THE TYPICAL CREDIT CARD

PAYMENT SYSTEM

Giuseppe Viceconte
Matr. num. 864896 – B61
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Cotta "La crisicard paymentdisystem
del governo partito all'italiana"

TOPICS
• Introduction
• Payment cards: types and characteristics
• How credit cards work
• The EU payment cards market
• References
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Cotta "La crisicard paymentdisystem
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Introduction
• The credit card payment is becoming more common, we use it for
any type of purchase (the bill in a restaurant, refueling) and offer
considerable advantages in terms of practicality and convenience.

• Credit cards also offer consumers an easy way to track expenses,

are accepted worldwide and are available with a large variety of
credit limits.

• This work aims to illustrate the typical credit card payment system.
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Payment cards: types and characteristics

• A payment card is a card that can be used by a cardholder and
accepted by a merchant to make a payment for a purchase.

• Typically, a payment card is electronically linked to an account; this

account may be deposit account or credit account.

• We can be distinguished the payment cards in:

▫ Credit cards: the issuer creates a line of credit for the cardholder;
▫ Debit card: the purchase funds are withdrawn directly from the bank
account;
▫ Stored-value card: a monetary value is stored on the card, and not in
an externally recorded account.
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• The main brand of credit card are represented by:

▫ Visa and MasterCard for the western market;
▫ American Express and Diners Club in the Americans;
▫ JCB and CUP (China UnionPay) in East Asia.
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How credit cards work

• The typical credit card transaction involves five parties:
▫ the merchant is any entity — a store, restaurant, online retailer, hotel,
or airline — that accepts credit card as payment.;
▫ the acquirer is a financial institution that initiates and maintains
contractual agreements with merchants for the purpose of
accepting and processing credit card transactions;
▫ the issuer is a financial institution that issues credits card for his
costumers and allows to pay for goods and services;
▫ the cardholder is any consumer or business using a credit card to
make payments;
▫ the credit card network is the brand's network with which the
credit card was agreement.
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M. typical credit
Cotta "La crisicard paymentdisystem
del governo partito all'italiana"
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M. typical credit
Cotta "La crisicard paymentdisystem
del governo partito all'italiana"

This scheme shows the anatomy of a credit card transaction:

• there is the cardholder that wants spend for a purchase on a
merchant, so he passes the credit card on a POS that generates a
transaction;

• the merchant transmits the transaction to acquirer;

• the acquirer requires an authorization to the credit card network;

• the credit card network forwards the request to the issuer;

• the issuer authorized or not the transaction according the

availability or not on the account of the cardholder.
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M. Cotta "La crisi del governo di partito all'italiana"

The EU payment cards market

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M. typical credit
Cotta "La crisicard paymentdisystem
del governo partito all'italiana"
M. Cotta "La crisi del governo di partito all'italiana"

References
• Petrulli, M. (2006), Carte di credito , Bancomat e Pos. Profili
giuridici, Operatività e tutele, Metallica, Halley Editrice.
• Trane P. (2002), Le carte di credito, Giuffrè.
• MasterCard Worldwide, What we do, Understanding Interchange,
“Interchange – Facilitating Benefits to Cardholders, Merchants and
Society”:
http://www.mastercard.com/us/company/en/whatwedo/interchan
ge.html
• Visa Italia, Accettare Visa, “Commissioni di Interscambio
(Interchange Fees) di Visa Europe”:
http://www.visaitalia.com/accettare-visa/commissioni-di-
interscambio
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• As can be seen in this graph, there is a growing use of payment

cards, credit transfers and direct debits;

• Regarding the use of checks there was a slow decline;

• I chose this topic because it's very interesting and because there is
a lot of confusion on how works a credit card;

• Much of the information I found in internet, particularly on the

website of Visa and MasterCard;
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Good morning.
My name is Giuseppe and today I'd like to give you some facts about
the typical credit card payment system.
This should only last 10 minutes and please don't hesitate to ask me
questions.
I have divided my presentation into 4 topics. They are:
• Introduction
• Payment cards: types and characteristics
• How credit cards work
• The EU payment cards market
So, let's start with a short introduction on the field of the payment
cards.
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• The idea for the birth of the credit cards was conceived in a
restaurant in New York City in 1949.
• Diners Club cofounder Frank McNamara was dining with clients and
realized he had left his wallet in another suit.
• His wife paid the tab, and McNamara thought of a multipurpose
charge card as a way to avoid similar embarrassments in the future.