Transaction Processing

©2022 Mastercard. Proprietary and Confidential.

 Today’s Presenter

Ramy Fayed
Senior Specialist,
Implementation, IMK
Duration: 45 minutes + 15 mins Q&A
Agenda

• Four Party Model and Mastercard core systems

• Authorization Overview
• Clearing Overview
• Settlement Overview
• References
• Questions

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Mastercard Smart Authentication
The Four Party Model

Acquirer Issuer

Merchant Cardholder

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Role of Mastercard

Acquirer Issuer

Franchisor
Processor
Advisor

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 Transaction Process

Acquirer
Issuer

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System Roles - Authorization

Dual Message System – Authorization and

DMS clearing occur in two separate messages
“Authorization Messages + Clearing Messages”.

Single Message System – Authorization and

SMS clearing occur in a single message “Financial
Messages”.

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System Roles - Authorization

• Authorization platform provides:

– Access to all customers 24 hours a day, 365 days a year

– Fast and cost-effective authorization processing

– Interfaces to support non−Mastercard card processing

– Backup to primary routing and authorizing paths

– Multiple currency conversion capability

– Support of security functions

– Reporting

Dual Single
Message Message
System System

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What is Authorization?

• Authorization request: A request by an acquirer for issuer approval to complete a

transaction involving a payment card.

During authorization:

• Cardholder’s identity is verified (Cardholder Verification Method)

• Authenticity of the card is established (Cardholder Authentication Method – Offline / Online)

• Acquirer and merchant/ATM are assured that the transaction can take place

• Issuer can control cardholder spending

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Access to the network

Customers connect to Mastercard Network via MIPs

(Mastercard Interface Processor)

Mastercard
Network

MI MIP
P

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Types of
Authorization

Offline Online
Authorization Authorization

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Offline Authorization Process
Card and terminal exchange data in order to determine if:

1. The card is genuine

2. The Cardholder is genuine (if appropriate)

3. The transaction can be processed offline

The transaction is either:

• Concluded offline (approved or declined)

• Sent online to the Issuer

Allowed for EMV chip, Contactless,

and paper transactions

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Offline Authorization

• If all conditions are met, then the

transaction is APPROVED offline!

Approve

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Online Authorization
Request 0100 message

Full issuer processing

1. The acquirer receives a request for approval from the terminal or the merchant
2. The acquirer generates an authorization request message
3. The acquirer then send its to network as per the specifications
4. The authorization request must give the issuer the maximum amount of information about the
transaction, in order to make the authorization decision

©2022 Mastercard. Proprietary and Confidential.

Online Authorization
Request 0100 message

Stand-in Processing mandatory for Mastercard

In case of:
• Connectivity problems
• Technical problems
• Delayed response

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What is Clearing ? • Authorization completed successfully between Acquirer and
Issuer

Cardholde Merchant
r

Cardholder has
received ….but the merchant
goods, services or has not (yet) been
money…. paid for them!

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Clearing Basics

• Clearing is the movement of data from the customer to

Mastercard and from Mastercard to the customer.

GCMS –
Global
Clearing
Management
System

• GCMS is a centralized clearing facility owned and operated by

Mastercard for the daily processing and routing of worldwide
financial transactions between Mastercard and its customers.

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Steps in the Clearing Process

1. Submission
3.
Acquirer GCMS Notification Issuer
2. Acknowledgement

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Submission - Acquirer

• Initiates clearing process

• Provides data about
transaction in 1240/First
Presentment message 1. Submission
• Submits clearing Acquirer
messages, with a view to
being paid Customer
generated
file

GCMS

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Acknowledgement of file(s)

Customer
generated
file
Acquirer GCMS

• The Acquirer will receive acknowledgements for transactions

that successfully passed validation by GCMS
• The acknowledgements are provided for ‘groups’ of
transactions, according to the parameters defined by the
Acquirer
• Acknowledgements are not provided at individual
transaction level

• GCMS will edit the contents of all mandatory fields

• Errors are reported using the relevant error code(s)*

• Errors will lead to rejection of the file or message

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Notification of file(s)

• Issuers receives a Mastercar

Acquirer d
clearing file containing generated
file
clearing messages
from Acquirers all over GCMS
the world.
• Acquirers received
notification for Issuer
chargebacks raised by
Issuers

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 Summary

Issuer
Acquirer
Issuer

Acquirer

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Settlement
Settlement is the process by which Mastercard facilitates the
Exchange of Funds on behalf of its Customers

The Settlement Account Management (SAM) System:

✓ Calculates the customer’s daily net settlement
position
✓ Issues advisements reports
✓ Transfers orders from Monday to Friday

SAM

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Settlement Workflow

Acquirer
Advisement
s

Issuer
Transactions Totals
• International
• Domestic
GCMS SAM

Payment
Instructions Settlement
Bank

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Last Step For Issuers & Acquirers

+ -
Acquirers credit their Issuers debit their
Merchants Cardholders

Merchant Cardholder

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Failure to Settle! • Customers in a net debit settlement position must ensure
that adequate funds are transferred to the Settlement Bank
by the value date (i.e. the Settlement Account must not be in
a negative balance)
• Failure to settle in a timely manner may incur:
• Interest compensation
• Settlement non-compliance fee (see MCBS manual)
• Cost reimbursement

©2022 Mastercard. Proprietary and Confidential.

References
These manuals are available under the Technical Resource Center on
Mastercard Connect:

• Mastercard Rules
• Transaction Processing Rules
• Data Communications Manual
• Authorization Manual
• GCMS Reference Manual
• IPM Clearing Formats
• Single Message System Specifications
• Customer Interface Specification
• Single Message System Settlement and Reports
• Settlement - Implementation Quick Reference Guide
• Settlement Manual

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 Questions & Answers

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Tell a Colleague

The recorded version of this Live Event will shortly be available in the
Resource Center of Academy on the Web

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