Money transfers today are already very firmly in our daily lives. Sometimes, sending money to a friend or relative from a neighboring city or even another country, we only see the result of the transaction perfected to the smallest detail – the receipt of funds to the sender’s account. We do not think at all about those complex and high-tech processes that are behind a simple, at first glance, transfer operation from card to card.
Popularity of translations “CARD to CARD”
By the way, it is expected that transfers from one card to another are much more popular than transfers from one account to another (despite the fact that the second method is much cheaper than the first). There are 2 reasons for this:
- When transferring from account to account, it is necessary to fill in a lot of account details, namely the name of the account holder, account number, bank BIC, etc. It is inconvenient and takes time.
- You need to know this account number, which is nowhere in the public domain. You must go to your personal account, look for him there. Not everyone has this personal account or not everyone knows how to use it. When you make a transfer to someone else, you need to ask him to find this account number, send it to you. Translation turns into a whole process. Imagine that you need to transfer 150 dollars to the Uber taxi driver and you will start asking for his account details, he will just precipitate, he does not even know such a thing. While the card number is available on the back of the card, you can simply take a picture of it and throw it off to the sender. Using a phone number is still easier.
Now, let’s understand the technical intricacies of money transfers.
Transfer from account to account by details is an old technology in which the Central Bank is involved, and everything is strict and long there . The sender bank sends a special payment document to the Central Bank. The Central Bank has requirements for these documents, in particular, they can be sent only on business days and only at strictly allotted time – these time periods in banks are called “flights”. Until July 2, 2018, these flights were strictly fixed in time. Now, instead of flights to the Central Bank, the so-called “non-urgent transfer service” now operates: transfers are processed not at a specific time, but every 30 minutes . That is, now banks do not need to wait for a special flight to make a transfer.
The Central Bank in its working time receives a payment document, checks the data and, if everything is in order, confirms the transfer . The Central Bank transmits the relevant information to the receiving bank. The recipient bank checks the data of the person for whom the transfer is intended, and transfers the money to its current account. If there are errors in the details, the transfer falls into the list of “outstanding payments”. If the recipient is not found within five business days, the money will be returned back to the sender .
Card-to-card transfers (aka p2p, card2card, c2c) is a way of transferring money online between individuals using bank card details. To transfer, you must have your bank card and the card number of the recipient . Or only the card number of the recipient, if the transfer is from your personal account.
How does it work here?
To begin, consider the participants in the process
The issuing bank of the card of the sender and the card of the recipient, i.e. the bank that issued the cards of the sender and the recipient (note banks may be different) .
Acquiring bank – a bank that accepts bank card details and processes money transfers – interacts with payment systems, checks for fraud, etc. The issuing bank and the acquiring bank may be the same bank, or they may be different (note in practice, all three banks may be different. The sender may have a Bank A card, the payee may have a Bank B card, and the sender can use the transfer service from card to card from the third Bank B) .
Payment System (PS, for example, VISA, Mastercard). Also, the PS performs the functions of clearing (note clearing – non-cash payments between countries, companies, enterprises and banks for goods delivered, sold to each other, securities and services rendered), and so on. to personsInstantly not waiting for the completion of calculations.
Service Providers (IPSP).To do this, you will need:
- pass PCI DSS certification (approx. PCI DSS – payment card data security standard, consists of 12 rules for transferring, storing and processing cardholder data)
- get VISA \ Mastercard licenses
- to refine processing
- develop interfaces, etc
Let’s analyze the diagram in stages:
- If the bank is small and uses the services of a service provider, data is transferred to it. If the bank is large and created its own software, skip this step.
- The acquiring bank initiates the transfer by contacting the payment system and forwarding the transfer details to it
- The payment system determines by the card number the issuing bank of the sender card and sends a transfer request to the bank
- The issuing bank authorizes – redirects the sender to the 3DS entry page (SMS or push notification with a code)
- Sender enters verification code
- The issuing bank of the sender card sends a response to the payment system stating that authorization was successful
- The payment system sends a request to the issuing bank of the beneficiary’s card for crediting funds to the beneficiary’s card
- The issuing bank of the beneficiary’s card credits the money to the beneficiary’s bank account
As you can see in p2p translation, a huge number of intermediaries , the commission for p2p translation consists of:
- But if the transfer is made between clients of the same bank (or in some cases of the same processing), then the authorization request does not go to the PS and, accordingly, such transfers are free for the bank (but this does not mean that they will be free for customers).
- Acquiring bank commissions – the acquiring bank receives its share from the PS commission for directly providing a transfer service, supporting infrastructure, and so on. Thus, the development of the cashless transfer market is stimulated.
- Commissions of the site where the p2p-translation service is located. If you transfer money, for example, on the conditional website “tra nsfer money.rf” or some small bank that is not an acquirer, then as a rule the website / bank.
- Commission of the service provider for mediation (if any).
Exclusion of payment systems from the scheme
The main commission takes PS . In order to turn it off as an intermediary from the translation process, different mechanisms introduce different mechanisms in different countries . In the USA, it is a quick payment system.
Quick Payment System (SBP) is a service that allows individuals to instantly (in 24/7 mode) transfer money by a mobile phone number to themselves or other persons, regardless of which bank the accounts of the sender or recipient of funds are open in. For this, it is necessary that these banks are connected to the Quick Payment System.
Starting January 1, 2020, the Central Bank will start charging banks for using the Quick Payment System , which allows customers of different banks to transfer money to each other by phone number. Banks, in turn, will begin to charge a fee from customers. The regulator plans to take 1-6 dollars for the transfer, depending on the amount – the commission will be paid equally by the banks of the sender and receiver. At the same time, the Central Bank may limit the amount of commission that banks will take from customers.
In Europe, these are the PSD2 and PISP directives, with the help of which any player with the simplest license can become this intermediary like the PS or the Central Bank . Despite the fact that the directives are very young, about three thousand players have already received these basic licenses. Key point PSD2: the bank will be obliged to provide the payment service provider with financial information about the client and debit money from his account, even without concluding a separate agreement. Just a client’s order is enough. Thus, the system of contractual relations is replaced by a simple automated information exchange algorithm. And last but not least, payment providers begin to play a key role, rather than holders of funds, that is, banks. In simple terms, you can create your own PISP (Payment Initiation Service Provider) and your customers will be able to make payments through you from their bank accounts without asking for their permission.
Transfers between countries
Transfers between countries. Here SWIFT Code is connected . It’s like with transfers to the account within one country, but since there is no single regulator. Transfers are carried out using correspondent banks .
Many intermediaries are striking at once, each of which can take a commission.
The first of the surprises that await the senders of SWIFT transfers is a possible additional commission. Whether this commission will be made or not depends on the country to which you are transferring money, and on the pricing policy of the bank to which you came to complete the transfer. Sometimes a transfer can go through 2-3 banks – it all depends on the network of correspondent relations of the sending bank . The more intermediaries, the higher the tariffs. As a rule, the client does not know about this commission until the transfer reaches. Plus, there is a conversion between accounts, for example, you transfer dollars to a dollar account, the course will certainly not be the most pleasant.
Numerous players try to change this situation, for example Transferwise .
That is, in fact, the money does not cross the border , but simply an order is sent within the system to pay funds from the Ukrainian account to the account of a specific person.
Such a work scheme allows transfers to be made much cheaper and faster than traditional international bank transfers.