Visa owns and manages an efficient and reliable global processing infrastructure, VisaNet. VisaNet provides a wide range of processing services to the Visa membership, including, but not limited to, authorisationAuthorisation Authorisation This is the process of the card issuer (like Visa or Mastercard) verifying payment details and reserving the funds to capture it later. In ecommerce, in-app and point-of-sale payments, authorisation is implemented as an API call to the payment gateway. The gateway and payment processor then perform required validation and risk checks, and ask a corresponding card network to authorise this payment from an issuer to an acquirer. When a payment was authorised but hasn’t been captured yet, a merchant can also decide to cancel it for some reason (like a high risk of fraud). Note that authorisation is valid only for a limited amount of time. In case an authorised payment hasn’t been captured or cancelled, it expires after the predefined deadline is missed. routing, currency conversion, clearing, and risk management and settlement enablement. The processing services offered by VisaNet are optional at a domestic level and Members may elect to use these, or make their own provisions. In practice, due to the infrastructure and banking maturity in the CEMEA Region, many domestic transactions are conducted without the Visa net.
It is important to set out that Visa members bank are distinct legal entities incorporated under a specific legal regime of whatever country of jurisdiction they are located in. The Visa member banks have to be financial institutions and regulated by the appropriate Central bank. They have to be organised under the commercial banking laws of their equivalent of any country. Further, VIOR (Visa International Operating Regulations) requires that a Visa member has to adhere to and follow local law. While Visa lays down various requirements designed to protect the Visa mark and promote security of the system, regulation of retail banking services is determined by country of jurisdiction of the member rather than by Visa.
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- Visa lays down the minimum criteria on the terms on which Members contract with the Merchants to participate in the Visa system essentially for operational raasons and for the purpose of insuring relatively consistent acceptance procedures for consumers. The four principal requirements set down by Visa relate to:
- (a) Criteria for recruitment; (b) Honour all cards; (c) Non-discrimination (or surcharging); (d) Compliance with authorisation and other operational procedures
- Application for membership in Visa may be made by any organization that desires to participate in Visa card issuing and/or acquiring. Members have to be (i) organized under the commercial banking laws or their equivalent of any country or subdivision therefore, and authorized to accept demand deposits; or (ii) controlled by one or more organizations described above. Visa does have members who are not technically commercial banking institutions, and/or do not accept demand deposits, these include Post Offices and Insurance companies. As Visa guarantees interbank payments between members, Visa takes initial responsibility to cover any losses, which may be incurred by banks to ensure and guarantee the reliability and security of the system to merchants and cardholders
- The CAMELS approach is used as the global standard for due diligence.
- There are eight classes of membership: Principal, Associate, Participant, Merchant Bank, Cheque IssuerIssuer Issuer (or Issuing bank) A bank that issued a card for a shopper to make cashless payments via an ecommerce website, inside a mobile app, or in a physical store. To be able to issue a card, an issuer must be a member of one or several card networks. Sometimes a shopper’s bank is referred to as an issuer even if there is no card issued. This is to distinguish between a shopper’s bank, which sends funds, and a merchant’s bank, which acquires funds. (this relates to travellers cheques only), Plus Programme Participant, Interlink Programme Participant and Cash Disbursement Member.
- A Principal Member may issue cards and acquire merchants (subject to Visa licensing). It may also carry out all the activities associated therewith (e.g. providing an authorisation service, interchanging vouchers and so on). The Principal can undertake these functions directly or by contact with other Members. The processing functions can also be contracted to third parties
- An Associate must be sponsored by a Principal. It can then carry out all the functions of a Principal subject to its written agreement with its sponsor. Visa International requires the sponsoring Principal to give a standard-form of undertaking to Visa International accepting full responsibility for compliance with all Visa rules and regulations by its Associate Members.
- A Participant must be sponsored by a Principal. It can then assist the sponsor in performing its functions. . Visa International requires the sponsoring Principal to give a standard-form of undertaking to Visa International accepting full responsibility for compliance with all Visa rules and regulations by its Participant Members. However, a Participant cannot enter into direct contractual relationship with cardholders or merchants.
- Visa net: VisaNet consists of “hubs, which are switching and data processing centres where Visa’s computer servers are situated. VisaNet is used for payment card (i) authorization and switching worldwide and (ii) for settlement and clearing operations between member financial institutions. There are four hubs worldwide; two in the United States of America, one in England and one in Japan. Each hub backs up the others. Members in that region can connect to this hub through a network of leased lines terminating with equipment called the VisaNet Access Point (“VAP”) at member’s sites.
- VisaNet provides the network to facilitate the: (a) authorization and switching; and (b) clearing and settlementCapture Capture (or Clearing and settlement) A payment that has been authorised by the payment processor must be captured to be completed. Capturing is the act of transferring the reserved funds from the shopper to the merchant. By default, payments are captured automatically, immediately after authorisation. Many payment methods support separate authorisation and capture. This means as a merchant you can set up a capture delay; capture payments manually; perform partial captures; or cancel an authorisation. for both domestic and international transactions; generally; unless the Issuing Member and the Acquiring Member are the same financial institution and are located within the same country or, in certain limited other cases.
In addition to principal membership with Visa and MasterCard, there are acquiring/licensing contracts with American Express, China UnionPay, Diners Club, Discover and JCB. Bank services such as currency management complement the outsourcing of financial processes.