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April 3, 2020

Money Movement Overview

This guide provides an overview of how money moves through the Marqeta platform in various types of transactions. It also introduces some common payment card concepts.

You can learn more about basic payments concepts on the Payments Terminology page.

How money moves in transactions

This section provides an overview of how transaction messages and money move through common transactions.

These transactions use the standard funding model. For examples of these scenarios using Just-in-Time (JIT) Funding, see Gateway JIT Funding Scenarios.

Credit card transactions

When a cardholder makes a purchase without using a PIN, the following occurs:

  1. The merchant initiates the purchase and sends an authorization message to the card network.

  2. The card network sends an authorization message to the Marqeta platform.

  3. The Marqeta platform sends an authorization response to the card network

  4. The Marqeta platform updates the account’s ledger balance.

  5. The card network sends an authorization response to the merchant.

If the authorization was approved, the following clearing process occurs:

  1. The merchant submits a capture request to the card network.

  2. The card network sends a clearing record to the Marqeta platform.

  3. The Marqeta platform completes the transaction.

PIN debit and ATM debit transactions

A PIN debit transaction occurs when a cardholder uses their PIN at a point of sale to make a purchase.

When a cardholder makes a purchase using their PIN, the following occurs:

  1. The merchant initiates the purchase and sends a PIN debit message to the card network.

  2. The card network sends a PIN debit message to the Marqeta platform.

  3. The Marqeta platform sends a PIN debit response to the card network.

  4. The Marqeta platform updates the account’s ledger balance.

  5. The card network sends a PIN debit response to the merchant.

Withdrawing money from an ATM triggers a similar flow. When a cardholder withdraws money from an ATM, the following occurs:

  1. The ATM sends an ATM withdrawal message to the card network.

  2. The card network sends an ATM withdrawal message to the Marqeta platform.

  3. The Marqeta platform sends an ATM withdrawal response to the card network

  4. The Marqeta platform updates the account’s ledger balance.

  5. The card network sends an ATM withdrawal response to the ATM.

Refunds

When a cardholder asks a merchant to refund a prior transaction, the following occurs:

  1. The merchant initiates a refund request by sending the request to the card network.

  2. The card network sends the refund request to the Marqeta platform.

  3. The Marqeta platform updates the account’s ledger balance.

  4. The Marqeta platform completes the transaction.

Reversals

When a merchant requests a reversal, the following occurs:

  1. The merchant cancels the transaction prior to capture.

  2. The merchant sends a reversal message to the card network.

  3. The card network sends a reversal message to the Marqeta platform.

  4. The Marqeta platform updates the account’s ledger balance.

  5. The Marqeta platform completes the transaction.

Tips

A tip transaction occurs when an original authorization amount is updated with a new amount, such as when a cardholder makes a purchase at a restaurant and then adds a tip on top of the authorization amount.

When a cardholder adds a tip to the original authorization amount, the following occurs:

  1. The merchant initiates the purchase and sends an authorization message to the card network.

  2. The card network sends an authorization message to the Marqeta platform.

  3. The Marqeta platform sends an authorization response to the card network.

  4. The Marqeta platform updates the account’s ledger balance.

  5. The card network sends an authorization response to the merchant.

  6. The merchant calculates the transaction total, including the tip.

  7. The merchant submits a capture request to the card network.

  8. The card network creates a clearing record that replaces the authorization amount with the new amount that includes the tip.

  9. The card network sends the clearing record to the Marqeta platform.

  10. The Marqeta platform completes the transaction.

Automated fuel dispenser (AFD) transactions

An automated fuel dispenser (AFD) transaction occurs when a cardholder purchases fuel directly from the fuel dispenser.

When a cardholder purchases fuel from an AFD, the following occurs:

  1. Before the cardholder pumps the fuel, the merchant initiates a fuel transaction and sends an authorization request for an initial amount of money to the card network.

  2. The card network sends the authorization request to the Marqeta platform.

  3. If the authorization request is successful, the Marqeta platform sends an authorization response to the card network.

  4. The Marqeta platform updates the account’s ledger balances, placing a hold on the initially authorized amount.

  5. The cardholder pumps the fuel.

  6. The AFD sends an authorization advice message to the card network.

  7. The card network sends an authorization advice message to the Marqeta platform to update the original authorization to the final amount of the fuel purchase.

  8. The Marqeta platform updates the account’s ledger balance to the final purchase amount, releasing the hold on any amount over that final purchase total.

  9. The Marqeta platform sends an authorization advice acknowledgement to the card network.

  10. The card network receives the authorization advice acknowledgement from the Marqeta platform.

  11. The merchant submits a capture request to the card network for the final purchase amount.

  12. The card network sends a clearing record to the Marqeta platform.

  13. The Marqeta platform completes the transaction.

Concepts

This section defines some of the most common concepts relevant to payment card systems, as well as concepts specific to the Marqeta platform. An understanding of these concepts is foundational to working with the Marqeta platform.

Acquiring bank

An acquiring bank provides merchant accounts that enable legal entities to accept card payments. The acquiring bank works in conjunction with an acquirer processor. In some cases, the acquiring bank and acquirer processor are a single entity.

Acquirer processor

Acquirer processors connect with merchants, the card network, and the acquiring bank (either directly or through a payment gateway) to facilitate payment at a merchant. They provide the means to create the system of record that communicates with the authorization and settlement entities. In some cases, the acquirer processor and the acquiring bank are a single entity.

Advice

An advice message updates or amends an existing or ongoing transaction. The receiver of the advice message must send an advice response message to acknowledge receipt of the advice.

For example, a cardholder purchases fuel at an automated fuel dispenser and the initial authorization request is for $100. However, the final transaction is only for $50. In this case, the automated fuel dispenser sends an authorization advice message to the card network with the updated amount for the final sale. The card network then sends an authorization advice message to the Marqeta platform with that same updated amount. The Marqeta platform sends an authorization advice response to the card network to acknowledge the updated authorization.

Authorization

An authorization is requested by a merchant through their acquirer processor when a cardholder attempts to make a purchase. The authorization process determines three conditions about a card in a given transaction:

  • If the card is valid

  • If the card is sufficiently funded

  • If the business rules for that card are being followed

If all three conditions are met, the issuer processor authorizes the transaction and places a temporary hold on the necessary funds. A clearing transaction follows a successful authorization.

Automated Clearing House (ACH)

ACH is the primary electronic network for money movement in the United States. It automates the movement of money between banks.

Capture

Capture is the process of finalizing a successful authorization, including the initiation of a money transfer by a merchant.

Card network

A card network connects merchants to card issuers in order to approve transactions. The network connects bank computers, processors, and payment card terminals all over the world. Each network uses a proprietary encryption code that is shared only with its partners. Visa, Mastercard, and Pulse are all examples of card networks.

Card transaction types

Payment card transactions can be either single-message transactions or dual-message transactions:

  • Dual-message transactions have two stages: authorization and settlement. This is the typical credit card transaction type.

  • Single-message transactions combine authorization and settlement into a single stage. This is the typical debit card transaction type.

Note

The terms "single" and "dual" in this context refer to the minimum number of messages for the relevant type. It is common for both types to have multiple messages.

Clearing

Clearing is the process by which the acquirer processor and issuer processor exchange financial transaction details. In the clearing process, the issuer processor posts an authorized transaction to a cardholder’s account and determines the amount of money the issuing bank must send to the acquiring bank to settle the transaction.

Money does not move in the clearing process, but rather in the settlement process.

General Purpose Account (GPA)

The General Purpose Account (GPA) holds the money that cardholders access when transacting with their cards. Every user and business on the Marqeta platform has an associated GPA. Funds in a GPA are “open-loop” funds that can be used at any merchant, subject to authorization controls. Most Visa and Mastercard accounts access GPA funds.

GPA order

On the Marqeta platform, a GPA order refers to the direction of funds into the GPA of a user or business.

Issuer processor

The issuer processor connects directly with card networks and issuing banks to provide a system of record for payment card data, manage the issuance of cards, authorize transactions, and communicate with settlement entities. Marqeta is an issuer processor.

Issuing bank

The issuing bank fills three primary roles in payment processing:

  • It is a network sponsor, which means it can issue cards on a given network

  • It is a holder of prepaid funds for non-credit instruments such as gift cards

  • It is a settlement point, managing a cardholder’s account and paying out to the merchant’s account after a purchase

Just-in-Time (JIT) Funding

Just-in-Time (JIT) Funding is a method of automatically funding a GPA in real time during the transaction process.

With JIT Funding, GPAs do not need to carry a balance. Instead, the Marqeta platform automatically moves funds from your funding source into the appropriate GPA at transaction time.

Ledger

The ledger is the system of record that keeps track of credits and debits for a given account. On the Marqeta platform, each GPA has a ledger to track its credits and debits.

Ledger balance

When using standard funding, the ledger balance shows the balance that is available to spend immediately. When using JIT Funding, the ledger balance shows authorized transaction balances that are currently on hold, but not yet cleared.

Peer-to-peer transfer

A peer-to-peer transfer occurs when two users transfer money between two different accounts on the Marqeta platform. These are also known as “peer transfers.”

Refund

A refund occurs when a cardholder requests that the merchant return funds from a previous transaction after the clearing process has completed.

Reversal

A reversal occurs when a merchant cancels a transaction after the authorization succeeds, but before the clearing process begins.

Settlement

Settlement is the process by which a merchant’s bank and a cardholder’s bank exchange both financial data and money with each other.

Standard funding model

In the standard funding model on the Marqeta platform, GPAs must be funded before the account holder can perform any transactions. You must manage each account balance to avoid under-funded or over-funded accounts.

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