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What does blocking Visa and MasterCard mean – the principle of operation and connection with SWIFT: is there a risk of people losing money

What does blocking Visa and MasterCard mean – the principle of operation and connection with SWIFT: is there a risk of people losing money

Is SWIFT with the popular Visa and MasterCard payment systems, which also, from time to time, Americans and Europeans, are threatened with blocking?

SWIFT has no connection and direct relation to the international payment systems (IPS) Visa and MasterCard. SWIFT blocking cannot affect their performance in any way, since processing (processing and transmission of information) is used directly in settlements between banks IPU Visa/ MasterCard.

SWIFT and Visa/MasterCard are different things.

How Visa/MasterCard works

The Visa International Payment System (IPS), like MasterCard, performs in all settlement operations (using its cards) only the processing function – the procedure for processing data necessary for carrying out a financial transaction (transferring funds from one account to another) between banks. So to speak, an automated software procedure for checking and confirming transfers. All other actions for crediting and debiting, based on this information, are already carried out by the banks themselves.

Here is an example and an algorithm for calculating with Visa / MasterCard cards when buying goods in a store.

The equipment that is used to accept payments is called a POS terminal (this is a terminal at the checkout of a store / ATM / online service of an online store).

Visa-MasterCard-banks interaction scheme when paying for purchases in the store

When paying for purchases, the bank card holder confirms the operation, and the acquirer (the bank that issued the terminal to the store - the acquiring bank) reads the information from it and sends a request to the processing center (in this case Visa / MasterCard).

The center processes the request and, if it finds such a card in the system, transmits the information to the issuer (the bank that issued the card to you).

The issuer checks the status of the balance on the card account and, if there is a sufficient amount of funds, blocks (reserves) it contains the required amount and transmits the corresponding request through the processing center (the same Visa / MasterCard) to the acquiring bank.

For reference:

When the buyer makes a purchase, the acquiring bank holds the money in its merchant account ("temporary" merchant account of the store) before transferring it to the settlement account of the store itself directly to its bank. If there are any refunds or cancellations related to the transaction, they will be deducted from the merchant account before the money is transferred.

Merchant account is a bank account used to accept non-cash payments on payment cards of Visa, MasterCard and other issuers.

Further, the acquiring bank confirms the fact of payment and informs the cardholder and the store where the purchase was made.

All this operation takes a few seconds - within the time you insert the card into the terminal and receive a receipt for the operation performed.

At the end of the day, a list of completed payment transactions is created, which is transmitted through the acquiring bank to the processing center (Visa/MasterCard). The latter forms a register of payments and provides messages to issuing banks (cardholders), acquiring banks (which serve them) and a clearing center. Based on this message, the clearing center sends a request to the issuer, who writes off the payment amount (from the card account of the cardholder who made the purchase) and through processing transfers it to the acquiring bank, and the acquiring bank to the organization (store) in which the purchase was made.

For reference:

The same bank can be both an issuer and an acquirer.

Settlement and clearing centers are being created for interaction between different banks. To carry out the relevant operations, all these organizations need equipment and permission from the payment system.

The acquirer and the issuer inform their clients about successful transactions.

For using Visa /MasterCard processing, the acquiring bank incurs costs in the form of a certain percentage of the transactions carried out. Therefore, it is not difficult to guess why sometimes when withdrawing money from someone else's ATM, the acquirer takes a certain commission.

Similarly, transfers between cardholders and cash withdrawals at ATMs are organized.

Now all these operations are carried out in real time and are fully automated. It may take from a few seconds to one day from the moment of the request for payment to the debiting of funds.

What does blocking or disabling Visa/MasterCard in Russia and Belarus mean - is there a risk of people losing money

The possible blocking of Visa or MasterCard IPS for certain countries (in particular Belarus and Russia) involves only disconnecting them from the payment processing process itself, which is the brainchild of Visa/MasterCard.

This means that it will be impossible to transfer money within the framework of this algorithm, where their transfer/payment accounting program (processing) is involved, both within the country and abroad.

It is also necessary to understand that if Visa or MasterCard is blocked, Apple Pay, Google Pay and other similar foreign services, which are essentially acquirers for Visa and MasterCard, will most likely stop working.

This will not affect the balances of funds held on Visa and MasterCard cards in any way.

bank card - money access tool

It should be understood that a bank card is only a tool for accessing the money that is in your account. Blocking this tool does not mean that people will lose money. They will lose the opportunity to use their money with this tool.

In any case, money can be withdrawn either through the bank's cash desk or through its ATM/terminal (although through another processing center, for example, through the national payment card system).

The main issue is that the bank itself should be able to issue them taking into account its current solvency (sufficiency of its liquid reserves).

A way out of the situation and is there an alternative

A possible solution to the problem of blocking or disabling Visa/MasterCard , in this case, is based on reconnecting all their existing cards and acquiring banks (ATMs/termanals/online services) to the national payment card system.

These cards will work, but only within the state and without the possibility of paying them abroad.

Why can 't I pay abroad ? - Because equateurs will be foreign banks that do not have a national payment card system configured, and their Visa/MasterCard system will already be disabled.

Therefore, Belkart cards are already being issued in Belarus on the basis of its national payment card system, and in Russia the WORLD. The region of coverage of these maps is within the country. In order for such cards to function abroad, it is necessary that foreign acquiring banks are connected to the processing of national payment card systems (Belarus/ Russia). As far as possible, especially now …?

We also note that for several years Russian banks have been issuing cards based on the Chinese UnionPay system. They are accepted in almost all countries and are a good alternative to Visa/MasterCard.

Russian cards based on the Chinese UnionPay system

In general, blocking/disabling Visa and MasterCard is an unreasonable decision for these companies themselves, as this will not only hit their incomes, but also give a good chance to earn money for the Chinese.

Blocking Visa and MasterCard – principle of operation and connection with SWIFT: is there a risk of people losing money - Something like that!

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