Capstone Exercise: Trace a Card Payment End to End

The exercise starts at checkout, where a customer in Bengaluru buys a laptop for 85,000 rupees on an e-commerce website and pays with a Visa debit card. The merchant's website sends the card details to its payment gateway, which routes an authorization request to the card scheme, and the scheme routes it to the customer's bank, which is the issuer. The issuer checks the account balance, checks the card status, runs a fraud check, and approves the transaction, placing a hold of 85,000 rupees on the account. The approval travels back through the scheme and the gateway to the merchant in under two seconds, and the customer sees a confirmation page. Capture is the next step, and it happens when the merchant ships the laptop. The merchant sends a capture request for 85,000 rupees, which tells the issuer to convert the hold into a real debit. If the merchant ships only part of the order, it can capture a smaller amount, such as 40,000 rupees, and release the remaining hold. The capture request carries the original authorization code, so the issuer can link the capture to the authorization and confirm that the amounts match. A capture that arrives without a matching authorization is rejected, because the issuer has no hold to convert. Settlement is where the money actually moves, and it happens in batches at the end of the day. The merchant's acquiring bank collects all the day's captures and sends a settlement file to the card scheme, and the scheme calculates what each issuer owes each acquirer. The acquirer credits the merchant's account with 85,000 rupees minus the merchant discount rate, which might be 2 percent, so the merchant receives 83,300 rupees. The issuer debits the customer's account for the full 85,000 rupees. Settlement files are exchanged in the evening and funds are typically available to the merchant the next working day. Reconciliation is the daily discipline that proves the money went where it should. The merchant's finance team matches three sets of records. The orders in the website, the authorizations and captures in the gateway report, and the settlement credits in the bank statement. If the gateway shows a capture of 85,000 rupees but the bank statement shows a credit of only 83,300 rupees, the difference of 1,700 rupees must be explained as the merchant discount rate, not treated as a missing payment. Any capture with no matching settlement credit is investigated the same day, because a missing settlement is a real loss of money. The refund path tests whether the team can reverse a payment cleanly. Suppose the customer returns the laptop within seven days, and the merchant agrees to a full refund of 85,000 rupees. The merchant sends a refund request through the gateway, referencing the original capture, and the issuer credits the customer's account within three to five working days. The refund must be linked to the original transaction so the customer can see it on their statement, and the merchant's finance team must confirm that the refund appears in the next settlement file as a negative entry of 85,000 rupees, not as a missing sale. The dispute path is the final step and the hardest to handle. Suppose the customer claims they never received the laptop and raises a chargeback with their bank for 85,000 rupees. The issuer debits the merchant's account provisionally and asks the merchant for evidence, such as the delivery confirmation and the tracking number. If the merchant provides proof of delivery, the chargeback is reversed and the merchant keeps the money. If the merchant cannot prove delivery, the chargeback stands and the merchant loses the 85,000 rupees plus a chargeback fee of around 1,500 rupees. Your exercise questions follow. What data would you need to defend this chargeback, which system holds it, and how would you design a report that shows the chargeback rate by product category?