Single message and dual message processing systems often confuse people. It is one of those topics that is fairly easy to understand once it has been explained, but before that, it can trip up even the most assured fintech professionals.
Single message processing transmits the authorization request and clearing in one combined message, while dual message processing separates them into two messages: an authorization request followed by a separate settlement message. Choosing the right system depends on the region where you issue cards, the card networks you partner with, and your payment processing needs.
What is dual message processing?
In the UK and in some parts of Europe, a dual message system is used, meaning a card payment has two messages. There is a request and a response. First, the authorization request for authorized transactions is sent from the merchant to the card issuer. Then, the issuer responds with an authorization code or declines the transaction.
If the transaction is approved, the merchant can proceed with the actual payment capture in a separate message, usually referred to as a "capture" or "settlement" message. Thus, dual messaging.
But there is trouble afoot. Let's say a business decided to expand its operation from the UK and start issuing cards in North America, and was not aware that in the USA, messaging uses a single system. In that case, they might leave themselves open to fraudsters. Someone could make a transaction knowing a line of credit was not available, expecting the issuer to correctly refuse the transaction. But caught using an incorrect messaging system, the company might mistakenly refund their own money into the fraudster's account. They could do it again. And again. And again. Essentially emptying their accounts and profits to someone who likely expected all of this and headed to their nearest ATM.
What is single message processing?
Electronic payments are now far more mainstream than cash. The way payments are processed, going from cardholder, to merchant, to card issuer, and then payment network, is either single or dual in nature.
In single message processing, all the detail needed is carried over in one message. In the vast majority of cases, this is done by the merchant. Once sent, the message travels down from the network and hits the card issuer. Once the issuer has processed the transaction, it sends back a response to the store in the same message.
The benefits of single message processing
Ever had 4 huge shopping bags in the car? You need to take them into the house, but they are overflowing with a week's worth of groceries for a family of 4. There are tins, potatoes, cabbages and toiletries. It is heavy.
But, you have been to the gym recently and decide to carry 2 bags in each hand. It might cut the blood from your hands but you will make it quicker and not need to do two trips.
In single messaging, the benefits are much the same:
- Simplified communication. All the information needed is in a single message, meaning the communication is taken care of quicker and easier.
- Real-time authorization. Like being able to check the contents of all 4 bags in the kitchen in one go, you have real-time authorization in single messaging.
- Lower latency. Just as you save energy not making two trips to the car, you also save time in single messaging, with a reduced transaction processing time.
Drawbacks of single message processing
Once you have authorized the transaction in single messaging, there is less ability to communicate. Let's say for example, you realize the cabbage is damaged just after you buy it. Needing a refund might require a separate process.
There is also reduced flexibility in single messaging. Should you decide you would like to change or alter your system, doing so is a far more challenging process than dual.
And speaking of which...
We dual at dawn
As mentioned above, in dual messaging you get an authorization file and a clearing file. Where single messaging gets all the shopping there in one go, the steadier, more careful dual messaging takes two trips.
The authorization request is sent to the card issuer, from the merchant, and the issuer responds with an authorization code or decline. If there is not enough money in the coffers, the issuer might refuse the request. Or it might be that the card is out of date, or has been reported as stolen. Either way, the cabbage is staying where it is.
If the transaction is approved however, the store can handle the payment capture in a separate clearing and settlement message and it is cabbage soup for everyone. Rejoice.
The benefits of dual message processing
Just as you have more flexibility to get your keys out the door carrying two fewer bags from the car, so greater flexibility comes with dual messaging too:
- Post-authorization flexibility. Handle a partial refund, should just one of the cabbages have a worm wiggling through it.
- Easier reconciliation. It is far easier to track and reconcile the transactions because they take place in two parts.
- Modular updates. Should you want to update either part of your process, you can modify one without impacting the other.
Like anything in life however, it is not all sunshine and lollipops. Where single is slightly faster, so dual is slightly longer. That means a delay, and is the unhappy equivalent of not enjoying your cans of chopped tomatoes quite as quickly as you would like to. It is also a more complicated process. And that might mean you need more advanced systems in order to process them successfully.
Single vs dual message processing: Which regions use which?
If you are launching a card issuing program, you need to be worldly. You need to know which regions use which system. And you need a card issuer with the huge selling point of being able to help you handle both.
So which regions are single? And which are in happy relationships with dual messaging? Well, like many relationships in life, it is complicated.
- North America (single). This includes the USA, along with its southerly and northerly cousins Mexico and Canada respectively, though possibly for different reasons.
- European Union (mixed). Many in the EU have moved to a single model, partly driven by SEPA (Single Euro Payments Area), essentially to make things easier for others. But others in mainland Europe and the UK are dual.
- APAC (mostly single). There is a desire to get things moving quick-sharp, with Singapore and Australia both single.
- Rest of world (mostly single). Others around the world are following suit, including Brazil, South Korea, Saudi Arabia and UAE.
We did say it was complicated though.
Most companies are, or desire to be, global in today's economy. Whether you are in fintech or fish fingers, the world is getting smaller. Opening your business to those on far-flung shores makes sense.
But BINs do not work the same way in every country. And the local rules and regs make a difference. While some countries are pushing for single messaging, it does not mean neighbouring countries are, or that entire continent adoption is on the way.
So will single continue to mingle, with more countries joining the movement? Potentially. But there is nothing to say technology will not evolve even further or that fresh thinking will come to fruition by the time the UK looks up and reads the room.
Everything you need to know now for your pitch deck or program
There have been people aplenty in previous presentations who have pitched their projects and presumed they know what they are doing. You know what they say about assumptions.
Your expansion plans will not quite cut the mustard if the success of your project assumes fluency between regions running different systems, or that you can simply use your current system in a new region seamlessly.
The consequences of making this assumption involve having to fix the issue in real time, and 'plugging the dam while the gallons are gushing' so to speak. Assuming you have the capability to do so. Or can pay someone who does. Once your program goes live, it is too late.
Luckily for you however, help is at hand, whatever stage you are at. Your card program is better with Marqeta. Reach out today.
