2.3 Payment card brands
A payment card is a payment instrument that allows bills in payment transactions to be charged to a designated account, which is linked to the card.
A card association or a payment system operator plays the central role in the card business. They have founded payment card brands to promote their payment card products, to establish and enforce rules for their use and acceptance, and to provide networks to connect end-to-end issuing and acquiring financial institutions. The brand signifies acceptance of a payment card with ATMs and POS terminals in shops , restaurants , and hotels, guaranteeing the availability of the payment service anytime and anywhere the logo of the brand is displayed. The logo is represented as a payment card decal that appears in the store window of the merchants accepting the corresponding card product. The decal itself is a representation that the merchant has a relationship with an acquirer, allowing it to accept the payment card brand. Each brand develops the necessary network infrastructure to support its cards, providing the availability of retail financial services for the customer. Some of the most known card associations are Visa , Master-Card , American Express , Europay , Diners Club , Discover , and JBC , to name only those reaching a global scale. Some of these card associations, like Visa, MasterCard, and Europay, are built as membership associations of banks, which mutually recognize and guarantee the payments done with their payment cards.
Each card association or payment system operator develops specific card products, addressing credit and debit payment behavior, but also electronic purse or virtual cards. Even in the same category of payment behavior, various card products are marketed. They address groups of people with various financial possibilities, within different categories of age, for ATM or POS services. Card products are designed for either face-to-face interaction or more recently for remote interaction, using the Internet or wireless telecommunication networks. There are card products that can answer both interaction modes simultaneously .
Each payment product implies a payment mechanism that describes the protocol of the payment transaction between the consumer and the merchant, as well as the processing performed by the acquirer, the card association, and the issuer on the payment message generated by this transaction.
2.4 Credit and debit payment cards
The emergence of payment cards was related to credit payment behavior, providing the convenience for consumers not to pay for purchases immediately, but rather pay later. The financial institution ”either the card association itself or a member bank ”that guarantees the consumer's payment allows for a well-established period of time for making the payment. Usually, for a credit card product all the payments performed between the end of the previous month and the end of the current month are compiled together in a single itemized statement. The consumer has to make a payment in full of the entire debt at the beginning of the next month.
When a bank issues a credit card, it can provide the real credit facility to its customers through revolving credit cards. When such an agreement intervenes between the bank and the customer, only an agreed percentage of the debt has to be paid each month. For the rest of the amount to be reimbursed, the bank applies a certain credit interest rate, which is referred to as the annual percentage rate (APR), which is spread out over a monthly period. When offering revolving credit cards, the financial institution may require the opening and maintaining of a savings account as security for the customer's line of credit, depending upon credit history that, for example, could have suffered some damages following a revenue crash [8, 9]. The revolving credit card with a savings account is sometimes called a secured (revolving credit) card. The possibility of offering revolving credit has to be seen as a customized feature, considering, for example, a temporary financial conjuncture of the customer.
Credit cards allow payments that involve amounts over a certain threshold or even some cash advance. To the basic financial service, the card issuer can add a number of supplementary services like quick credit card replacement, emergency money in case of lost or stolen cards, and juridical assistance in case the customer has disputes using the card.
The amounts involved in transactions performed with debit cards are debited directly from the designated account of the customer as soon as the bank keeping this account is informed of the transaction or at the latest when the clearing is performed.
Debit cards are always linked to the customer's account, enabling customers to immediately access their money. Therefore, having an account is an obligatory condition for debit card issuance. The customer and the issuing bank can set up two types of agreements. In the first setup, the condition of a successful payment is that the amount to be paid is less than the balance of the account. In this case both purchasing and ATM money withdrawal services are possible. In the second setup, the issuing bank accepts that purchase transactions can be still performed even when the balance of the customer's account is less than the amount of the transaction, with the condition that the deficit is not higher than an agreed-upon negative threshold.