The history of processing payments

Before the Internet became a functional platform for the development of various kinds of relationships between people (personal, business, banking), it was impossible to check the balance of a credit card without leaving home. There were not so many financial companies that took part in payments by plastic cards. There were several types of such organizations.

Regulators. These companies produced plastic cards ordered by banks. The same companies also produced equipment with the help of which all information was read from credit cards. These organizations were: Visa, American Express and MasterCard. These payment systems are still very popular all over the world today.
Banks. Here, credit cards were handed out to customers. This process was controlled by a regulatory company. The banks tasks were to charge and write off funds from user accounts (the database and financial guarantees were provided by the regulator).
Business structures (e.g. shops). These are companies that were users of banks. Receiving payments from their clients, they had to wait quite a long time for the money to go to the companys merchant account (the funds were credited to the accounts with a long delay).
The 90s were marked by the development of the Internet. Now, in its vastness, it was possible not only to get interesting information about something, but to earn money, establish business relations, and so on. IT technologies have not bypassed card payment systems either: the status of cards from this moment can be checked online. If earlier only credit cards were in use, now banks also offer debit cards.

So, the development of electronic payments is gaining momentum. However, the question remained regarding the legal side of online payment transactions: the legal framework was completely absent.

Competent and promising people did not miss the opportunity to earn extra money: companies appeared on the Global Network whose employees developed new electronic money. In principle, these organizations can be confidently called the first Internet banks, however, banking legislation did not apply to them.

For example, if you need to exchange Visa to Bitcoin, then our exchanger will help you with this.

As a result, a new word appears - "processing". Today, the activity associated with the processing of information, which is used in conducting transactions for electronic payments, is called this term. Organizations specializing in this type of activity are called processing centers. Enterprises that provide processing services fall into the category of payment processing.

Visa processing in Russia

The popular Visa payment system also provides processing services. On February 18, 2015, Visa and the National Payment Card System entered into an agreement, as a result of which all domestic payment transactions of this system are transferred to the NSPK, that is, all payments must be processed within the borders of the Russian Federation.

For these changes, Visa had to donate $ 50 million. This was due to the Law on the creation and operation of the NSPK (this law was signed by the Russian president back in 2014). The document says that operators that are not among the payment systems important for the state must deposit a certain amount on the accounts of the Central Bank. This amount should be equal to the turnover that the payment system receives for two days of work in the country.

However, Visa enjoyed a few privileges: it did not charge a guarantee fee. In return, the Russian authorities requested that payments be processed within the country at the NSPK. Visa executives have agreed to work with the National Payment Card System. The transfer of processing to the Russian Federation cost the Visa payment system $ 50 million.

Legislative framework that controls the work of processing centers

Times change. Today, the operation of electronic payment systems, including Visa processing, is regulated by legislation (PSP / IPSP), which presents the rights and obligations of the processing center. For example, to start activities in the field of processing services, a company needs to purchase a license. Each country has its own prices for permits of this kind.

Having received an IPSP license, a company can enter into an agreement with any bank for the clearing procedure, which involves debiting funds from one bank account and then crediting them to another account. Conditions for a partner bank:

he must work with Visa;
the bank must have a PSP authorization document for banking processing.
However, the legislation for processing centers is not limited to PSP / IPSP licenses. There are many documents that control and regulate the activities of regulatory organizations (after all, it is these companies that determine how events will unfold in the global payment card market). By the way, Visa processing has the largest list of such documents.

Once electronic payments were firmly established on the Internet, some of the most popular processing services created their own banking systems. But most of the companies offering processing services still continue to engage in "clean processing", having entered into partnership agreements with several banking organizations at the same time. But here are two sides of the coin:

on the one hand, the processing company has certain advantages;
on the other hand, there is one big drawback: such centers do not have their own money.

Benefits of Clean Processing Companies

Processing companies have certain advantages that banks do not have.

Processing centers do not obey the laws that are adopted in banking structures.
They are not bound "hand and foot" by any definite policy.
These companies do not have any obligations to customers (investors).
They can partner with several banking networks at the same time, benefitting from the features of each of them.
Companies providing processing services can work with electronic currency (a regular bank is deprived of this opportunity).

Classic processing

The following "actors" take part in the processing:

business (for example, a store);
processing center;
card regulator (Visa);
issuing bank (bank that issues plastic cards);
acquirer bank (structure in which the companys account is opened).
To coordinate transactions between all participants, a technology called “clearing” was developed.

The complexity of the process lies in the fact that a large number of organizations are involved in the processing of electronic payments. In addition, this action takes a lot of time (several days).

Carrying out the process through one transaction comes with risks. If one of the participants, for example, has equipment out of order, then most of the payments that have already been made will be canceled. In order for the procedure to go through all the stages without incidents and to end safely, experts in the field of Internet payments have come up with a special technology with a complex sequence.

Classification of processing companies

There are three types of processing companies:

white;
gray;
black.

"White" processing companies

Such organizations include systems that fully adhere to the letter of the law. They are often residents of the European Union and the United States of America. They cooperate only with those businesses that pay taxes and do not engage in dubious activities. Services in such centers are inexpensive, and the processing procedure is not complicated.

 

"Gray" processing centers

These are companies that are registered in different offshore zones, in Asian countries and jurisdictions with low taxes. These are quite decent firms. They differ from "whites" only in the fact that they are ready to serve any business: enterprises selling medical drugs, dating services, portals for adults, and so on.

Gray centers do not partner with clients without referrals. They demand guarantees from their clients, personal data. These firms provide quality services at an optimal cost.

 

"Black" processing companies

"Black" processors do not disdain anything. They make deals even with those organizations that are openly illegal. Such processing is associated with offshore and Chinese banks that open accounts.

The turnover here is simply enormous. However, the risks are also very high. Therefore, "black" structures are carefully conspiring: to get in touch with representatives of this company, you need to have "acquaintances". Clients of "black" processing are at great risk: at any moment the company can close down, having appropriated the users money. And yet black companies have a large clientele.

 

Advantages of a bank that uses the services of a processing company

By using the services of a processing company, the bank gains certain advantages over its competitors.

Thanks to "cloud" processing, the server of the banking organization is unloaded, and funds are freed up that can be directed to the further development of the enterprise. The provider (Visa processing) provides the bank with ready-made schemes. The bank pays for those transactions that customers have already completed.
Visa processing integrates banking products and provides customer support.
The processing provider not only serves bank cards, but also helps organize retail banking business, focusing on the "one-stop-shop" method, which allows users to provide a wide range of services: make transfers, make payments, replenish accounts (including electronic ones), repay loans ...

What services do processing companies provide?

The counterparties of large processing centers are located in many countries of the world. Thanks to this feature, companies can enter into partnerships with foreign processing organizations.

Types of services:

Selection of a company that offers optimal processing conditions.
Implementation of the transfer of the enterprise to activities under offshore schemes that do not imply taxation.
Creation of a processing company.
Negotiation related to connection.
Selection of a processing provider operating in an offshore zone to create a new business model.
Audit of international online projects.
Assistance in acquiring a processing license for financial institutions and commercial enterprises.
Management and maintenance services for card accounts.
Services for maintenance of ATMs and POS-terminals.
Processing centers provide banks with the opportunity to realize themselves in the card business. At the same time, large investments will not be required.

Such companies help to implement complex billing schemes (organization of a cryptocurrency exchange point, bulk payments, outgoing payments for individuals).

 

Stages of creating a company providing processing services

To create your own processing company, you need to go through several stages.

Purchase a processing license.
Purchase encoding modules.
Draw up contracts with future partners (banks) and with other processing firms.
Create and integrate a software package.
Organize an online customer support service.
Draw up a marketing and product promotion strategy in the modern market.