment in my account which stated Debit Card Adjustment beside it, this could be a Debit Card payment you've made has been incorrectly debited and this (+positive or -negative) is a correction?
Sometimes, this could be a bounced transaction as the merchant took too long to take the money or did not process the transaction correctly causing your account to go overdrawn when you have no overdraft limit.
Examples of Adjustments that increase the balance in cash drawer would include:
Authorization transactions are used in dual message processing, where there is an authorization side and clearing
side to a transaction.
An authorization transaction only authorizes the transaction. The actual transaction debits or credits are not posted to an account until the clearing side of the transaction is received.
For credit transactions, an authorization essentially verifies that the account exists so an acquirer knows to accept the credit.
For debit transactions, an authorization guarantees the requested funds (for example, by placing them on hold), but does not post the transaction debits or credits to the customer's account until the clearing side is received.
When you buy gas the pre-authorization is used to check that you have enough money into account, if this is positive you can buy gas and this will be charged using a Force Posted (1220 – financial advise)
When you rent a hotel room an amount of money will be reserved, like the price for 1 night. When you arrive at the hotel the rest of amount will be reserved from your account.
After you lived the hotel the completion will be done. In case you did some damage in the room possible to pay more. In case some guarantee has been preserved you will pay less.
The actual amount of the purchase is entered using this transaction and the hold for the amount entered in
the pre-authorization purchase transaction is released. The transaction is then completed using the actual amount.
Following the hotel example, if you don’t have to pay the guarantee, the actual amount will be less then the hold amount.
This transaction is similar with online ones or with POS transactions. You have to give the card details:
As the technology is going on, new types of devices for payments will appear.
Mobile Wallet is a quick and easy way to make payments with cash directly from your payment mobile phone. Send money, pay bills and top-up your mobile phone in a snap.
Now more and more is talking about mobile wallet which will be a new alternative for cards.