# Debit Card

<mark style="color:red;">COUNTERPARTIES</mark>

* Consumers
* Point of Interaction: Merchants or ATMs
* Acquirer Members
* Networks
* Debit Processors
* Issuer Account Processors
* Issuers

### <mark style="color:purple;">FLOWS</mark>

### <mark style="color:red;">2a: Authorization</mark>

<figure><img src="/files/RlOa6ydgrcbn55mbrhT6" alt=""><figcaption></figcaption></figure>

1. A consumer uses debit card b, which is issued by Bank B, at merchant a, where POS a is located. She/he enters a PIN.
2. POS a sends the transaction message to Bank A’s processor, to which Bank A outsources acquiring services.
3. Bank A’s processor sends the message to the online debit network that both Bank A and Bank B are members of.
4. The network forwards the message to Bank B’s processor, which does part of the transaction authorization.
5. Bank B’s processor then forwards the message to Bank B, the card issuer.
6. – 9. Bank B authorizes the transaction and posts the debit to the cardholder’s account. The decision is sent back to Bank B’s processor, the network, Bank A’s processor, and then the terminal, POS a.
7. The consumer’s purchase is completed.

### <mark style="color:red;">2b: Fees</mark>

<figure><img src="/files/XiDSu5YvZYeKR1AY5L5I" alt=""><figcaption></figcaption></figure>

```
Suppose Bank B charges a PIN fee to its cardholders.
Cardholder b is charged a PIN fee by Bank B, the card issuer. The fee is automatically debited from her/his account.
Merchant a pays a discount fee to Bank A, the acquirer.
Bank A, the acquirer, pays an interchange fee to Bank B, the card issuer. The interchange fee is set by the network.
Bank A also pays a switch fee to the network.
Bank B, the card issuer, pays a switch fee to the network.
```

### <mark style="color:red;">2c: Settlement</mark>

<figure><img src="/files/HtnHz8atwQKIIZpPaLFy" alt=""><figcaption></figcaption></figure>

1. Processors provide their customers’ (financial institutions) transaction information to the network.
2. The network calculates its members’ net positions (direct settlement) or its processors’ net positions (processor-level settlement). It, then, provides information to the network’s clearing bank.
3. The clearing bank originates ACH debit or credit entries to the network members (direct settlement) or processors (processor-level settlement).
4. The ACH operator (Federal Reserve Bank) debits and credits the Fed account of the network’s clearing bank.
5. The ACH operator (Fed) debits and credits the Fed accounts of direct settlement members or their correspondent banks (direct settlement), or the Fed accounts of the processors’ clearing banks (processor level-settlement).
6. For direct settlement, acquirers/merchant banks post credits to their merchants’ accounts.

### <mark style="color:red;">2c (cont.): Processor-level settlement</mark>

<figure><img src="/files/Q8XTgIMVFxfc35ecMg7E" alt=""><figcaption></figcaption></figure>

1. The processor calculates its customers’ (financial institutions) net positions and provides information to the processor’s clearing bank (if the processor is not a bank).
2. The clearing bank originates ACH debit or credit entries to the customers (again financial institutions).
3. The ACH operator (Federal Reserve Bank) debits and credits the Fed account of the processor’s clearing bank.
4. The ACH operator (Fed) debits and credits the Fed accounts of processor’s customers or their correspondent banks.
5. Acquirers/merchant banks post credits to their merchants’ accounts.

***

<figure><img src="/files/nBYkTWaVDUFItdk3KgxE" alt=""><figcaption></figcaption></figure>

```
DEBIT CARD TXN USER FLOW
1. Pat opens a new banking account and receives a debit card
2. Pat goes to a store to buy a pair of jeans and taps the debit card at the store’s POS terminal
3. The store’s POS terminal communicates with its acquirer processor, which is providing card acceptance and transaction processing services
4. The acquirer processor electronically forwards the transaction to a debit network, which is in communication with Pat’s issuer’s debit processor
5. The debit processor evaluates the transaction and forwards it to Pat’s issuer account processor
6. If the various transaction conditions and risk evaluations pass and funds are available, Pat’s issuer authorizes the transaction, debits Pat’s account and sends a message electronically through the issuer account processor, debit processor and network that the purchase is approved
7. The network electronically notifies the acquirer processor of the transaction approval, the approval message is sent to the merchant and Pat leaves with the jeans just purchased
8. Collectively, all these actions are completed quickly – within a few seconds
```

<figure><img src="/files/TAcfKm34r379SLh3ttdb" alt=""><figcaption></figcaption></figure>

<mark style="color:blue;">VISA DIRECT FOR WALLET FLOW</mark>\
Step 1: The sender initiates a payment using a visa direct client.\
Step 2: The Visa Direct Client processes the payment through the Visa Direct Gateway.\
Step 3: The Visa Direct Gateway connects to the Visa Payments Limited (VPL) network.\
Step 4: A network of wallet aggregators and operators on the VPL is utilized to facilitate the transaction.\
Step 5: The payment is transferred to the recipient's financial institution.

<mark style="color:blue;">VISA DIRECT FOR ACCOUNT FLOW</mark>\
Step 1: The sender initiates a payment using a visa direct client.\
Step 2: The Visa Direct Client processes the payment through the Visa Direct Gateway.\
Step 3: The Visa Direct Gateway connects to the Visa Payments Limited (VPL) banking network.\
Step 4: The local funds transfer scheme/network is utilized to identify appropriate network partners.\
Step 5: After a network partner has been identified, the payment is transferred to the recipient's financial institution.<br>

***

<figure><img src="/files/cS83pvnj2EBed7YXYrmM" alt=""><figcaption></figcaption></figure>

<figure><img src="/files/Lox1WqEOsS2M0WO42iDx" alt=""><figcaption></figcaption></figure>

<figure><img src="/files/sar35ts4ibGJkbF34Nn0" alt=""><figcaption></figcaption></figure>

<figure><img src="/files/Kr5ciCFmxWHHwE9eGQ2X" alt=""><figcaption></figcaption></figure>

<figure><img src="/files/oB2206Uh5Co4uF9dtpLr" alt=""><figcaption></figcaption></figure>

0

***

RESOURCES

[Exploring multilateral platforms for cross-border payments](https://www.bis.org/cpmi/publ/d213.pdf)

[Debit card networks 101 Fiserv](https://xft.finance/downloads/debit-networks-101-fiserv.pdf)

[BIS payment diagrams](mailto:undefined)

[A Guide to the ATM and Debit Card Industry](https://www.kansascityfed.org/documents/6674/GuideATM_DebitCardIndustry_2003.pdf)


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