Bank transactions - how do they work?

[telstarbox]

Can someone explain how the IT system works behind the scenes to connect a shop transaction back to your bank account?

Also I've noticed that credit card transactions take longer to show up on a statement whereas debit card ones appear almost instantly in online banking. Is that because a credit card doesn't have a finite "balance" to check against?

 

[Peter Mugridge]

Can someone explain how the IT system works behind the scenes to connect a shop transaction back to your bank account?

Also I've noticed that credit card transactions take longer to show up on a statement whereas debit card ones appear almost instantly in online banking. Is that because a credit card doesn't have a finite "balance" to check against?

Debit cards are "instant" live transactions from your bank account.

Credit cards only take the accumulated payment monthly*, not instantly, and even then not necessarily the full amount owing depending on how you are set up with it.



*Or whatever payment plan frequency you have with them. I don't use credit cards so I'm sure if anything other than monthly is even possible?

 

[JonathanP]

I used to work on the card payment processing software for a bank.

When you use a card terminal or cash machine, via the card network the issuing bank of the card receives a request to authorise the transaction. It is up to them how they choose to display this - some may show it the same as a settled transaction, some show it seperately, some may not show it at all. The connection from the card terminal to the card network can be over phone line or the internet. The connection between the bank and the card network had to be over a dedicated leased line.

The actual transfer of money from one bank to another via the card network(settlement) takes place a in a batch process later on, providing the payment wasn't cancelled in the meantime.

 

[mikeg]

I understand it's different for Maestro and v-pay cards in that they are online only and always use a single message transaction... How does this work?

 

[telstarbox]

Ok thanks

 

[EssexGonzo]

I understand it's different for Maestro and v-pay cards in that they are online only and always use a single message transaction... How does this work?

I *believe* (I’m not technical but have a banking background) that these type of cards (there was/is a Visa “lite” version too) insist upon a real time authorisation for every transaction, so the auth code provided back to the retailer will be based on a real-time query from the issuing bank account. In the case of other cards - debit and credit - the authorisation requirement was based on transaction value and type plus card type. I.e. not very single transaction interrogates a bank account in real time.

All transactions, however, are settled overnight by batch processing as already mentioned. It’s not like faster payments.