AI for Credit Card Processing

Banks can Leverage AI in Credit Card Processing in Many Ways

Credit Card Fraud Protection

Credit card processing involves several steps to facilitate a transaction between a cardholder and a merchant. Here's a simplified overview: 

1. Card Swipe or Input: The cardholder presents the credit card for payment. The merchant swipes the card through a card reader or manually inputs the card details if it's an online transaction. 

2. Authorization Request: The merchant's payment system communicates with the credit card network (e.g., Visa, Mastercard) to request authorization for the transaction amount. The network forwards this request to the card-issuing bank. 

3. Bank Approval: The card-issuing bank reviews the authorization request. If the card has sufficient credit, is not reported stolen, and the transaction seems legitimate, the bank approves the transaction. 

4. Transaction Processing: Once approved, the transaction is processed, and the merchant receives an authorization code. 

5. Batching: Throughout the day, the merchant accumulates approved transactions. At the end of the business day, these transactions are batched together to be settled. 

6. Settlement: The merchant sends the batched transactions to their acquiring bank (also known as the merchant bank). The acquiring bank then sends the transactions to the credit card network for processing. 

7. Funding: The credit card network routes the transactions to the appropriate issuing banks to transfer funds. The acquiring bank credits the merchant's account for the settled transactions, minus any fees. 

8. Statement and Fees: At the end of the billing cycle, the merchant receives a statement detailing the transactions and associated fees. These fees often include interchange fees (paid to the card-issuing bank) and merchant service fees (collected by the acquiring bank). 

This process ensures secure and efficient handling of credit card transactions, allowing businesses to accept electronic payments from customers. Additionally, credit card issuing banks employ various methods and sophisticated technologies to detect and prevent fraud. 

By combining these methods and constantly updating their fraud detection systems, credit card issuing banks strive to protect cardholders from unauthorized transactions and minimize the financial impact of fraud.