Mastercard Message Flow

A Mastercard authorization also starts with an ISO 8583 message from the merchant, through the acquirer, to the Mastercard network. The acquirer sends a message type 0100 with the card number in field 2, the amount in field 4, the merchant category code in field 18, and the point of service data in field 22. Mastercard routes the request to the issuer, or to the issuer processor, and returns the response with a response code in field 39 and an authorization code in field 38. The main difference from Visa is in the network processing rules and the stand in service, which Mastercard calls Stand In Authorization, and which uses issuer defined limits to approve low value transactions when the issuer system is unreachable. The Mastercard Interface Processor, often shortened to MIP, is the hardware and software that a bank uses to connect to the Mastercard network. A large bank may run its own MIP on site, while a smaller bank uses a processor that runs a shared MIP on its behalf. The MIP translates between the bank internal message format and the Mastercard ISO 8583 format, encrypts the connection, and stores and forwards messages when the network is briefly unavailable. When a business analyst writes an integration requirement for a Mastercard connection, the MIP is the component that must be installed, certified and tested, and certification includes test cases for approvals, declines, reversals, refunds and stand in processing. Clearing on Mastercard uses the Integrated Product Message file, known as IPM, which is a single file format that covers all Mastercard products, including credit, debit, prepaid and commercial cards. The acquirer creates an IPM file at the end of each day, with one record per transaction, including the card number, the transaction amount, the currency, the merchant identifier, the authorization code and the interchange category. Mastercard validates the IPM file, checks each record against its authorization, calculates interchange and scheme fees, and produces a settlement file for each member bank. If a record is rejected, for example because the amount does not match the authorization, the acquirer receives a reject file and must correct and resubmit the record. Settlement on Mastercard follows the same net settlement principle as Visa, but the timing and the settlement currency can differ by region. In India, Mastercard settles domestic transactions in Indian rupees through the settlement accounts that member banks hold with the Reserve Bank of India or with a settlement bank appointed by Mastercard. The network calculates the net position for each bank, which is the total of all payments it must receive minus the total it must pay, and instructs the settlement bank to move the net amount. A bank that is a net receiver gets a credit, and a bank that is a net payer gets a debit, so only one net transfer is needed per bank per settlement cycle instead of thousands of individual transfers. A worked example shows the Mastercard flow in practice. A customer buys groceries worth 3,200 rupees at a supermarket in Mumbai with a Mastercard debit card issued by Bank of Baroda. The supermarket terminal sends an authorization request through its acquirer to Mastercard, the issuer approves it with response code 00 and authorization code 558120, and the customer leaves with the groceries. That night, the acquirer includes the transaction in its IPM file, Mastercard validates the record, calculates an interchange of about 1.5 percent, and prepares the settlement. The next business day, the net settlement is made, the acquirer credits the supermarket with 3,152 rupees after fees, and the customer sees a debit of 3,200 rupees on the account statement. If the issuer had been offline, Mastercard stand in service could have approved the payment, and the issuer would have honoured it later.