Visa 2007 Annual Report Download - page 14

Table of Contents
Authorization is the process of approving or declining a transaction before a purchase is finalized or cash is disbursed. Clearing is the process of
delivering final transaction data from an acquirer to an issuer for posting to the cardholder's account, the calculation of certain fees and charges that apply to
the issuer and acquirer involved in the transaction, and the conversion of transaction amounts to the appropriate settlement currencies. Settlement is the
process of calculating, determining, reporting and transferring the net financial position of our issuers and acquirers for all transactions that are cleared.
Visa transactions can be authorized, cleared and settled either as dual-message transactions or as single-message transactions. The choice of processing
method may vary depending upon the issuer, the type of card or the region in which the transaction takes place.
• In a single-message transaction, the acquirer submits a single electronic message containing all data required for the authorization, clearing and
settlement of the transaction. Actual financial settlement occurs at a later time.
• In a dual-message transaction, the acquirer submits an electronic message at the time of purchase containing the information required for an
authorization decision and a second message at a later point in time containing additional data required for clearing and settlement.
Authorization
A typical Visa transaction begins when the cardholder presents his or her Visa card to a merchant as payment for goods or services. The transaction
information is then transmitted electronically to the issuer for authorization. In certain cases, we may authorize the transaction on behalf of the issuer through
a service known as stand-in processing, based on parameters established by the issuer. The following diagram illustrates the processing steps involved in a
typical transaction authorized through our network. In a typical Visa transaction, the authorization process by Visa occurs in approximately one second.
1. The cardholder presents the merchant with a Visa card for payment. The merchant point of sale terminal reads the account number and other data
encoded on the card's magnetic stripe or chip.
2. The merchant terminal transmits the card information and transaction amount to the acquirer.
3. The acquiring financial institution or its third party processor combines the transaction information into an authorization request message and
transmits it to Visa.
4. Visa routes the authorization request to the issuer for review. In certain circumstances, such as when the issuer's systems are unavailable, Visa
may perform stand-in processing and review and authorize or deny the transaction.
5. The issuing financial institution or its third party processor returns an authorization response message, either approving or denying the transaction
to Visa.
6. Visa routes the authorization response to the acquirer.
7. The acquirer transmits the result of the authorization request to the merchant terminal.
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