Title: How does credit card processing work? Post by: COTInetwork on May 31, 2018, 10:31:36 AM https://i.imgur.com/tUi1hP1.png
While credit cards provide convenience and security to people all around the globe, there are many stakeholders involved in the process of confirming credit card transactions. These third party financial intermediaries drive up fees for merchants, although consumers are also left with the short end of the stick. Six to eight middlemen are typically involved in verifying a single transaction, each taking their cut and reducing merchant cash flows in the process. The many middlemen involved in a single transaction The transaction verification process begins when a credit card is swiped at a retail payment terminal or processed over the Internet through an online shopping cart. Such payment gateways are the first intermediary and provide merchants with the ability to accept major credit cards. A number of other middlemen are involved in verifying a transaction, including credit cards (e.g., Visa, Mastercard) and credit card issuing banks (e.g., Wells Fargo, CITI). Credit card processors, also known as acquirers, act as messengers between merchants and credit card associations. They pass along batch information and authorization requests so merchants can complete transactions. Yet another intermediary is a merchant account provider, or a company that manages credit card processing services (e.g., sales and support). From the payment gateway through to merchant account providers, each party charges its respective fees. https://i.imgur.com/CTj9Ghj.png The verification process Authorisation is the first step in transaction verification. It opens the payment gateway in order to verify the account balance and ensure that the cardholder has sufficient funds available to make the purchase. Next, funds are held in the capture step until settlement is reached. To settle a transaction, a number of banks, credit card companies and other relevant stakeholders must sync relevant transaction activity. The duration of this process can take anywhere from a few days to two weeks, which creates a strain on merchant cash flows. Transaction fees Transaction fees are typically charged to the merchant and sometimes to the cardholder. They include transaction fees, flat fees and incidental fees.
Fees vary between different credit card types. American Express usually charges higher merchant fees than Visa and Mastercard, which usually charge approximately 2%. Small businesses usually pay a higher transaction percentage in fees than high transaction volume businesses, such as department stores, major supermarket chains and large online retailers like Amazon. Fees that are commonly charged to cardholders include international transaction fees, annual fees, late payment fees and interest fees. When a cardholder swipes their credit card in a country that uses a different currency, the credit card company makes a currency conversion and the cardholder is charged in the merchant’s local currency. Additionally, the cardholder is charged an international transaction fee, which is currently 3% through Mastercard and many other credit card companies. https://i.imgur.com/OEUpSfm.png The COTI ecosystem COTI, Currency of the Internet, has developed the TrustchainTM, a unique base-level protocol which is highly scalable, extremely efficient and centered around trust. The protocol consists of FinTech application layers resting on a blockless distributed ledger, which utilises a directed acyclic graph (DAG) data structure. This DAG-based model significantly reduces both consumer and merchant fees while overcoming many of the shortfalls of traditional and digital payment systems. How does COTI save merchants fees? The COTI ecosystem has a smaller number of stakeholders and intermediaries than traditional payment systems like Visa and Mastercard, which results in low-to-zero fees. What’s more, reputable merchants exhibiting high Trust Scores incur lower fees in the COTI network. Because of COTI’s buyer-seller protection system, chargeback fees are virtually eliminated, which is also a major cost-saver for merchants. How does COTI process merchants faster than most credit card systems? COTI’s DAG-based consensus can handle 10,000 TPS, which enables instantaneous transaction confirmations. Moreover, COTI’s decentralised Mediation System can handle buyer-seller disputes more efficiently and at a low cost. As for merchant rolling reserves, they are held for at least seven days, as compared to 14–90 days with other common payment systems. For cross-border transactions, COTI’s currency exchange provides network participants with continuous access to liquid markets for streamlined digital and fiat currency exchanges. Thank you to all consumers that have registered to our whitelist. Please note that the pre-sale contribution will be on June 4–5, 2018 for whitelisted members only! The COTI community is continuously growing at a rapid rate. If you have any questions, you are welcome to get in touch with us on Telegram or viaemail. We will be providing further updates in the near future. https://i.imgur.com/uPYVcNS.png https://i.imgur.com/LDAcMgN.png https://i.imgur.com/izXBen0.png https://i.imgur.com/kzC1EMY.png https://i.imgur.com/zJIemCQ.png https://i.imgur.com/csSrUDf.png Talk with us on Telegram (https://t.me/COTInetwork) Official Facebook (https://www.facebook.com/COTInetwork/) Official Twitter (https://twitter.com/COTInetwork) Official Reddit (https://www.reddit.com/r/cotinetwork/) Official Youtube Channel (https://www.youtube.com/channel/UCl-2YzhaPnouvBtotKuM4DA) COTI Group (https://https://www.linkedin.com/company/coti-ltd/) |