How To Work A Card Network - Payment

For a long time, I did not write a single article. Suddenly, I thought I should write something about the financial system because I have been working with financial companies for four years already. The concept may be old, but there are still a lot of people who do not know how it works!

First things first, in this article, we will design a “Card Network” and understand how VISA, Mastercard, JCB cards, and others work. Let’s suppose that “Vubon” is the brand name of our card network system.

Let’s break down our system into multiple parts.

1. Customer (A card holder)

2. Merchant (Service provider, e.g. Food Service, Ride Service, etc)

3. Acquirer Bank (Who provides POS machine, Payment Gateway, etc)

4. Issuer Bank ( Who provides cards to customers)

5. Vubon card Network

Customer: A customer can obtain a credit card from any issuing bank. However, if the customer wants a debit card, they should have a bank account with the same issuing bank. For instance, let’s say the customer’s name is Roy and he has a credit card with the card number 2222–3333–4444–5555.

Merchant: Let’s refer to the merchant as Pathao (which is my ex-company). Pathao is providing food services to customers.

Acquirer Bank: This bank mainly provides services such as a POS machine, payment gateway, etc.

Issuer Bank: The issuing bank primarily issues credit or debit cards on behalf of the card network company. In this case, Vubon is our card network company, and therefore all card numbers are provided by Vubon.

Vubon card network: As we have already established Vubon as a card network company, it will communicate with both the Issuing Bank and the Acquiring Bank.

Example: Roy, a Pathao customer, orders food and pays using his credit card with the number 2222–3333–4444–5555. What happens behind the scenes? Take a closer look at the diagram for some insights.

Here’s how the payment process works:
Step 1: Roy submits his card details to Pathao.
Step 2: Pathao submits the card details to the Acquirer.
Step 3: The Acquirer identifies the card brand and submits the card details to Vubon.
Step 4: Vubon identifies the Issuing Bank and requests authorization for the transaction by submitting the transaction details.
Step 5: The Issuing Bank checks Roy’s account details, including balance and limitations. If everything is in order, the card network will receive a response from the Issuing Bank. The card network will then relay this response to the Acquirer and the merchant.
Finally, Roy receives a successful response for his transaction.

So, this is a basic explanation of how a card network system works and how a card transaction is processed. In my next article, I will discuss the 3DS system. It is another mechanism that helps facilitate transaction flows.