Datasheet

Chapter 1  Internet Era: E-Commerce 11
In the closed-loop model, a single entity issues cards, handles merchants, sets
transaction rules, provides switching services, and manages the network brand.
The closed-loop model was originally created by American Express and is the
operation model for Discover and JCB networks. Other closed-loop schemes
include private-label credit cards and stored-value, and prepaid cards.
The full lifecycle of card processing, either four-corner or closed-loop, usually
includes three phases:
Authorization request

Settlement

Chargeback

Authorization request is a mandatory step and takes place when a transaction
is initiated by the cardholder. If an authorization request fails, the transaction
fails. The settlement phase is when the merchant attempts to settle all its charges
against the network and initiates the actual money-movement process. The
settlement phase is mandatory as well, and is the point where the merchant is
also charged for using the card processing network services. The chargeback
process is optional and occurs when a good or service is returned (or if fraudu-
lent activities are performed against the cardholder’s account) and the merchant
has to credit the cardholder’s account. Figure 1-3 illustrates the authorization
request step of the four-corner card processing model.
Six digit issuer
identifier
Account number
Check digit
Merchant Cardholder
Acquirer Issuer
Schemes
Merchant Device ID CC Number Amount CurrCVV TRK2 ExDt Time Stamp
061-3448069-3685309 5588320123456789 100.00 USD 425 xxxxx 01/08 20080515102600
Figure 1-3: The four-corner model: authorization request
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