How Electronic Payments Work
around the world billions of consumers
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choose to use electronic payments to
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make purchases when shopping in stores
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online and over mobile devices visa net
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the digital network behind visa joins
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billions of consumers tens of millions
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of merchant locations and nearly 15,000
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financial institutions worldwide in this
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video we are going to take a look behind
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the scenes of an electronic payments
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network to see how transactions are
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processed explore how all of the
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different parties involved are connected
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and review the various steps required
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for any electronic payment to occur
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let’s start out by taking a look at the
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cast of players involved in every
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transaction consumers are issued debit
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or credit cards which allow them to
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access their money or credit lines at
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numerous ATMs and make purchases at
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millions of merchants acceptance
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locations around the globe the consumers
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bank that issued the cards is known as
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the issuer the issuer will authorize the
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transaction and guarantee payment on
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behalf of the consumer merchants who
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choose to participate in the payments
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network can take advantage just a large
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consumer base along with the fast safe
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and secure transactions provided by the
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network the merchant bank is also known
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as the acquirer the acquirer provides
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access to the network for the merchants
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by authorizing their transactions and
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ensuring that the merchant receives
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payment quickly and securely and there
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is a network for Visa net that connects
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all of the parties involved in order to
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make electronic payments possible every
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electronic payments transaction can be
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divided into three steps authorization
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clearing and settlement let’s see what
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happens during a typical transaction at
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a local grocery store authorization the
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first step in the process begins at
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checkout when the consumer swipes taps
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or insert the card into the stores
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point-of-sale terminal
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once the card is read by the
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point-of-sale device a digital message
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containing the details of the
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transaction along with the consumers
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account information is sent from the
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merchant to the acquirer the acquirer
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will format the details of the
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transaction and then send the message to
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be submitted when visa net receives a
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message it will run the message through
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a series of risk and fraud prevention
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tools to ensure that the transaction is
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valid and secure the request is then
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routed to the issuer when the message is
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received the issuer will check the
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balance on the consumers account to see
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if sufficient funds are available to
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cover the total amount of the
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transaction if there is enough money in
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the account the issuer will place a hold
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on these funds and then send the message
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back to Visa met the internet will route
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the approval message to the acquirer the
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acquirer receives the details of the
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transaction and then sends the issuers
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approval to the merchant the merchant
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can now let the consumer leave with the
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groceries because the issuer has
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approved the request and guarantees
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payment to the merchant for the value of
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the goods sold this entire authorization
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process usually happens in just a matter
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of seconds as far as the consumer and
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merchants are concerned the transaction
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is now complete the consumer has the
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groceries and the merchant knows that
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the acquirer will pay them within the
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terms of their agreement but this is
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just the first step of the transaction
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process the next step is called
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clearings after the transaction is
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complete the acquirer formats the data
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and transmits the final transaction and
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cardholder details to Vita net visa not
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been sourced all transactions worldwide
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and transmits a consolidated batch file
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suit each issuer that is participating
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in the network upon receipt of the batch
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file the issuer removes the
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authorisation holes from the consumers
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account and debits the final transaction
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amount from their account balance once
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the clearing of the transactions has
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commenced the final step of the payment
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process takes place
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this step is known as settlement during
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the settlement process Ethernet
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consolidates every electronic payment
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transaction worldwide and sends
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consolidated net settlement statements
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to the participating issuers and
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acquirers funds are then transferred
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between each institution with the
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contact
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to settle all transactions that have
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occurred within a specific processing
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day at this point the process is
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complete payments have become faster and
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more secure than ever before providing a
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foundation for innovation enabling
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exciting new ways to pay and be paid
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from e-commerce to mobile
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person-to-person and beyond electronic
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payments networks are helping to pave
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the way to the future