Maintaining authorization file Providing customer service Processing payments and handling settlement and income Interchange Establishing collections operations. Managing a credit card program is expensive. Smaller banks can issue cards without becoming an issuing member by being an agent. This allows small banks to retain customers who want a credit card program. Clearing refers to the exchange of financial information.
Settlement refers to the exchange of the actual funds for the transaction and the associated fees.
Clearing and Settlement Occur Simultaneously. A financial institution can be both an issuer and an acquirer. MasterCard and Visa send the transaction to the issuer overnight, credits the acquirer and debits the issuer for the transaction. In essence, the issuer pays the acquirer for the transaction, via the Mastercard or Visa interchange system. Interchange makes it possible for the issuing banks and acquiring banks to exchange information, transactions and money on a standardized basis.