Scheme Transaction Flow

A comprehensive overview of card payment processing from initiation to completion, including dispute resolution

Regular Transaction Flow

The regular transaction flow involves multiple parties coordinating to process a card payment securely:

                    sequenceDiagram
                        participant C as Customer
                        participant M as Merchant/Gateway
                        participant A as Acquirer Bank
                        participant S as Card Scheme
                        participant I as Issuer Bank

                        C->>M: 1. Initiates payment
                        M->>A: 2. Authorization request
                        A->>S: 3. Forwards request
                        S->>I: 4. Routes for verification
                        Note over I: Verifies card validity
and available funds
                        I-->>S: 5a. Authorization decision
                        S-->>A: 5b. Forwards response
                        A-->>M: 6. Relays response
                        M-->>C: Transaction result

                        rect var(--secondary)
                            Note over I: 7. Places temporary hold
if approved
                        end

                        rect var(--secondary)
                            Note over S,A: 8. Clearing & Settlement
                            I->>S: Transfer funds
                            S->>A: Settlement complete
                        end
                

Transaction Steps

The transaction process follows these key steps:

• Customer initiates payment at merchant point of sale
• Authorization request flows through the network
• Issuer verifies and approves the transaction
• Funds are held and then settled through clearing

Dispute Resolution Process

When a transaction is disputed, a separate flow is initiated to handle the chargeback process:

                    sequenceDiagram
                        participant C as Customer
                        participant I as Issuer Bank
                        participant S as Card Scheme
                        participant A as Acquirer Bank
                        participant M as Merchant

                        C->>I: 1. Files dispute/chargeback
                        I->>S: 2. Initiates chargeback
                        S->>A: 3. Notifies acquirer
                        A->>M: 4. Requests evidence
                        Note over M: Prepares evidence
                        M->>A: 5. Provides documentation
                        A->>S: 6. Submits representment
                        S->>I: 7. Reviews evidence
                        
                        alt Merchant wins
                            I-->>S: 8a. Decline dispute
                            S-->>A: Notify merchant win
                            A-->>M: Dispute closed
                        else Customer wins
                            I-->>S: 8b. Accept dispute
                            S-->>A: Process chargeback
                            A-->>M: Debit merchant account
                        end
                

Dispute Resolution Steps

The dispute process involves several stages:

• Customer initiates the dispute with their issuing bank
• Merchant provides evidence to support their case
• Card scheme reviews and makes final decision
• Funds are either returned or transaction stands

Layman's view

From a layman's perspective, the transaction flow can be summarized as:

                    flowchart TD
                    subgraph Customer["Customer Zone"]
                        A[Customer initiates payment] --> B[Card/Payment details entered]
                    end
                
                    subgraph Merchant["Merchant Zone"]
                        B --> C[Merchant payment gateway]
                        C --> D[Basic fraud checks]
                        D -->|Suspicious| E[Transaction declined]
                        D -->|Clean| F[Transaction routing]
                    end
                
                    subgraph Scheme["Scheme Network"]
                        F --> G[Scheme fraud detection]
                        G --> H{Risk Assessment}
                        H -->|High Risk| I[Block transaction]
                        H -->|Medium Risk| J[Additional authentication]
                        H -->|Low Risk| K[Route to issuer]
                        
                        J -->|Passed| K
                        J -->|Failed| I
                    end
                
                    subgraph Issuer["Issuer Bank"]
                        K --> L[Issuer fraud controls]
                        L --> M{Risk evaluation}
                        M -->|Risky| N[Decline]
                        M -->|Safe| O[Approve]
                        
                        O --> P[Monitor post-transaction]
                        P -->|Suspicious| Q[Investigation]
                        P -->|Normal| R[Complete]
                    end
                
                    style Customer fill:#e6f3ff
                    style Merchant fill:#fff2e6
                    style Scheme fill:#f3e6ff
                    style Issuer fill:#e6ffe6
                
                    classDef fraudCheck fill:#ffe6e6,stroke:#ff0000
                    class D,G,L,P fraudCheck                    
                

General Payment ecosystem

                    flowchart TD
                    subgraph Customer["Customer Side"]
                        A[Customer] --> B[Payment initiated]
                    end
                
                    subgraph Gateway["Payment Gateway Layer"]
                        C[Payment Gateways]
                        C1[Stripe]
                        C2[PayPal]
                        C3[Square]
                        C4[Adyen]
                        B --> C
                        C --> C1
                        C --> C2
                        C --> C3
                        C --> C4
                    end
                
                    subgraph Schemes["Card Scheme Networks"]
                        D[Card Schemes]
                        D1[Visa Network - VisaNet]
                        D2[Mastercard Network - Banknet]
                        C1 & C2 & C3 & C4 --> D
                        D --> D1
                        D --> D2
                    end
                
                    subgraph Banks["Banking Layer"]
                        E[Issuing Bank]
                        F[Acquiring Bank]
                        D1 & D2 --> E
                        D1 & D2 --> F
                    end
                
                    style Customer fill:#e6f3ff
                    style Gateway fill:#fff2e6
                    style Schemes fill:#f3e6ff
                    style Banks fill:#e6ffe6
                
                    classDef gateway fill:#ffd700,stroke:#ff8c00
                    class C1,C2,C3,C4 gateway
                    classDef network fill:#4169e1,stroke:#000080,color:#fff
                    class D1,D2 network