Clearing of Internet payments

A payment resulting from Internet acquiring is essentially a regular bank clearing, but it involves several third-party companies and is based on payment card information. In the case of online businesses, it is correct to consider what is happening from an information technology perspective. So, the following servers are involved in the clearing procedure:

Merchant server (online company)
Processing centre (bank or processor)
Card scheme (VISA, MasterCard, etc.)
Issuing bank (that issued the card)
Acquiring bank (that opened the merchant account for the merchant)

The clearing technology was invented precisely to coordinate transactions between these servers. The fact is that, in addition to the difficulties due to the presence of several participants in the process, the processing of an online payment is very time-consuming (several days), therefore, it is very dangerous to carry it out in one transaction. In the event of equipment failure of any of the participants, a large number of already completed payments for huge amounts will be cancelled. In order to guarantee the completion of the entire chain of transactions, a “transaction for transactions” was invented. This complex sequence, which takes several days, is essentially the clearing procedure. Functionally, the relationship between its participants is shown in the following diagram:

For the purpose of carrying out clearing operations, a processing centre must comply with a number of requirements, a list of which is provided in the article “Setting up Payment Processing Centres”. As can be seen from the diagrams presented, payment processing is a key element in the entire payment chain. The commission charged to the “merchant” largely depends on the cost of their services. And due to the fact that one processor can work with several banks, it is generally more advantageous to cooperate with ordinary processors, rather than with bank processors, which only work “in-house”.

In case you are interested in the specifics of payment systems operation on the Internet and would like to expand your knowledge in this area, we invite you to consult with us. We will be happy to share all the necessary information with you. Please contact us.