Visa 2007 Annual Report Download - page 15

Table of Contents
Clearing and Settlement
Clearing occurs at the time of the authorization, for single-message transactions, or in a single daily batch message containing all transactions reported
by the acquirer, for dual-message transactions. Settlement occurs on each business day and is conducted on a net basis for all transactions submitted during
the previous settlement cycle. The following diagram illustrates the clearing and settlement process between the issuer and acquirer for a typical transaction
processed through our system.
Clearing
1. The merchant transmits sales draft information for the transaction, including account numbers and transaction amounts, to the acquirer.
2. The acquiring financial institution or its third party processor formats this information into a clearing message, which it transmits to Visa.
3. Visa routes the clearing message to the card issuer and calculates the settlement obligation of the issuer and the amount due to the acquirer, net of
certain applicable fees and charges.
Settlement
4. The issuer sends funds to Visa's designated settlement bank in the amount of its settlement obligation.
5. The settlement bank, at the direction of Visa, transfers funds due to the acquirer.
The issuer and acquirer involved in a typical Visa transaction perform additional functions that we do not generally perform or monitor. For example,
the acquirer credits the merchant's account for the amount of the transaction less any fees the acquirer charges in accordance with the contractual agreement
between the merchant and the acquirer. In addition, the issuer sends a statement to the cardholder and collects payment, in the case of a credit or deferred
debit card, or collects payment directly from the cardholder's deposit account, in the case of a debit card.
We process virtually all transactions within the United States, as well as all cross-border transactions, involving products carrying our brands. Outside
of the United States and certain other countries, we do not process the majority of the domestic transactions (i.e., transactions where the issuer and the
merchant are located in the same country) on products carrying our brands. Such transactions are generally processed by government-controlled payments
networks, our financial institution customers, independent companies or joint ventures owned in whole or in part by our financial institution customers.
We perform clearing and settlement through our VisaNet system for transactions involving an issuer that is located in Visa Europe's region and an
acquirer that is located in the rest of the world, or vice versa. In addition, we currently provide clearing and settlement services for Visa transactions occurring
entirely within Visa Europe's region and will continue to provide such services until completion of deployment of Visa Europe's own processing system. Visa
Europe authorizes transactions for its members through its own processing system.
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