Click on the links below for more information:
- Authorisations
- Code 10
- Online Transaction
- Offline Transaction
- Referral
- Terminal Messages
- Telephone Authorisation
- Floor Limit
- Fallback
- Refunds
- Reversal
- End of Day
- Paper Vouchers
Authorisations
When a merchant accepts a card transaction, they will seek an authorisation - from the cardholder’s issuing bank - that the transaction details that have been processed by their terminal are correct. Where a card issuer confirms that these details are accurate, the merchant will receive an authorisation and an authorisation code for that particular transaction at that time on that day.
However, even though an authorisation has been given, it only checks that there are available funds in that card account up to the value of the transaction at the time it is processed and that the card used has not been reported as lost or stolen. An authorisation does not guarantee that a transaction is not fraudulent or that it will not be charged back at a later date.
The following are some of the terms a merchant may come across when accepting card transactions and these can be fully explained by an acquiring bank.
Code 10
There may be occasions, in a face-to-face transaction when a merchant is suspicious about a cardholder, the card they are presenting, the circumstances surrounding the purchase, or an instruction is given by the terminal to call the Card Authorisation Centre (CAC). In these circumstances, a merchant can make a Code 10 call, if the merchant considers it is safe to do so, to their acquiring bank’s CAC where the operator will guide them through the next steps.
Bear in mind that even if a merchant has followed all the correct steps and been given an authorisation code by the CAC this does not guarantee payment.
Online Transaction
A terminal is said to have gone online when it dials out to connect to an acquiring bank to process a card transaction and request an authorisation. This may be because the chip on the card has told the terminal to do this, or because the transaction value is above a merchant’s agreed floor limit.
Offline Transaction
A transaction can be processed off-line where the terminal does not dial out for an authorisation. This may happen, for example, if the transaction value is below the floor limit, as agreed by an acquiring bank, for which a merchant can accept a transaction.
Referral
When a merchant is processing a card transaction their terminal may prompt them to make a manual authorisation call to the cardholder’s issuer – known as a referral. An acquiring bank’s operating instructions will guide a merchant through how to process a referral.
Terminal Messages
When a merchant is accepting a card transaction, their terminal will provide prompts on the actions they should take when processing a card transaction.
Telephone Authorisation
There may be occasions when a terminal asks a merchant to call through a card transaction for telephone authorisation. The operator will guide the merchant through what needs to happen next.
Floor Limit
A floor limit is the value of a transaction that has been agreed between a merchant and their acquiring bank above which a terminal will go online to the issuer and request an authorisation that will be either approved, and an authorisation given, or declined. Conversely, where the card transaction value is below the floor limit, the terminal can process the transaction offline, i.e. the terminal does not go online to the issuer, and stores the transaction details for transmission to the acquiring bank at a later time.
A floor limit is agreed by the acquiring bank and merchant that takes into account any card scheme rules that may be applicable and will be pre-programmed into the merchant’s terminal.
Fallback
When a merchant cannot accept a card transaction using its standard method, they can fallback to the next available method. For example, where a merchant’s terminal or PIN pad has malfunctioned or there has been a power or telephone network failure and they have to fallback and use a manual imprinter. In this case, a merchant is said to have had to ‘fallback’ to using a paper voucher. The card schemes require different ‘fallback’ actions to be taken depending on the type of card being processed.
Where a terminal has not accepted a chip and PIN card because the chip cannot be read, a merchant can ‘fallback’ to the card’s magnetic stripe and attempt to process the transaction on this basis by swiping the card.
An acquiring bank will provide details on what a merchant should do when they have to ‘fallback’ including details on which cards cannot be accepted on paper vouchers.
Refunds
There may be occasions when a merchant needs to make a refund on a card transaction for purchases made.This should only be done using the card that was used for the original transaction. When providing refunds, merchants are advised not to give a cash or cheque refund as this is a common method used by fraudsters to appropriate cash from the card.
An acquiring bank and terminal supplier will supply information on the correct procedure to use when making a refund.
Reversal
If a merchant has processed a transaction, received an authorisation and yet now wants to cancel the transaction or make a reversal – for example if they have made a mistake with the transaction amount. This can be done, but the reversal has to be the next transaction that a merchant processes after the transaction that has to be cancelled. This means a merchant cannot process a transaction for another customer and then go back to cancel a previous transaction. In this case, a merchant would have to make a refund rather than cancel the original transaction. This would mean that a merchant is processing two transactions and their acquiring bank will have negotiated how this will be charged.
End of Day
This is an action that a merchant manually performs at the end of their trading day and is at a time agreed with their acquiring bank. This specified time can be referred to as the ‘Banking Window’.
This procedure will prompt a merchant’s terminal to produce a printout showing the value of card transactions, both debit for amounts taken by a merchant and credit where they have given a refund processed during their business day. It may also show the volume and values for each card type. By performing this procedure, a merchant’s acquiring bank can collect the day’s transactions that are stored on the terminal for processing.
An acquiring bank or terminal supplier will provide instructions on how this process can be performed.
Paper Vouchers
Paper sales vouchers are used if the merchant manually completes the sales details. A merchant places a voucher into an imprinter or zip zap machine together with the customer’s card that produces a carbon copy of the card details that are embossed on the front of the card. The voucher is then handed to the cardholder for them to sign.
Where a merchant has a working terminal, they must not use paper vouchers. However, there may be occasions when a merchant has to use a paper voucher where the terminal is not working.
Processing a transaction using a paper voucher presents a greater risk that it could be charged back than if the transaction was processed online using a terminal. For example, a merchant cannot authenticate the cardholder against the chip on a chip and PIN card. A merchant will also have to carefully inspect the card’s security features to guard against a counterfeit fraud.
Paper vouchers can also be used to process card not present transactions and a merchant’s acquiring bank will advise if any special agreement is required, what the chargeback risks are and the correct processing procedures to use.
An acquiring bank will further provide details on the procedures to process and perform refunds on a paper voucher card transaction, banking these vouchers, and which cards cannot be accepted using vouchers.
