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Last Updated: Monday 27th July 2015 @ 20:20 pm

Electronic Payment Transactions
Message Types & Transaction Codes


Understand the Business - General Overview

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:

  • Understanding the business
    • Debit / Credit
    • ATM / POS

  • Transaction Types (MTI)
    • Authorization
    • Financial
    • Reversal
    • Others

  • Transaction Codes (from ISO8583 Field 003) – definition and examples.
    • Purchase
    • Merchandise Back
    • Cash Advance
    • Cash Back
    • Pre-Authorization
    • Completion
    • Non Currency Dispense
    • Withdrawal
    • Debit / Credit Adjustment
    • Account Funding
    • Mail Phone

  • What’s next ?
    • Mobile wallets ...


Payment Systems in Business

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.

Electronic payment transactions

Understand the business - Debit and Credit Cards

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.

Understand the business - POS / ATM

The most usual terminals used for transactions are POS and ATM.

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:

  • Withdraw,
  • Deposit,
  • Pay bills,
  • Charge mobile or Cell Phone,
  • Funds transfer,
  • Request an account balance, and
  • Statement of account.

As we can see there are different kind of actions which will need to sent specific information to the server:

  • Information about the ATM machine like Terminal Identifier.
  • Information about the transaction code (such as Withdrawal).
  • Card/Customer information.
  • Amount information.
  • Other

POS

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:

  • Purchase,
  • Cash Back,
  • Merchandise Return,
  • Adjustment and
  • Completion.

There are specific information related to the transactions done from POS:

  • Information about POS machine : type(our server is supporting a various number of types), terminal id.
  • Information about Merchant, receipt number.
  • Information about the bank where the customer is registered.
  • Information about the acquirer network.
  • Transaction details: amount, currency type …
  • Others

Message - General Description

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.

Transaction message

This picture shown above present you a general image for how a message looks.

Message Type Identifier ( MTI )


Message type indicator MTI is a four digits number.

MTI Message type indicator

For Example:

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

MTI – Message Classes (oXoo)

The most common class messages are:

Authorization (x1xx)

  • It is an approval or guarantee of funds given by the card issuer.
  • Balance.

Financial (x2xx)

  • It bills the transaction amount to the cardholders account.

Reversal (x4xx)

  • Partially or Fully nullify the effects of a previous financial or authorization transaction (modify or cancel)

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:

  • 0-ISO reserved: Messages in this class are reserved for ISO use.

  • 1-Authorization: Messages in this class are used for an authorization transaction, which is an approval or guarantee of funds given by the card issuer to the acquirer.

    Following the authorization, the transaction amount that is approved by the issuer is not immediately billed to the cardholder’s account.

    This is postponed until a financial message, which is sent by the acquirer to the issuer, confirms the completion of that transaction at the point of service, following the authorization.

  • 2-Financial: Messages in this class perform a financial transaction that directly bills the transaction amount to the cardholder’s account.

  • 3-File action messages: Messages in this class allow the initiation of a remote control transaction over the file system hosted in a device, like adding, changing, deleting, and replacing a record in a file or adding / deleting a file in the file system.

    These messages are used to perform the management of blacklists, which contain those cards that were compromised (stolen, abused through overspending, cards with compromised cryptographic material, etc.).

  • 4-Reversal/Chargeback: Reversal transactions are used to undo the effect of a previous authorization or financial transaction.

    The acquirer triggers a reversal transaction any time the result of an authorization or financial transaction is not received from the issuer in due time, or when the cardholder voluntarily cancels the authorization or financial transaction at the point of service.

    Chargeback transactions also undo the effect of a previous authorization or financial transaction, but at the initiative of the issuer.

    The reasons that the issuer can invoke for performing a chargeback transaction include a customer dispute, an infringement of rules concerning the use of a certain type of card product on a specific terminal, the use of an expired card, or an invalid transaction.

  • 5-Reconciliation,

  • 6-Administrative,

  • 7-Fee collection, and

  • 8-Network management are not explained in this presentation, but the interested reader can find their definition in the ISO 8583:1993 standard.

MTI – Message Functions (ooXo)

In this section, the purpose of the each of the messages is explained.

Authorisation Request

  • Message Type Identifier: 1100
  • Purpose: to request approval for a (bank) card originated authorisation.
  • Routing: from acquirer to issuer.


Authorisation Request Response

  • Message Type Identifier: 1110
  • Purpose: to inform the acquirer of the outcome of a request for authorisation.
  • Routing: from issuer to acquirer.


Financial Transaction Request

  • Message Type Identifier: 1200
  • Purpose: to request authorisation for a (bank) card originated transaction.
  • Routing: from acquirer to issuer.


Financial Transaction Request Response

  • Message Type Identifier: 1210
  • Purpose: to inform the acquirer of the outcome of a transaction request.
  • Routing: from issuer to acquirer.


Financial Transaction Advice

  • Message Type Identifier: 1220
  • Purpose: to notify the issuer of authorisation of a financial transaction.
  • Routing: from acquirer to issuer.


Financial Transaction Advice Response

  • Message Type Identifier: 1230
  • Purpose: to confirm receipt of a Financial Transaction Advice.
  • Routing: from issuer to acquirer.


Acquirer Reversal Advice

  • Message Type Identifier: 1420
  • Purpose: to fully or partially reverse a request for (pre-)authorisation.
  • Routing: from acquirer to issuer.


Acquirer Reversal Advice Response

  • Message Type Identifier: 1430
  • Purpose: to confirm receipt of Acquirer Reversal Advice.
  • Routing: from issuer to acquirer.


File Action Request

  • Message Type Identifier: 1304
  • Purpose: to request a file update.
  • Routing: from originating system to destination system.


File Action Request Response

  • Message Type Identifier: 1314
  • Purpose: to inform the originator of the outcome of a File Action Request.
  • Routing: from destination system to originating system.


File Action Advice

  • Message Type Identifier: 1324
  • Purpose: to advise a file update.
  • Routing: from originating system to destination system.


File Action Advice Response

  • Message Type Identifier: 1334
  • Purpose: to confirm receipt of a File Action Advice.
  • Routing: from destination system to originating system.


Network Management Request

  • Message Type Identifier: 0800
  • Purpose: to inquire about the presence of the other party.
  • Routing: between two communicating parties.


Network Management request response

  • Message Type Identifier: 0810
  • Purpose: to confirm presence to the other party.
  • Routing: between two communicating parties.


Network Management advice

  • Message Type Identifier: 0820
  • Purpose: to advice the other party to change the session status.
  • Routing: between two communicating parties.


Network Management advice response

  • Message Type Identifier: 0830
  • Purpose: to confirm a change in session status to the requesting party.
  • Routing: between two communicating parties.


Three different situations are identified:

  • Request message (xx0x)
  • Response message (xx1x)

  • Advice message (xx2x)
    • The advices can be financial or reversal.
    • The reversals are managed as advices.

  • Advice response (xx3x)
    • Receiver inform the sender that he got the advise message.

  • Notification message (xx4x)


  • The sender addresses a request message (third digit = 0) to inform the receiver that a transaction is in progress and its response is required to complete it.

  • The receiver evaluates the request and approves or denies it, transmitting back to the sender its decision in a request response message (third digit = 1).

  • The sender informs the receiver with an advice message (third digit = 2) about a certain activity that has been completed at the point of service.

  • The receiver is not required to approve or deny the advice, but it has to elaborate an advice response message (third digit = 3), which is sent back to the sender.

  • The sender informs the receiver with a notification message (third digit = 4) about a certain activity that has been performed. The notification message requires no response back from the receiver to the sender.



Store And Forward (SAF)

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.



Message Dialogue types

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:

  • Reply-expected, consisting of a Request and a Request Response message. If a Request Response message is not received (in time), this must be reported to the other party;

  • Must-confirm, consisting of an Advice and an Advice Response message. An Advice is an "isolated" message and does not require an application response.

    However, the importance of an Advice is such that the receipt must always be acknowledged by the receiver;

  • Inquiry, consisting of a Request and a Request Response message. To honour a new Request it is irrelevant to know whether the previous Request Response has been received or not.

In accordance with the dialogue type the message belongs to, a message is referred to as either "reply-expected", "inquiry" or "must-confirm" messages.



MTI Message Type Identifier - 4th digit

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.


Transaction Codes

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:

  • Digits 1&2 define the Processing Class
    • 00 - Goods and services
    • 01 - Cash withdrawal (ATM) and cash advance (EFT/POS)
    • 02 Debit - Adjustment
    • 03 Debit - Check Guarantee (funds guaranteed)
    • 04 Debit - Check Verification (funds available but not guaranteed)
    • 05 Debit - Eurocheque
    • 06 Debit - Travelers Checks
    • 07 - Letter of credit e.g. Pre-authorisation
    • 08 Debit - Giro (Postal Banking)
    • 09 Debit - Goods and Services with Cash Disbursement
    • 0A Private - Phone Top Up
    • 0B Debit - Fee Collection
    • 10 Debit - Non-cash Financial Instrument (e.g., Wire Transfer)
    • 11 Debit - Quasi-cash and Scrip
    • 14 - Load transaction for electronic purse
    • 17 - Cash advance or Fast Cash (EFT/POS)
    • 18 Debit – Private Use
    • 19 Debit – Private Use
    • 20 - Credit Card Refund or Return
    • 21 - Deposit
    • 22 Credit - Adjustment
    • 23 Credit – Check Deposit Guarantee (requires SSB)
    • 24 Credit – Check Deposit (requires SSB)
    • 28 Credit – Deposit with Cash Back
    • 29 Credit – Check Deposit with Cash Back (requires SSB)
    • 2A Funds Disbursement
    • 2B Credit – Prepaid Load
    • 30 Inquiry - Available Funds Inquiry
    • 31 - Balance Inquiry
    • 36 - Verification
    • 38 Card Verification
    • 39 Statement Print (inbound/outbound)
    • 3A Mini-Statement Inquiry Check Clear (inbound/outbound)
    • 3B Mini-Statement Inquiry Last Debit/Credit (inbound/outbound)
    • 3C Mini-Statement Inquiry Last Source (inbound/outbound)
    • 3D Mini-Statement Inquiry Last Check (inbound/outbound)
    • 3E Mini-Statement Inquiry Last Debit (inbound/outbound)
    • 3F Mini-Statement Inquiry Last Credit (inbound/outbound)
    • 3G Mini-Statement Inquiry Last Transfer (inbound/outbound)
    • 3H Inquiry – Customer Vendor
    • 3J Inquiry – Scheduled Payment
    • 3K Inquiry – Scheduled Transfer
    • 3L Inquiry – Last Payment and Transfer
    • 3M Inquiry – Scheduled Transaction
    • 3N Inquiry – Account List
    • 40 Transfer – Cardholder Accounts Transfer
    • 48 Transfer – Private Use
    • 49 Transfer – Private Use
    • 4A Transfer – Future
    • 4B Transfer – Recurring
    • 50 Payment (can include both a from and to account type)
    • 56 Payment to (only a to account is present)
    • 58 Payment Enclosed
    • 59 Payment – Private Use
    • 5A Payment – Payment Future
    • 5B Payment – Recurring
    • 7S Private Use – PIN Unblock
    • 7T Private Use – EMV Management PIN Change
    • 7U Private Use – EMV Management PIN Unblock
    • 90 PIN Change
    • 91 PIN Verify
    • 92 Private Use – Close Batch
    • 93 Private Use – Close Day
    • 94 Private Use – Close Shift
    • 95 Private Use – Batch Subtotals, Private Use – Administrative Subtotals, Private Use – Network Management Message
    • 96 Private Use – Administrative Load
    • 97 Private Use – Initial Cash
    • 98 Private Use – Add Cash
    • 99 Private Use – EMV Script Management
    • 9A Private Use – Scheduled Payment
    • 9B Private Use – Scheduled Future Payment
    • 9C Private Use – Scheduled Recurring Payment
    • 9D Private Use – Scheduled Future Transfer
    • 9E Private Use – Scheduled Recurring Transfer
    • 9F Private Use – Delete Scheduled Payment
    • 9G Private Use – Delete Scheduled Transfer
    • 9H Private Use – Change Scheduled Payment
    • 9J Private Use – Change Scheduled Transfer
    • 9K Private Use – Customer Add
    • 9L Private Use – Customer Inquiry
    • 9M Private Use – Customer Update
    • 9N Private Use – Customer Vendor Add
    • 9P Private Use – Customer Vendor Delete
    • 9Q Private Use – Customer Vendor Update
    • 9R Private Use – Master Vendor List Inquiry
    • 9S Private Use – Master Vendor Add
    • 9T Private Use – Customer Vendor Master List
    • 9U Private Use – Phone Top Up
    • 9V Private Use – Loan Application
    • 9W Private Use – Message to Bank
    • 9X Private Use – History Inquiry – All Transactions
    • 9Y Private Use – Administrative Balance Standard Cash
    • 9Z Private Use – Administrative Balance Current Cash
    • A0 Private Use – Prepaid Activation
    • A1 Private Use – Log Only
    • U* User defined. Can be any value that starts with a “U” (U0-UZ). These can include log-only transactions.

  • Digits 3&4 indicate the "Account From"
    • 00 Default - Not specified or funding
    • 10 Savings
    • 20 Checking (DDA)
    • 30 Credit
    • 38 Credit line
    • 40 Universal account
    • 50 Investment account
    • 58 CD
    • 59 IRA
    • 60 Reloadable cash card account (transfer value)
    • 67 Disposable cash card
    • 90 NOW
    • 9A Commercial loan
    • 9B Installment loan
    • 9C Mortgage loan
    • 9M Other

  • Digits 5&6 indicate the "Account To"
    • See above "Account From"


ATM – Withdrawal / Fast Cash / Mobile Top-Up

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).

ATM - Deposit

Initiates a deposit transaction. Deposit transactions can be of the following types:

  • Envelope deposit = 21 (Credit - deposit) - An unverified deposit of funds to a customer's account. This type of deposit enables the customer to deposit one or more checks or a number of bills in an envelope at a terminal.

  • Check deposit = 24 (Credit - Check deposit) - Enables the customer to deposit a check's value into an account.

  • Cash deposit = 2E (Cash deposit) - A deposit of currency to the customer's account. Note: The transaction code specified in the request message is based on the type of deposit.


ATM - Cash Advance

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.


ATM - Non-Currency Dispense

A non-currency dispense item

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

POS - Cash Back

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

POS – Purchase / Merchandise Return

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.

POS - Debit / Credit Adjustment

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:

  • Customers paying money on their in store account.
  • Service Charges or Service Charges added to accounts.


Examples of Adjustments that would decrease the balance in the cash drawer include:

  • Cash paid to suppliers out of till for stock purchases.
  • Cash taken by management for out of pocket expenses.
  • Customer Cash Outs from electronic payments.

    For example, the customer makes purchases for $20 and takes $50 in cash, and a total is billed on their bank account of $70

    Safe drops cash in excess of what is needed to make change is removed from the cash drawer and placed in a safe to reduce the chance of robbery.

  • Discounts.


POS – Pre-Authorization

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.

Examples:

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.

POS Completion

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.


Mail or Phone Order

Mail or phone order

This transaction is similar with online ones or with POS transactions. You have to give the card details:

  • Card Number
  • CVV
  • Expiration Date
  • Personal Info
  • Details about the product you pay for

  • Amount
    • One aspect is that your card is not present, you just give its details.
    • The merchant is using a software where he insert your information for transaction processing.



What’s next ?

Mobile wallet payment next?

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.

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