Advanced Card Payments Overview Dan Kramer Senior Vice President, SHAZAM
Agenda PIN-Based Transactions Signature-Based Transactions EFT Regulations Tokenization
PIN-Based Transactions
Intra-Network PIN-Based Transaction ATM or POS Acquirer Settlement Credit Approval Authorization request and posting item EFT Network Settlement Debit Issuer
System Funding Switch fees Interchange fees Surcharges Service charges
Settlement for PIN-Based Volume $ $$$ $ $ $ $ $ $ $ $ $ $ $$$ $ $ $$$ $ $$$ $
Intra-Network ATM Transaction $25 Requested Card Issuing FI CH DDA $26.50 Cardholder $25 Dispensed ATM $1.50 surcharge Acquiring FI Approval Authorization Request Transaction Authorization Authorization Request Approval $25 + $1.50 collected from the card issuing FI Daily $25 + $1.50 paid to the acquiring FI Settlement Switch fee and interchange fee collected from the card issuing FI Monthly Billing Switch Fee Interchange fee forwarded to the acquiring FI
Inter-Network PIN-Based Transaction Settlement Credit ATM or POS Acquirer Approval Authorization request and posting item Acquirer s EFT Network (Switch) Issuer s EFT Network (Switch) Settlement Debit Issuer
Inter-Network ATM Transaction $25 Requested Card Issuing FI CH DDA $26.50 Cardholder ATM (Cirrus) $1.50 Acquiring FI surcharge Authorization Request Approval Transaction Authorization Daily Settlement $25 Dispensed Authorization Request Approval Approval $25.00 + $1.50 Settlement $25.00 + $1.50 Settlement Acquirer Processor Foreign Network Authorization Settlement, fees and data exchanged based on contract terms SHAZAM Switch Fee Interchange Fee Monthly Billing Switch Fee Cirrus Interchange Fee Cirrus Switch Fee Cirrus Interchange Fee Cirrus Switch Fee
Signature-Based Transactions
Signature-Based Transaction Merchant Acquirer Processor or Network Authorization Process: Time of purchase Posting Process: After merchant batch process Card Issuer
System Funding Discount fees Interchange passes through to issuer Remaining monies retained by acquirer, card association, network(s) and processor(s) Switch fees charged to issuer
Settlement for PIN-Based Volume $ $$$ $ $ $$$ $ Issuers $ $$$ $ Member Organizations $ $$$ $ Acquirers
Signature-Based Transaction: Time of Purchase $25 Requested Card Issuer Cardholder $25 Purchase Merchant-Cardholder making $25.00 purchase Auth Response Fees and data exchanged based on contract terms Acquiring FI Acquirer Processor Authorization Request Authorization Request Authorization Auth Response Transaction Auth Response Authorization No funds are exchanged at the time of authorization
Signature-Based Transaction: After the Purchase Card Issuer CH DDA $25.00 Merchant processes the batch to collect their money for the purchase. Average 1-3 days. Merchant-Cardholder making $25.00 purchase Discount fees Merchant DDA Interchange fees, settlement and data exchanged based on contract terms Acquiring FI Acquirer Processor $25.00 Financial Advice Financial Advice Acknowledgement Transaction Settlement $25.00 Financial Advice Financial Advice Acknowledgement $25.00 Financial Advice Interchange $25.00 $25.00 $25.00 Settlement SHAZAM Switch Fee: 1) Authorization MC/Visa Transaction fee 2) Financial Advice Month end Interchange Interchange
EFT Regulations
EFT Regulations Electronic Fund Transfer ACT (EFTA) Regulation E Durbin Amendment Regulation II
Tokenization
About Tokenization The process of replacing a high-value credential with a surrogate value for use in transactions Replaces card data (PAN) with tokens that are unusable by outsiders Static replacement of card credentials Card-present or card-not-present environment Original card data not transmitted as part of token transaction at the POS
About Tokenization Protects real card data at point of capture in a transaction Addresses potential for fraud in card-not-present scenario within online/mobile channel Token used throughout the payment chain and real PAN known only to Token Service Provider (TSP), issuer and cardholder
Tokenization Players Issuers: FIs that issue debit cards and/or credit cards to cardholders Token Requestors: authorized entities that may request and maintain tokens managed by a token service provider Token Service Providers (TSPs): generate tokens and maintain a token vault containing actual PANs and each token associated with them on behalf of an issuer Networks: payment networks that receive tokenized transactions from acquirers, interact with TSPs to decrypt tokens and pass both actual card and token data to issuers for authorization
Tokenization Scenarios ecommerce Merchant NFC and Chip Digital Wallet / HCE QR and Bar Code Merchant uses tokens instead of PANs in cardon-file database Tokenized account number in NFC or chip device Tokenized account number in the Cloud QR or bar code supplier put a bar code in front of card on file
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