The Anatomy of the Swipe

Question 1

Issuer

(key term)

Siddiqui, Ahmed. The Anatomy of the Swipe: Making Money Move (p. 26). New Degree Press. Kindle Edition.

Answer 1

An Issuer or Issuing Bank’s function is to underwrite the user by giving them a bank account, a debit card, and potentially access to credit facilities and a credit card. Examples include Citibank, Wells Fargo, US Bank, and Chase.

Question 2

Issuer Processor

(key term)

Siddiqui, Ahmed. The Anatomy of the Swipe: Making Money Move (p. 26). New Degree Press. Kindle Edition.

Answer 2

The Issuer needs a technology provider that can connect with the payment networks. Usually, the Issuer Processor will have a piece of hardware in their data centers and a fast network connection directly to the payment networks to approve or decline a transaction.

Sometimes, the Issuer may have built this technology in-house or may rely on a third-party Issuer Processor to handle this. Examples include Marqeta, Tsys, Galileo, i2c.

The decision maker - does the approve or denying of a transaction

Question 3

Merchant Acquirer

(key term)

Siddiqui, Ahmed. The Anatomy of the Swipe: Making Money Move (p. 27). New Degree Press. Kindle Edition.

Answer 3

The Merchant Acquirer goes out and acquires Merchants and provides them the tools and facilities to accept and process card-based payments. Examples include Citibank, Wells Fargo, US Bank, and Chase.

Question 4

Acquirer Processor

(key term)

Siddiqui, Ahmed. The Anatomy of the Swipe: Making Money Move (p. 27). New Degree Press. Kindle Edition.

Answer 4

The Merchant Acquirer needs a technology provider that can connect with the Payment Networks.

Usually, the Acquirer Processor will have a piece of hardware in their data centers and a fast network connection directly to the Payment Networks to request approval of a transaction.

Sometimes, the Merchant Acquirer may have built this technology in-house or may rely on a third-party Acquirer Processor to handle this. Examples include Chase Paymentech, Tabapay, and Fiserv.

requests approval

Question 5

Payment Network

(key term)

Siddiqui, Ahmed. The Anatomy of the Swipe: Making Money Move (p. 29). New Degree Press. Kindle Edition.

Answer 5

Sometimes referred to as a “Card Scheme” or just as a “Network.”

Examples of Payment Networks include Visa, Mastercard, American Express, and Discover.

These Payment Networks provide the rails for card-based transactions to occur.

They sit in between Acquirers and Issuers and pass messages back and forth to make the transaction happen.

The Payment Networks also set the communications rules and standards that the Acquirers andIssuers need to adhere to.

Question 6

What four things must exist for a card payment network to work?

Answer 6

1. A card issued by a bank
The card takes the form of either:
- physical card w/ magnetic strip/chip
- virtual (online only)
- tokenized (stored in phones wallet) ex. Apple Pay or Gpay, tap+pay

2. The Merchant’s machine to read the card (provided by Acquirer)
- this hardware is sometimes referred to as the following: card reader, card terminal, payment terminal, Point of Sale (POS)
- online merchants sometimes call this a payment gateway (software instead of hardwear)

3. The linkage between the card and card reader = Payment Network
- ex. Mastercard or Visa

4. A secure internet connection for all of these messages to transmit back + forth
- done via Ethernet or Wi-Fi (in past don eover phone lines via dial-up connections)

Question 7

What are the 5 questions the Issue Processor must confirm before approving a transaction request sent over the payments network from the Acquirer Processor?

Answer 7

1. Based on the card BIN (1st 6 #), does the user have an account at that bank?
2. Is the user’s card active?
3. Does the user’s account have enough money?
4. Is the user allowed to spend money at this Merchant?
5. Does this transxn raise fraud flags based on location, prior activity or type of Merchant?

The payment network (Mastercard) is determined by the Acquirer Processor.

Question 8

KYC process

Answer 8

Know Your Customer
- the process the Issuer uses to identify a user before issuing a checking account.

In the US, they key means of performing KYC is by getting the following pieces of info from the customer.
- name
- social security number
- date of birth
- physical address
- phone number
- drivers license, passport, government-issued ID

Done to prevent bad actors from entering the financial system. Makes sure user isn’t funding terrorist activity or participated in money laundering.