1. Introduction

Visa card is a product of the Visa company. It is a worldwide accepted type of card. It is one of the methods used for doing online payment. The introduction of Visa card was in the year 1976 and the headquarters of Visa company is in California. It was established as a financial service and it has continued to operate as a financial service till today. It is traded publicly in the New York Stock Exchange as V. It is also part of Dow Jones Industrial Average. The different types of Visa card include travel Visa, student Visa, business Visa, co-branded Visa, and secured Visa. Visa can also be a type of document given by the consulate of another country which is in a person’s passport, which allows the person to travel to that country. The company known as Visa company has nothing to do with the Visa that is put in the person’s passport. Also, the Visa that is put in the passport is given by the embassy or consulate of the country which the person is planning to visit. The Visa card, as stated before, is widely accepted worldwide. It is accepted in more than two hundred territories and countries. As a matter of fact, merchants and banks in those locations can benefit from different types of transaction process and services. The acceptance of Visa card carries a stronger weight of credibility and convenience.

1.1. Definition of Visa Card Transactions

Second, for merchants, accepting Visa card (which is a form of credit card) as a payment offers vital advantages. Credit cards can help online businesses to boost their sales. This is because offering a credit payment option makes it easier for customers to buy on the spur of the moment. It also joins in the ranks of other methods that a business might use to attract customers like having an efficient e-commerce payment system or offering special discounts.

Visa credit card is undoubtedly a popular choice for consumers and businesses today for many reasons. First, a credit card helps consumers to build a sense of financial responsibility. By giving them access to funds if needed and easily keeping track of their purchases. This is important in improving an individual’s credit score. When the credit score goes up, it will affect positively on the terms of loans an individual could receive for the biggest purchases in the future such as a house or a car. The use of a credit card for everyday purchases will help individuals in three ways: tracking spending, building a credit history, and credit card rewards.

All the transactions made on an account are listed on a statement which is sent to the cardholder usually every 28 days. The statement will display the merchant’s name, the date, and the amount of each transaction. Any incorrect or suspicious transactions should be reported to the card bank instantly. Also, if the cardholder has not made a particular transaction, he does not have to pay for it until the bank has investigated the transaction.

When a Visa card is used in making payments, as soon as the cardholder’s information has been submitted, the cardholder’s information is encrypted by the Visa system and the particular card bank will be sent the transaction information through the card scheme. Any card issued by the Card Association has a unique BIN number. This is the first 6 digits of the card number. Please be aware: if a card number starts with ‘4’, it is a Visa card.

A Visa card transaction is defined as an electronic transaction that is carried out by a cardholder using a Visa card that allows a legal transfer of money from the cardholder’s account to the merchant or vendor who provided the cardholder with goods and services. All the Visa card transactions must be in accordance with the Visa International Operating Regulations, Value Added Tax law, Card Act, Computer Misuse Act, Data Protection Act, and Privacy and Electronic Communications Regulation.

Definition of Visa card transactions: Visa card is a type of credit card which a cardholder can pay for a transaction using a digital signature. Every transaction is checked either online or offline before the cardholder is able to pay. Once approved, the value of the transaction is reduced by the appropriate amount. After a number of transactions have been made, the cardholder will need to settle the outstanding amount with the credit card issuer. However, all transaction processes and the settlement must be completed through the Visa card.

1.2. Importance of Visa Card Transactions

As customers and the society in general continue to embrace a cashless culture in their transactions, the value and necessity of using Visa card payment in business is bound to rise. It is important for business owners and the persons concerned to explore the possible means of embracing this simple yet beneficial technology in line with this dynamic trend of consumer behavior through effective implementation of the relevant laws and industry standards like Payment Card Industry Data Security Standards.

Card transactions liberate businesses from time and location constraints. With the current development of online payment processing and mobile point of sale devices, businesses do not have to be confined to a particular premises. Once a business embraces the Visa card technology, it eases the process of expanding the market coverage through e-commerce and in creating convenience outlets with mobility in remote and transient places – such as kiosks, market stands, and home deliveries. Also, work schedules and manning of established outlets will be made more flexible hence efficient.

In addition, Visa card transactions help in simplifying bookkeeping and administration in a business entity. Recording and tracking individual sales made using different payment methods can be cumbersome. However, when all sales are processed onto a business account through Visa cards, a collective single record is generated showing the gross sales amount as well as the amount settled at once in respect of the card sales. This not only minimizes paperwork but also simplifies the process of accounting and record keeping in a business.

The acceptance of this payment mode is crucial to business success and growth. Today, international commerce heavily depends on the convenience of transacting using a Visa card. This is largely driven by the fact that customers are interested in making their purchases fast and efficiently. They do not want a payment process that is time-consuming and inconveniencing. By accepting this mode of payment, businesses will definitely have an upper hand in attracting and retaining customers domestically and internationally.

2. How Visa Card Transactions Work

First of all, the terminal will send the amount of the payment and some ‘transaction specific element’. This is a number that makes sure the transaction is unique – in fact, it prevents the same payment data being sent more than once. The PCD will then send on the ‘cryptogram’ which, in the context of internet and data, means a piece of information that has been encrypted and digitally signed. This cryptogram is given along with a ‘dynamic validation code’, which is a number that is unique to the specific payment attempt being made at that time.

First of all, the card and the PCD will ‘talk’ to the terminal using very short-range radio wave communications. This normally takes less than half a second and essentially establishes whether the card and the terminal are ‘happy’ with each other. They do this by swapping a selection of things, such as the account number and the language used on screen. Once this is complete, the terminal will display the amount that the customer has to pay, and the customer the chance to lock their PCD (usually requiring a fingerprint or passcode) and confirm the payment. Bear in mind that the customer could, at this stage, cancel and the whole saga would have to be unwound! However, if the customer submits the payment, then the necessary information will be sent from the card or PCD, via the terminal, to the payment processor.

In this day and age, transactions are often started on a ‘portable consumer device’ (PCD), such as a mobile phone or smartwatch. To make a payment, a customer will tap this on a ‘point of sale’ terminal – that is to say, the card reader that many of you will be familiar with in restaurants and shops. This is where the transaction kicks off, and the merchant will soon be swept up in the technical wizardry that us modern lawyers have to try and understand.

In the modern world of mobile technology, it is often easy to take the simplicity of a successful transaction for granted. After all, a customer simply taps their card or device, and within seconds a merchant will get confirmation of the payment and the money will show up in their account. However, the process behind this is somewhat complex and, importantly, not just instantaneous.

2.1. Authorization Process

Visa uses an authorization process to verify that you have enough credit or funds available before a transaction is completed. Typically, the authorization process is started when you swipe your card through a credit card terminal or enter your information into a website. Once your account information is submitted, the merchant sends the information to their payment processor. Your payment processor then routes the transaction to the applicable card network such as Visa. At the card network, the transaction is sent to the bank that issued your credit card – also called the issuer. The issuer reviews the transaction and decides whether to approve or decline the request. Once the issuer makes a decision, it sends a response back to the card network, which forwards the response to the payment processor and then back to the merchant. If the transaction is approved, your account is debited the approved amount, and a hold in the approved amount is placed on your available credit. If the transaction is declined, the process ends and you are typically notified that the transaction could not be completed. Also, if the transaction is approved but later found to be invalid, it may be charged back to the merchant. One important thing to note – not only must the transaction be approved by your card issuer, but you must have enough available credit or funds for the transaction. For example, if you have a credit limit of $1,000 and have charged $950 in purchases to your credit card account already, you have $50 in available credit. If you try to make a $75 purchase, your account will be declined because you do not have enough funds to cover the purchase. This is why it’s important to keep track of your credit card usage and know your available credit at all times!

2.2. Settlement Process

When dealing with credit card transactions, the settlement process is when the merchant actually receives the money for the transaction. This happens a day or two after the transaction is authorized during the batch settlement process. At the end of the day when a transaction takes place, it is stored in the terminal or point-of-sale system until the merchant is ready to settle the transaction. However, the settlement process does not just begin and end at the merchant’s end; it can also involve the bank that issued the merchant account and the credit card associations as well. First, the merchant turns on their point-of-sale system and sends a signal to begin the settlement process. They may also need to close the batch of transactions from the previous day. The point-of-sale system then sends a settlement request to the merchant acquirer to let them know that the merchant wants to settle their transactions. The settlement request will list the net amount of the transactions. Net amount simply means the total amount of all the sales for the day, minus the total for all the refunds for the day. The settlement amount may be different from the authorization amount for any individual sale. When a customer makes a purchase with a Visa card, the merchant presents the transaction to the merchant acquirer requesting payment through their Visa membership. The merchant acquirer then sends the settlement request and net amount to Visa, and Visa sends the net amount to the consumer’s bank, which is known as the issuing bank. In the end, this settlement process allows the merchant to receive what is owed to them from the daily credit card transactions. However, it is important to note that different types of credit card transactions, such as manual transactions or recurring billing, can have different settlement processes and any fees that might be incurred during the process can vary as well. The settlement process and fees may also vary depending on which merchant services provider a merchant uses.

2.3. Clearing Process

The next part of the process is the clearing stage, which allows the money to move from the cardholder’s account to the merchant’s account. This is also known as the settlement stage. All of the authorised transactions are stored within the terminal or the point of sale machine (the bricks and mortar credit card machine). Usually merchants will click on a button that is marked with ‘batch processing’ and at this point all of the transaction details are then sent to the acquirer bank. The process that we have described above is known as an ‘online transaction’. This is when the merchant and the issuer are connected in ‘real time,’ normally over the internet and so this is sometimes called an ‘internet transaction’. However, there are other types of credit card transactions as well, such as phone transactions (where the terminal is linked to a phone line) and the process is similar to an ‘online transaction’ as we have described above but the details are sent using a DTMF (dual tone multi frequency) line. There is also a type of credit card transaction called ‘offline’ where the card and the merchant are connected but the merchant does not have to verify the transaction there and then i.e. over an online connection. Instead in an ‘offline’ transaction, the card details are verified and stored on the card machine or terminal and the merchant will then send all of the transaction information to the acquirer bank at a later time, for example at the end of the day. In an offline transaction, the terminal will store the transaction details in what is called the ‘terminal batch’. The merchant can send the transaction details to the acquirer bank at a later point, maybe by sending the details over the internet or by first transferring them to a computer system (such as a laptop installed with some specific software). This is known as an ‘offline transaction’. However, the details are sent to the acquirer bank in the same way as an online transaction and it is usually the managed solutions provider that will support the merchant, which will be the party that will provide the merchant with the card payment technology and the system to use.

3. Types of Visa Card Transactions

Point of sale transactions – the cardholder pays for goods or services by entering their personal identification number (PIN) on an electronic terminal. These transactions are known as ‘online’ transactions, as the card is checked by the authorization system in the UK to ensure that the card has not been reported lost or stolen, and that there are enough available funds in the account. If the cardholder’s account is overdrawn, the transaction will still be authorized. This type of transaction produces a large volume of transactions. Online transactions may be used by thieves who obtain and misuse card details. Payments made at a business, such as a supermarket, fast food outlet, restaurant or petrol station will likely be point of sale transactions. Online transactions – the cardholder uses their card for the purchase of goods or services on the internet. The cardholder will also need to give the three-digit (CVV2) number from the back of the card to the seller when making an online payment. The ‘verified by Visa’ scheme provides an additional level of security for online transactions for the cardholder, because a password is required to complete the transaction. This type of transaction also produces a large volume of transactions. Contactless transactions – the cardholder uses their card to make a payment without entering their PIN. This could be by the cardholder either placing their contactless Visa card directly on to the secure reader, or by the cardholder holding their contactless Visa card within a few centimeters of the secure reader. This type of transaction is limited to a specific value and only a certain number of consecutive contactless transactions can be made before a PIN is requested. The transaction takes a fraction of a second and is known as an ‘offline’ transaction, because the transaction does not need to be checked by the authorization system.

3.1. Point of Sale Transactions

Point of sale transactions are transactions where the card is physically swiped through a card reader. They get their name from the fact that they are executed at the place where the purchase is being made, i.e. the point of sale. When the card is swiped to make the transaction, the information on the magnetic stripe is read by the shop’s card reader and is sent to the acquirer. The acquirer then sends the details and authorisation request through the Visa network to the issuer for authorisation. Once the issuer authorises the transaction, the approval is sent through the Visa network to the acquirer once more, and a receipt for the transaction is printed. However, if the amount is above the floor limit (i.e. the maximum amount above which a merchant must get authorisation to process the transaction), the receipt may only be printed if the issuer gives verbal authorisation for the transaction. Once the purchase is made, shop and store operators then take this information and combine it with other sales information for the day. This not only reduces the chance of fraud through the use of stolen cards and so on (as completed transaction details are sent to the issuer), but also helps to produce accurate sales and accounting records. Also, points given or promotions run by the shops and stores can be updated more quickly and accurately. When not enough information can be obtained from the magnetic stripe (such as a missing pin number), the cardholder may be asked to sign the receipt to confirm the transaction. This method of confirming the transaction is fading out in the United Kingdom due to increased security measures, but is still prevalent in some countries.

3.2. Online Transactions

With the beginning of electronic and internet technology in the late 1900s, online Visa card transactions have become more mainstream. Online Visa transactions are completed in two main methods, dependent on the type of online transaction: “card not present transactions” and “secure online transactions.” In a “card not present” transaction, the card details must be entered by the customer on a website, and these are authorized using the details on the Visa card. However, this type of transaction is more vulnerable to fraud and misuse by third parties. On the other hand, a “secure online transaction” is completed when the cardholder uses a security application such as Verified by Visa. This is a free application provided by Visa, however, the card issuer has to be signed up for the service. This method requires the cardholder to enter their password to confirm the online transaction; as this password is only known to the cardholder, it means that it is very secure and reliable. All these methods of online transactions rely on a process called “address verification.” This is where the information provided by the customer is checked against the information registered with the card issuer. For example, a retailer may request the house number and postcode for the customer’s billing address. If this information is incorrect, it could indicate that the transaction is fraudulent or the customer is using a stolen Visa card. This process also assists in preventing misuse of Visa card transactions by customers themselves. By providing a double layer of protection – personal information from the Visa cardholder and a further password or security measurement – it means that customers and retailers can have faith in the card’s ability to complete secure online transactions. It also ensures that the cardholder’s sensitive information is kept secure.

3.3. Contactless Transactions

Contactless transactions are made through Near Field Communication. This is a method of communication that allows communication between devices when they are placed within a few inches of each other. For Visa cards, this communication occurs when the card and the card reader make contact. No physical insertion of the card is required and the transaction is processed quicker than the online or point of sale transaction. The speed of a contactless transaction makes it one of the fastest and most convenient payment methods at the moment. Contactless technology is now commonly used in public transport systems and for purchases below a certain amount, although the exact limit varies between different banks and shops. When a contactless transaction is initiated, the reader sends the payment amount and other pertinent transaction information to the Visa card. The Visa card, in turn, sends payment confirmation back to the reader. This process is often known as the card and the reader engaging in a ‘two-way handshake’. The transaction amount limit for a typical contactless transaction is about £30 within the United Kingdom. This limit is put in place as an added security measure, so that not too many small high-value purchases could be made fraudulently without a pin being entered. The contactless technology is marketed under the brand of ‘Visa payWave’. The term ‘wave’ originates from the fact that the card only needs to be quickly waved past the reader rather than inserted or swiped on it. However, there was a recent movement to simplify the term and this explains the new ‘Contactless’ logo. All Visa contactless cards now carry this logo and merchants who accept contactless transactions will display a matching sign as well.

4. Benefits of Visa Card Transactions

Moreover, making a purchase with a Visa card is very easy. This mode of payment is universally accepted across all the seven continents. Visa Inc. partners with over twenty-one thousand financial institutions to provide services to its customers globally. The parent firm of Visa Inc. (Visa International Service Association) has global operations, and several regional subsidiaries in Europe, Asia, Africa, Latin America and the Caribbean region. This means that a customer can use a Visa card to carry out a transaction in foreign countries while on a business trip or holiday vacation. The customer only needs to check for Visa friendly destinations around the globe. After that, he or she can proceed to make a Visa transaction using a compatible currency, and without the need to convert money. On the other hand, the use of hard cash to make payments is quite cumbersome. This is because one must sort out or organize the different denominations and coins in a wallet or a purse before making a purchase. Furthermore, if the balance in a purse or a wallet is insufficient, one has to find a bank or an ATM machine to make a withdrawal. The process of using cash is quite elaborate, and it might take a customer several minutes before finalizing a transaction. However, with a Visa card, a customer does not need to make several stops to carry out a successful transaction. A customer can access Visa contactless technology by simply tapping his or her contactless-enabled card or mobile device on a secure reader at designated purchase points. The cardholder does not need to key in a Personal Identification Number (PIN), or sign the sales receipt. This form of transaction is quite fast compared to using chip, PIN and traditional magnetic stripe payment methods. Visa contactless technology is also known as ‘click and pay’ or ‘tap and go!’. This technology guarantees faster checkout times, and lesser queuing at places like fast food joints, petrol stations, parking slots and convenience stores. Organizations that accept Visa contactless payments will display a universal symbol comprised of four bold lines at the beginning headed by the Visa Electron wave emblem or logo at the bottom. Visa card customers can use this mode of payment at numerous destinations such as train stations, airports, supermarkets, motorway service stations and outlets for popular high street brands.

4.1. Convenience and Accessibility

Convenience and accessibility of Visa transactions is clear right from the start, in that users can pay for goods without having to go to the bank. Grocery stores, malls, restaurants, and almost all other types of shops and service providers accept Visa. This advantage is particularly obvious during travel to another place, whether within the country or outside the country, where different currencies may be used. Shops and other places with the facility to accept Visa are very common. As of 2009, it was reported that there were over 179 billion production tolls used all over the world. Bank’s Automated Teller Machines also can be used to withdraw funds from the bank. Most cities and towns have many of these machines, which is very convenient for Visa cardholders. This means that with a Visa card, it is possible to access some money from the bank and use it in another place or even outside the country, provided the country also uses the Visa system. Visa debit card transactions are also so fast, near doubt, that once the card is swiped and it is successfully recognized by the Visa system, the authorization is so fast that it is uncommon to wait for a long time for the transaction to be complete. Online cardholders can use the Visa global registry of service providers to see which ones are currently allowing the card to be used for shopping online. Also, Visa has introduced a new technology for easing the process of making online transactions, the Verified by Visa (VbV) service. This is a service that enables the cardholder to confirm his or her identity by using a personal password when making online transactions. VbV reduces the risk of unauthorized use of the card online; similarly, for merchants who use the service, it is possible to actively trade online and at the same time reducing the danger of fraud.

4.2. Security and Fraud Protection

Using the Visa network also offers users advanced security and fraud protection. Visa has a number of features that protect both users and merchants. On the user side of things, Visa offers a zero liability policy. This means that in the case of an unauthorized transaction, the user is not held responsible for the amount. The transaction is still investigated but the user’s account is not debited until the investigation is complete. Furthermore, Visa has an advanced anti-fraud detection system. Every single transaction is analyzed and if a transaction is deemed to be high risk, the user is prompted to provide further information. This means that, in the case of credit card fraud, the theft does not get past a certain amount and shops which supply illegal goods or services are found and prosecuted. This provides a high level of protection to legitimate merchants too. The benefits of Visa security do not just apply to the cardholder. The high level of security encourages customers to shop with confidence, which leads to increased sales for businesses. This in turn means that the merchant is more than likely to receive transactions using Visa in the future. Furthermore, Visa’s anti-fraud detection system also has the benefit of reducing the number of goods ordered using stolen credit cards, as additional user information is required to complete these high risk transactions. Fraudulent orders and chargebacks can cause serious financial damage to online shops, particularly small businesses which may not have robust fraud prevention measures in place. Therefore, the security measures offered by Visa are invaluable to merchants using the payment platform.

4.3. Rewards and Cashback Offers

To encourage consumers to make their purchases with Visa cards, many providers offer rewards and cash back offers. According to the company’s official website, a wide variety of awards can be earned by using a Visa card for everyday purchases; from travel miles and hotel points, to grocery store discounts and gasoline deals. Many cards even offer cash back in the form of statement credits, check, or payments through popular e-commerce platforms. The amount of award that can be earned depends on the specific card and what type of purchase is made with it. For example, some Visa cards offer 5% back on gas, 3% on grocery store purchases, and 1% on all other types of purchases, while other cards provide a flat (and possibly higher) cash back percentage on all transactions. Luckily for the consumers, the rewards of using a Visa card are easily obtainable. Once a consumer has legally acquired a Visa card, they can sign up for the company’s rewards and begin to reap the benefits of their smart shopping tactics. By enrolling in the “Visa Offers” program, users can earn even more benefits from specified retailers. For example, so long as a consumer shops at a particular store through an online provided link and spends the required amount of money, they will get the promised rewards from that retailer – in addition to any other awards currently in place on the chosen Visa card. This type of program helps consumers and retailers alike, as stores can draw in customers with special cash back offers, and consumers can save money through their earnings and the given advantages of their card use. By continuing to offer its consumers new and exciting benefits for using a Visa card to make everyday purchases, Visa can maintain its position as one of the leading and most preferred methods of payment.

5. Visa Card Transaction Fees

The fees paid by merchants for Visa card transactions are determined either by the type of business or how the transaction is submitted. There are three main types of fees that determine the cost to a business for accepting Visa transactions. The first is the merchant discount rate, which is what the merchant is charged for retail and e-commerce transactions when a customer pays with a Visa card. The second fee type is the interchange fee, which is paid by the merchant’s payment processor to the bank that issued the card. Interchange fees vary and are determined by the type of merchant, the size of the business, the type of card used, and how the transaction is submitted to the payment processor. Finally, there are Visa and MasterCard assessment fees, which are charged on a monthly basis to businesses that accept Visa cards. These fees are the same for all businesses and are determined by the number and type of Visa transactions processed each month. Other fees that can be applied based on either the transaction type or the ease with which the card information is provided. For example, when a payment is processed without the card present, there is usually an additional fee compared to when a chip card is used in a card reader. All of these fees amount to the merchant paying between two and three percent for every credit card sale. However, a smaller business will usually have a larger percentage deducted for fees compared to a larger enterprise. This is because the companies that manage these Visa transactions recognize that larger businesses will usually have a larger volume of card transactions, so the fees are relatively smaller to the volume of sales being made.

5.1. Merchant Discount Rate

The merchant discount rate is the rate that the acquiring bank pays to the issuing bank. In the vast majority of transactions, the merchant discount rate is comprised of an interchange fee (paid to the issuing bank to cover costs), an assessment fee (paid to Visa for use of their network), and a processing fee (paid to the acquiring bank). The total merchant discount rate can be anywhere between 0.5% to 3.0%, and this is proportioned and distributed accordingly to the issuing bank, the credit card association, and the acquiring bank. The fees themselves are expressed in terms of basis points. One basis point is equal to a hundredth of a percent, and so one percentage point is equal to 10,000 basis points. So when we say that an interchange fee is 20 basis points, that simply means 0.2%. The merchant discount rate is usually expressed as a weighted average of the interchange fees for the transactions over a certain period of time – smoothly around each month. This is because the interchange fee can vary considerably between different transactions and to different locations, so the average gives a consistent forecasting in what the total charges to the acquiring bank will be.

5.2. Interchange Fees

The second category of fees imposed on merchants are interchange fees. These are paid by acquirers to card-issuing banks (in Bankcard) in order to provide financial support for capital reserves and bad debt insurance. At the beginning of each eight-week period, Visa will calculate the interchange fee that has to be settled with each card-issuing bank based on the number and value of all Bankcard transactions attributed to the banks’ Visa cards. First, Visa determines the value of the interchange fee for each transaction by referring to the relevant category of interchange fees, which are based on the Merchant Business Type of the merchant. Then, the total interchange fee value for a particular transaction is calculated by adding together the transaction’s base value and the value of the percentage fee. The base value of a transaction can be calculated by dividing the applicable category’s base interchange fee amount by 100 and locating this proportion of the transaction’s value, rounding off to the nearest cent. The total interchange fees payable by an acquirer to an issuing bank are offset against the value of total Bankcard transactions attributed to that bank. For example, say there are a total of 1,000 transactions made with banks’ Visa cards, with a total value of $100,000. The relevant interchange fee for these transactions comes to $7,000. This means that the card-issuing bank will receive not only the revenue generated from the $100,000 worth of transactions, but also an additional $7,000 in interchange fees.

5.3. Assessment Fees

Assessment fees are another cost of accepting Visa credit and debit cards. Much like interchange fees, assessment fees are paid to Visa. The cost of these fees is set by the network, so all Visa acquirers pay the exact same rate. However, unlike interchange fees, which are paid to the card-issuing bank, assessment fees are paid directly to Visa. On your monthly statement, this fee will be listed as a separate line item from your Visa interchange fees, usually with a description like “Visa Fixed Acquirer Network Fee.” Visa charges a network assessment fee for every settlement, sale and authorization that runs on the Visa network. Every single Visa transaction has an assessment fee attached to it – you’ll notice this when you’re reviewing your monthly statement and you see a line for “credit card assessment fee” for every transaction! Also, since the assessment fee is based on sales volume and not individual transaction amounts, it’s often cheaper to do transactions in larger dollar amounts as opposed to many small transactions. The assessment fee rate will fluctuate with the global sales volume of the business, and the rates are subject to change if there is a dramatic increase or decrease in that volume. The most recent rate for assessment fees is around 0.11% of the total transaction value multiplied by the sales volume of the previous month. This means that the more you sell, the higher your potential assessment fees will be. However, since it’s a nominal value of the total processed sales volume.

6. Visa Card Transaction Processors

Visa card transactions are managed by one of the world’s top international transaction processing companies, Visa. In contrast to the three types of Visa card transactions, VisaNet doesn’t send the transaction directly to the bank that issued the card. Instead, VisaNet sends approved transactions to the correct card issuer, who then sends the transaction amount back to the merchant’s primary bank. VisaNet takes only a few seconds to run. Even though the approval process may seem involved and long, the many steps in the Visa card information processing system occur in milliseconds. All that a customer must wait for is the credit and debit card machines to print the client receipt. The faster approach is the electronic payment processing method, as it not only avoids retailers having to send their charge card terminals but may also reduce the transaction time. VisaNet has many features designed to continue executing instructions from the finished transaction and Visa card data submitted by members. Because the Visa card transaction process is completed by connecting the information from the card with VisaNet, card fraud and theft can be easily reported by the owner and the card can be prevented from being used for transactions. By constantly working with digital and IT security managers to research and prepare recommendations that help ensure the protection and integrity of Visa card and smart card internet payment transactions, VisaNet can adapt and grow with new advances in cybersecurity. VisaNet is directly connected to over 16,600 banks and financial institutions and over 1.9 billion Visa cards worldwide. Visa processed 127.3 billion transactions through VisaNet in the 2015 fiscal year, with an average of 1,721 transactions per second. Third-party payment processors may offer the services that a company needs for Visa card payment processing without requiring them to build up and maintain their own internal processing system. These services may include more than just processing card transactions; companies may also be offered options for e-commerce, mail order, or phone payment processing. By spreading the transaction out between the cardholder’s bank, the Visa card transaction processor, and the Visa card bank that issued the card, it is unlikely that a bottleneck situation will arise and slow the transaction process. The role of Visa card transaction processors is to provide the servers and hardware needed to securely and effectively handle the processing and scrutiny of large quantities of transaction information. Visa Legend and Visa DPS are two such third-party Visa card transaction processors, providing stability, security, and data management solutions. These companies have invested heavily to provide advanced features like fraud analytics and people management functionalities, in order to help companies achieve higher standards of protection for their customers and themselves when processing Visa card transactions.

6.1. VisaNet

Visa card transaction data is transmitted through the VisaNet telecommunications network to the cardholder’s bank. VisaNet is a secure, global network that provides reliable and fast transmission of financial data. The network’s main components are the data centres, which are highly secure facilities that store and process Visa card transaction data, and the telecommunications network that carries the financial messages. When a transaction is initiated, whether the cardholder is making a purchase or withdrawing funds from an ATM, the payment data is first transmitted to the merchant’s bank (the acquirer). The merchant’s bank forwards the payment data to the cardholder’s bank, which verifies the cardholder’s account and the transaction details. This process takes place in the space of a few seconds and ensures that the transaction is secure and the funds are transferred from the cardholder’s bank to the merchant’s bank. The cardholder’s bank will hold the Visa card transaction data on file, either in the bank’s own computer systems or on a server belonging to the card company. This data is vital for managing the cardholder’s account, such as authorising further transactions and issuing replacement cards if the existing card is lost or stolen. In addition, the transaction details from the bank will be sent to Visa. This is done by sending a file of the completed transactions to the VisaNet system on a regular basis. The data is transmitted over the telecommunications network to the nearest Visa data centre, where it is processed and stored. Every Visa data centre is built to withstand natural disasters and has extensive security systems to protect the cardholder and transaction data. VisaNet may be slow since it handles a large volume of transactions at any given time, making it difficult for data to be processed in real-time. To address this issue, there are plans to improve the network so that next-generation technology can be used to make Visa card transaction data processing quicker and more efficient. Visa recently announced that it has started implementing a collection of security capabilities in VisaNet which covers “end-to-end encryption, use of tokenization and specialized processing for complex payment data” with more improvements planned. This will improve security when processing Visa card transaction data and will help to develop new ways for cardholders to use Visa’s digital payments system, Visa Digital.

6.2. Third-Party Processors

The Visa card, not being issued by Visa itself, the banks and service providers offering Visa products are referred to as third-party partners. The entire process of payment after a consumer swipes a Visa card begins with a third-party provider. The third-party payment process begins when the card is swiped by the consumer, and it includes a number of financial and credit institutions such as issuing and acquiring banks, third-party processors, as well as Visa International. The cardholder initiates a payment process by swiping their card at a point of sale. The action sends a request through a retailer system to the retailer bank. The retailer bank then relays the request to the particular network of the card used, in this case, Visa. Afterwards, Visa forwards the payment system to process the payment. Visa utilizes its superior standardized fraud prevention and encryption security system to preserve the integrity of the cardholders’ information. Therefore, any transaction or communication between the retailer bank, the card networks, and the third-party processors is safe and without any incident of fraud. After the payment has been accepted by the payment gateway and the payment is authorized, a notification is sent to the retailer with a successful sale message. A diligent consumer is bound to find out that the entire transaction takes only about two to three seconds to be completed. However, the procedure is just a tip of the iceberg that involves many facets of the financial industry in a concerted effort to deliver a fast and secure means of making payments. Since there are millions of Visa cardholders and a countless number of Visa transactions, the third-party processors have to be robust and reliable enough to handle the flow and have failover mechanisms in place as backups. Every second, different third-party providers send payment details to respective payer banking accounts. The payment details are received by the respective third-party processors which check the details and forward the same to the card networks. The details are thereafter credited to the retailer’s respective account. From the above-detailed third-party payment process, the consumer, retailer, and the retailer bank are relieved of the burden of having to deal with lengthy processes.

7. Visa Card Transaction Limits

A visa balance kept by opting into the Visa Fraud Monitoring Program for business and commercial purposes cannot be used to make Visa purchases for personal, family, or household purposes. All transactions valued greater than $25,000 will require dual authorization. It might be difficult to place a Visa transaction limit as the service provider might not know the value of the most expensive transaction. It might have worked at the beginning of the relationship, but as sales increased, so did the value of the transactions. The systems approach sets transaction limits based on what is called the Merchant Category Code, and as this is not something that the service provider chooses, they have to work to these limits. The systems determine the risk posture associated with a particular type of business by looking at loss reports and anything that might suggest fraud issues with that type of business. Certain types of businesses have red flags associated with the volume and nature of the transactions. These reports are provided by the risk groups of card transaction management services. For example, a business where there is a likelihood of a high proportion of telephone payments and transactions denote a business where people have their personal details stolen by a member of staff is likely to be prohibited.

7.1. Daily Transaction Limits

The daily transaction limit is the maximum amount that can be spent using a Visa card in any single day. This applies to all types of transactions, including purchases and withdrawals. The system is designed to provide cardholders with a very high level of protection if their card is lost or stolen. When a daily transaction limit is set, it means that the card cannot be abused to spend large amounts of money before the cardholder has had a reasonable chance to contact the card provider and report the card as being lost or stolen. The daily transaction limit is set by the card provider and will vary from person to person and from card to card. However, typical values for the daily transaction limit might be in the region of £2,000. These limits will apply to the majority of cardholders and cards. Allowing for some variation in individual circumstances and the agreements reached between card providers and individual cardholders, the payment services regulations state that for the majority of card transactions, the maximum daily transaction limit is £2,000 if the card is being used for ‘distance and e-commerce sales’. If a cardholder wants a higher or lower daily transaction limit, they can request this from their card provider. However, as with increasing limits which will be subject to any necessary security checks or credit assessments, any request to decrease a daily transaction limit will generally only take effect after the current card has expired and a new card has been issued with the new limit in place.

7.2. Monthly Transaction Limits

Once a Visa cardholder has activated their Visa card, they will not be able to utilize the full credit limit assigned to their card in a single day. The Visa card daily transaction limit refers to the maximum amount of money that a Visa cardholder is allowed to spend in a single day using their Visa card. Any spending that is expected to exceed the daily transaction limit calls for the cardholder to obtain an over-the-counter Visa card transaction pre-authorization. If a Visa cardholder does not require making a very large one-off transaction that is outside their typical spending behaviors, the pre-authorization of the over-the-counter Visa card limit would be a waste of time for the bank or the processing officers. It is important to note that any payments in instances where the daily transaction limits have been exceeded will not be authorized, and this may lead to the rejection of the Visa card, suspension of the card, or a temporary block to safeguard the cardholder from unauthorized access to their funds. Different Visa cardholders are assigned different Visa card transaction limits to match their economic needs and transactions to complete within a given day. For my Visa card type, Visa Classic Debit Card, the daily transaction limit is £5,000. On the other hand, a Visa credit card can be used to process daily transactions totaling up to £30,000 in the UK. However, there is no upper limit on the amount of money that can be spent on a single transaction provided that the available balance in the prepaid Visa card is sufficient enough to cater for the transaction. Every authorized Visa card transaction, excluding contactless transactions, that is processed by participating Visa merchants will be counted on a daily basis towards the daily Visa card transaction limits. Cash advances, ATM cash withdrawals, and over-the-counter transactions are also considered. Every Visa card transaction that is processed will be timestamped, and the resultant message records including the time of the transaction and the transaction amount will be stored in the Visa card server system. This information is vital for the detection and monitoring of any unusual or fraudulent activities on any Visa card. The continuity of allotting separate Visa card transaction limits on the same Visa card on different days is an economical way of ensuring the global and day-to-day security of Visa cardholders is upheld.

8. Disputes and Chargebacks in Visa Card Transactions

Appropriately, when disputing a charge on a Visa card account, the claim may be termed a “chargeback” – the term used to describe a customer’s dispute of a charge, typically initiated by a customer’s issuing bank. In the Visa dispute process, disputes and chargebacks stem from the issuing bank’s refusal to credit a customer’s account for a charge. Every chargeback is classified according to a numeric “reason code,” denoting the grounds for the chargeback, and each reason code is described in detail in the Visa Core Rules and Visa Product and Service Rules. This aids merchants in distinguishing the reason for a chargeback and eases the fact-finding process during the chargeback process. Many reason codes are directly related to the integrity of a transaction; however, some “reason codes” provided by the Visa Core Rules and the Visa Product and Service Rules do not quite fit the description of a chargeback that stems from the issuing bank’s refusal to credit a customer’s account. For example, reason code 81 “fraud card-present environment” holds that a customer’s account is not entitled to a chargeback and that the banks should absorb and handle the discrepancies among themselves in their normal chargeback process. For a chargeback associated with reason code 81, the merchant needs to have compelling evidence that the charge was valid and that the chip or the magnetic stripe on the customer’s card was processed in a compliant and appropriate manner. Continuously, reason code 83, the “fraud-no card present” type of chargeback, provides that a customer’s account is entitled to a chargeback. This allows merchants to consider these chargebacks as legitimate, in a sense, and to take the required steps to respond to each type of chargeback effectively. Haghighi Law Firm 2500 Wilcrest Dr Houston, TX 77042 Tel: (281) 975-4751 When receiving information on a chargeback, Texas law requires merchants to provide the cardholder with all valid disclosures and notifications required by state and federal laws. Also, a person who fails to comply with the required standards for chargeback notification may be in violation of the Texas Deceptive Trade Practices Consumer Protection Act. This Act outlines the standards and requirements owed to a customer filing a chargeback.

8.1. Reasons for Disputes

When purchases have been made on a Visa card and there is a dispute between whether the consumer should be able to keep the goods or the trader should have the money, the credit card issuer will try to deal with the dispute through a process known as a chargeback. There are a number of reasons which may cause a dispute. These include: the goods were not received; the trader refused to solve the problem or give a refund and the consumer has told the credit card issuer about the problem within the relevant time limits; the amount taken by the trader was more than the amount the consumer was told would be taken, for example in cases where the consumer was required to give specific agreement to a different amount; the consumer believes that the transaction never actually took place; the consumer believes that the transaction should not have taken place. The consumer might have a dispute if, for example, the goods or services ordered were not received, the consumer cancelled an order and the trader still took money, or there has been duplicate processing, that is the amount for the goods or services was taken more than once. For those purchases that went through the Visa Electron system, chargeback issues such as ‘services not provided’ may also be given. Also, there may be specific time limits within which the consumer must tell the credit card issuer of any problems with a transaction if the consumer wants to rely on the Consumer Credit Act. The Visa chargeback makes the consumer’s issued refund even quicker.

8.2. Chargeback Process

If a transaction dispute cannot be resolved through the pre-arbitration process, the merchant’s bank may charge the merchant’s account for the disputed amount while filing a formal chargeback request. However, the merchant’s bank must commit to sending a copy of the chargeback documentation to the merchant within a specified time period, which is usually two weeks. This documentation should include the chargeback advice, sales receipt, and other necessary documents. The chargeback advice must provide the reason for the chargeback, the date of processing, the type of transaction – whether face-to-face, magnetic stripe, online, or other type – and the source of the financial loss on the cardholder’s account. Generally, there are four types of chargebacks for the various kinds of transactions, such as failure to obtain authorization, authorization obtained, the dispute is for services or merchandise, and the disputed transaction was posted to a different account. Each type of chargeback has a predefined time period for either making a chargeback request, delivering the chargeback documentation to the merchant, or accepting a chargeback. However, a chargeback for failure to obtain authorization transaction, which was made on or after 1st June 2019, must be affected within 120 days from the day the cardholder was debited. A chargeback request normally costs the merchant, but a charge which is common for most low-risk merchants is about £15, and the procedure of chargeback re-presentment requires certain costs such as fees for documentation and postage. After the necessary chargeback documentation is sent to the merchant, the merchant will be given a period of 20 days to respond to the advice by providing either a valid authorization, a sales draft, or a credit voucher before the expiry of the time limit. If the documentation is incomplete but the chargeback information is proper, the merchant’s bank may request the card scheme to extend time for re-presentment to 30 days. In the finality of the process, although the cardholder’s bank is not obligated to inform the merchant’s bank of the conclusion of the chargeback process, the merchant’s bank has an obligation to keep the merchant informed of any decision made. The merchant’s bank must provide the merchant with details about any monetary debit to the merchant’s account no later than 2 days from the day on which the merchant’s account is debited. This will give enough time for the merchant to decide whether to seek further advice from professional and independent specialist or make an application to the Financial Ombudsman Services.

9. Future Trends in Visa Card Transactions

Chapter 9 completes the investigation by looking at the future likelihood for Visa as chip and signature implementation in the US is completed and changes to a broad-ranging chip and pin system are considered. I edited the 9 is last (as yet unseen by the teacher) and so this should be borne in mind when considering possible extensions to the coursework. The rest of the general comments still apply. Decreasing Frequency of Use of Visa. Recently in the United States, the large financial institution of Chase has been embarking on a marketing campaign to persuade American Express and MasterCard customers to switch card to them, so that they can use the much more ubiquitous “Visa” card. However, with the plans for a mass implementation of the EMV (Europay, MasterCard and Visa) security standards, which involve a change from magnetic strip technology to the chip and pin system, the attractiveness and convenience of using a MasterCard or American Express card over the signature-reliant system of Visa in the States is set to decline.

9.1. Mobile Payments

One of the most interesting and promising future trends in Visa card transactions is mobile payments. Today, the possibility to pay through a mobile phone is becoming more and more popular. Many significant companies like Apple, Samsung, and Google are already gaining market share when it comes to mobile payment solutions. However, in none of these solutions, a Visa transaction happens on the basis of pushing information from the mobile phone to either contactless or traditional point of sale terminals. Rather, the mobile payment technology interacts with something called near-field communication, or NFC in short, which needs to be there both in the mobile phone and in the payment terminal. In practice, it means that mobile payments in their current state are very similar to contactless Visa card payments, the only difference being that physical card needs to be replaced by a mobile phone. Nowadays, what significantly influences adoption of mobile payment solutions are both orientation to customers and retailers and solving the problem of security. When it comes to orientation, retailers need to invest in upgrading their terminals to modern ones supporting contactless, Apple Pay, Samsung Pay, and other services. Also, the implementation of this new technology requires educating both retailers and customers what in fact mobile payments are and how to use them. On the other hand, technology advancements like introduction of one token system which minimizes the risk of exposing sensitive payment information and increasing capability of mobile devices to support different types of transactions, without compromising safety of the payment itself, create a better environment for mobile payment solutions to thrive. All in all, it is expected that it will become more and more convenient to pay with a mobile phone and eventually the process will be easier than it is today with a plastic. I definitely am a fan of this trend and I have already added my Visa debit card to Google Wallet.

9.2. Biometric Authentication

Thirdly, a major advancement in the Visa card industry is the increase and development of biometric authentication. This makes use of unique human features such as fingerprints and facial recognition. Fingerprints have been more popular than any other biometric authentication methods mainly because all smartphones and laptops have the fingerprint readers. This advancement is worth focusing on because it is increasingly transforming the way card payments are made. It is very secure; credit or debit cards can only be linked to one set of biometric data and this data is securely stored within a unique processing chip on the card. Additionally, it offers a more simple, fast and smart way to pay. This technology is very relevant in the era of Internet of Things. Since most devices are becoming more interconnected, and with the emergence of smart cars, watches and smart home systems, card payments have to keep up with this advancement. Biometric data can provide a new and innovative way to authenticate payments in the Internet of Things to make automatic payments more secure and safe. This technology is increasingly becoming available. More and more biometric systems are being adopted and Visa has been at the forefront of these changes. Visa has recently launched a project that will see customers being able to download their scanned fingerprints ready for use as an authentication mechanism for card payments. It has also been explained that facial recognition software is going to be incorporated into payment cards in the near future. This is particularly beneficial for individuals who may be physically unable to make payments using PINs or are unable to recognize their own fingerprints. Such advances provide exciting opportunities to enhance the innovation in payment systems. Biometric authentication is making a long lasting impact on the future of Visa card payments, especially in respect of security. Visa is investing into and adopting the technology required for the advancement and integration of these systems. The future of secure and easy card payments will be shaped by biometric innovation.

9.3. Blockchain Technology

Blockchain is one of the most talked about, disruptive and revolutionary technologies in the past few years. Why is its potential application to the world of Visa card transactions so important? First, you must understand what the ‘blockchain’ is and how it works. It is a form of digital ledger that uses encryption to record each and every transaction made in a chain. Each recorded piece of data, or ‘block’, is then copied to tens of thousands of independent computers, or ‘nodes’, each of which is constantly verifying the information. These blocks of transaction data are then linked together on a chain in such a way that they allow anyone to see and examine any given transaction. Because this chain is constantly updating and because all of the information about it is held on so many machines at once, there really is no chance of someone being able to come in and corrupt the record of transactions for their own means. But why link this to Visa payments? At the moment, across the world each day, Visa will process multiple times more transactions than the total number of bitcoin transactions that happen in a week. Every single one of those transactions has to be initiated by the party that wants to add to the blockchain and has to be verified by the process of linking, or ‘chaining’, that record to a node. With some 85 billion transactions a year recorded through Visa, finding a means of streamlining the verification process would have a huge beneficial impact on the speed of transactions. But more important than that is the level of security that the blockchain process can add to the Visa payment system. Given that at the moment personal details, such as a card number, still have to be used as a method of verification for many online transactions, there is a much higher risk of fraud than there would be if we could use a newer, even more secure process. Because with blockchain encryption, each transaction has to be verified by the collective of nodes on the network before it is entered onto the chain, and because all of the verification processes for every transaction ever made using the blockchain are available for scrutiny, it would be almost impossible for someone to fake a transaction and add it to the chain.

10. Conclusion

This Visa card transactions paper has considered how to design and build a system that supports secure, reliable, and rapid transaction services for Visa cards. The transaction service will provide interfaces to support both cardholder and merchants, secure transaction features, and ensure that making a transaction with a Visa card is a rapid and secure procedure. Also, the system will be designed by using the most recent technologies such as the web-based application, J2EE, STRUTS, and Oracle. The Rapid Application Development (RAD) is employed in the whole software construction, and the system has been tested by utilizing QTP as well as the black box and white box testing methods. From the report, the manager could get an idea of the environment necessary for the project, the requirement analysis for the user and system we have identified. Also, the system will be properly designed and coded by using the Java 2 Enterprise Edition (J2EE), which is the current industry standard for developing large-scale enterprise software, and the most appropriate software and hardware requirements for the development, testing, and live systems have been considered. The cardholder will use the card service to purchase goods, and the merchant system will be used by valid merchants to take payment through a Visa account. Both systems will be supported with an ongoing testing and modification regime, and regular security checks will be employed by Visa. In the future, there may be an option to expand this service to use transaction services linked to GSM mobile phones. Visa has found that many clients are now demanding alternative payment methods, especially for low-value transactions. Although existing Visa users are comfortable and familiar with the products, the retail industry has been reluctant to invest in solutions to take low-cost payments. However, the growth of Internet shopping has meant that secure future low-cost payment methods could be employed by Visa for new products. Also, as an increasing number of options in paying with a Visa card are now available (electronically, online, over the telephone, or using mobile technology), it follows that merchants for a wide range of specialist markets may demand card facilities in order to expand their customer base. This means that a Visa service which offers value and convenience for merchant and cardholder is a strong option for many businesses. The success of a merchant’s customer base will determine the competitiveness of the merchant’s products and services, and mobile payment methods featuring security comparable to the “Visa payWave” or “verified by Visa” services could offer a competitive advantage in the future. So the future expansion for Visa transaction services is positive, and a mobile-based system would offer the flexibility for a wide range of merchant services.