C.R.S.

A System

First Line Code

Technology Consulting
C.R.S.A System
- Clearing.
- Reconciliation.
- Settlement.
- Accounting

Table of Contents
1. Definition
• Clearing.
• Reconciliation.
• Settlement.
• Accounting.

2. Purpose
Table of Contents
3. Master Card-Introduction:
3.1 How MasterCard Works:
3.1.1 Authorization:
3.1.2 Clearing
3.1.3 Settlement
3.1.4 MasterCard Transaction Flow:
3.1.5 Accounting Entries –
4. Input Data Files:
4.1 MasterCard Files
4.2 Core Banking File
4.3 Switch Files
4.4 Input Data Description
4.5 Issuing Dispute Management –
4.5.1 MasterCard Chargeback Cycle
5. Business Requirements –
6 Reconciliation Process:
6.2 Matching Parameters Specifications
7 Recon Reports:
• Definition: CRSA system
as a modular system that ensures parties' rights to get their correct balances
included profits paid/received in any payment cycle.
• Reconciliation.
Reconciliation is the process of comparing transactions and activity to
supporting documentation. Further, reconciliation involves resolving any
discrepancies that may have been discovered.
• Clearing.
Removing and sort all important or not important transactions in reconciliation
operations such as (commissions, Issuer, Acquirer, Balance Inquiry, network
Message, Time Out Transactions).
• Settlement.
Settlement generates a warning message when a mismatch occurs between
monies received or monies paid with transactions as Issuer, Acquirer, or fees,
enabling your business to take corrective action to identify and recover any
missing revenues.
• Accounting.
Accounting is the recording and tabulation of inputs and operations that
represent transaction events according to a CRSA system and the ability to
integrate the CRSA System with core bank system to Issuing accounting entries
as ("debit or credit").
Reconciliation
• Purpose
The process of reconciliation ensures the accuracy and validity of
financial information. Also, a proper reconciliation process ensures that
unauthorized changes have not occurred to transactions during
processing.
• Master Card-Introduction:
MasterCard is a financial services organization which processes the
transactions carried out on credit/debit cards operated by a range of
banks and other lenders.
 MasterCard has 3 types of products-
 Master Card- is the brand name for credit and debit cards (Domestic)
 Maestro Card- is the brand name for debit cards (International)
 Cirrus Card- Cirrus is the brand name that stands for the global
MasterCard / Cirrus ATM Network among the largest ATM networks in
the world. The Cirrus brand represents immediate deposit account
access convenience at millions of ATM locations worldwide.
3.1 How MasterCard Works:
When you make a purchase with your MasterCard there are a number of processes
that runs, following the purchase and leading up to the statement being delivered to
Customer.
There are three main steps to how a MasterCard transaction works-
• Authorisation
• Clearing
• Settlement
3.1.1 Authorisation:
When we take customer’s card payment, the payment system (whether a POS
terminal or its web-based counterpart, or payment gateway) immediately transmits
the transaction information to the card holders bank. At the issuer side the first thing
to be done is the authentication of the card’s validity and also confirms that the
account is open, and in good standing and has sufficient available funds to cover the
amount of the purchase. At the merchant end most, probable outcome
results/responses are-
 Approved- The transaction is authorized as reported
Declined- The merchant should not accept the card because of un-authorization or
insufficient funds.
A record of the transaction information exchange (an “authorization”) is created within
merchants and cardholder’s bank. And all this is done in a couple of seconds.
3.1.2 Clearing
To facilitate the exchange of money between the merchants and their customers,
MasterCard network conduct interbank “clearing” and “settlement” of each card
transaction. These interactions (exchanges of data and related funds) take place
between “acquiring” (merchants) Banks and “issuing” (card holders) Banks.
During the clearing process data exchanged serve to provide the verification for the
amounts debited from the card holders and credited to the acquirers (merchants).
Additionally, banks also use the clearing data for their own account management
purposes.
For clearing purposes, there are two distinct types of message transactions need to be
examined separately.
Clearing of Dual-Message Transactions
Clearing of Single-Message Transactions

Clearing of Dual-Message Transactions

When a merchant receives an authorization(Approved) message, then its payment
processing system (MasterCard) creates a record of that authorization through
something called “electronic draft capture” (EDC). These EDC’s are then stored in a
“batch” until it is processed.
For most merchants, batch processing occurs once a day, however high-volume
merchants may do it multiple times a day and very low-volume merchants may do so
less frequently. Whatever the frequency, however, merchants submit all their
authorized transactions to their acquirer (Merchant bank) in batch mode only.
MasterCard has defined time frames for the submission of transaction information.
Merchants are required to submit batches to their acquirers within a specified period.
As long as those time periods are met, issuers (card Holders bank) are required to
honour the transactions. The processing of all these transaction records also enables
MasterCard to calculate the total amount owed by each issuer and the amount owed to
each acquirer. This function of the clearing process is essential to the final settlement
stage.
Clearing of Single-Message Transactions

In most of the world, all card transactions authenticated with a PIN are single-message
transactions. With single-messaging, the authorization and clearing are done
simultaneously and all the information necessary to post a transaction to the
cardholder’s account is exchanged during the transaction. Therefore, there is no need to
create transaction batches. Single-message transactions have only one cut-off time each
day. This cut-off time is the same for all participants and is non-negotiable.
At cut-off, MasterCard calculates the total monetary positions for all its banks
(Issuer/Acquirer) for that day’s single-message transactions. These include both PIN-
based sales transactions and ATM transactions that take place at “foreign” ATMs (when
a cardholder has used an ATM that is not operated by her card’s issuer). The ATM
category includes withdrawals made with debit cards.
3.1.3 Settlement
MasterCard uses only one settlement window for both dual-message and single-
message transactions and settlement is done on an aggregate net basis. So, these
credits and debits are summed up and the net amount is credited to the Merchants
bank’s account and debited from the Card holder’s.

For issuers, most of their customers’ activity is in the debit category — cardholders are
making purchases for which the issuer will pay into settlement on their behalf.
MasterCard calculates the total of the debits, deducts the total of the credits and the
net remaining amount is collected from the issuer through settlement.
For acquirers, most of their merchants’ activity is in the credit category, but merchants
also conduct transactions, such as the refunds, which create debits. These debits are
subtracted from the total of funds owed to the acquirer and the net amount is
deposited into the bank’s account through settlement.

MasterCard plays an intermediary role in the processing of chargebacks and is the final
arbiter as to their validity. If the chargeback is resolved in the merchant’s favour, no
settlement activity takes place. If the chargeback is resolved in the cardholder’s favour,
MasterCard will debit the transaction amount from the acquirer’s net settlement and
credit it to the issuer’s net settlement. All of the activity just outlined is conducted
before the settlement cut-off time, once funds are settled between issuers and
acquirers, MasterCard provides electronic reports to its banks for facilitating the
detailed entries into the individual customer accounts each processing day.
3.1.3 MasterCard Transaction Flow:
The Below diagram explains, how the transaction flow (Authorization, Clearing and
Settlements) happens between merchants and Cardholders though the MasterCard’s.
3.1.5 Accounting Entries
Issuing
Transactions
Dr Cr
Time of Transaction Customer Ac Payable Ac
Settlement Net Settlement Ac Network
Settlement Clearing Payable Ac Net Settlement Ac

4. Input Data Files:

4.1 MasterCard Files
4.1.1 TT120
4.1.2 TT112

4.2 Core Banking File – CBS File.

4.3 Switch Files.
4.4 Input Data Description

SOURCES RAW FORMATS REMARKS

MASTER CARD (MCI files) TT120 IPM Outbound data MC To Member
MasterCard TT112 IPM Outbound data MC To Member
4.5 Issuing Dispute Management –
Card Holder raise the compliant to Issuing bank is called “Dispute”.
Issuer bank raise the complaint to Acquiring Bank through MasterCard is called
“Charge back”.
Bank will raise chargeback on reconciled transactions and will download the disputes
to upload the same in Master connect for the chargeback settlement.

Before raising the Chargeback, User need to check the below scenarios:

1. Analysis of customer dispute

2. For Disputed transaction there should be one debit leg in CBS
3. Against Debit weather settlement received from the MasterCard
4. Any refund against disputed transaction
5. Weather dispute is valid as per the TAT provided by the MasterCard
6. Proper supporting from the customer to raise chargeback with valid reason code
 4.5.1 MasterCard Chargeback Cycle
Stage Description MIT-Function Code(s)

First Presentment 1240-200

Acquirer submits the transaction to the issuer.

Cardholder or issuer disputes the first presentment.

Issuer may request a copy of the sales receipt to support or

Retrieval Request identify a potential chargeback. 1644-603
Note: Most chargebacks do not require a retrieval request.

1442-450 (full amount)

Chargeback Issuer initiates a chargeback within the time frame applicable 1442-453 (partial amount)
to the specific message reason.

Second When applicable, the acquirer may process a second 1240-205 (full amount)
Presentment presentment within 45 calendar days of the chargeback date. 1240-282 (partial amount)

Arbitration When applicable, the issuer may initiate an arbitration 1442-451 (full amount) 1442-454
Chargeback chargeback within 45 calendar days of the date of the second (partial amount)
presentment.

Arbitration Case The acquirer may file an arbitration case to MasterCard, for a
decision on the dispute, within 45 calendar days of the date of N/A
Filing
the arbitration chargeback.
5. Business Requirements
Business Requirement
MasterCard Reconciliation
1. Input source files Reading
1.1 MasterCard Network Files
1.2 Core Banking System File
1.3 Switch File
1. Reports
2.1 Reconciled Report
2.2 Un-reconciled report
2.2.1 In CBS, in Switch, but not in Settlement
2.2.2 In CBS, but not in Switch & Settlement
2.2.3 In Settlement, in Switch but not in CBS
2.2.4 In Settlement, but not in Switch & CBS
2.3 Suppress Report
2.4 Files Upload Status
2.5 Unreconciled transactions more than 14 days (to credit back to the
card holders)
2.6 Issuing Disputes

6. Reconciliation Process:
6.1 Matching Parameters - (Need to add field name as per files received from bank)
Matching Parameters Field Name in CBS Field Name in SWITCH Field Name in Settlement
Card Number
Transaction Amount
Transaction Date
Auth Number
 6.2 Matching Parameters Specifications -
Raw Files Filter Criteria:

i. CBS File.

ii. Switch File.

iii. MasterCard Raw Files.

7. Reporting:
A- Acquirer .
B- Issuer.
C- Chargeback report.
D- Settlement.
 Integration the Reconciliation System with Core Bank
System.
We have the ability to integrated the reconciliation system with the core bank
system to complete the settlement process of the transaction life cycle, we can
complete automatically and to avoid human errors and speed of operations instead
of manual work.

CBS File
IPM File.
Switch File.
Reconciliation System

Processor
Core Bank System
Integration System
The Most Important Characteristics:
1- Complete the operations inside the Core Bank System:

1.1 Lock Amount: It is done automatically with the processor.

1.2 Unlock Amount: the system will unlock the amount to complete the settlement process.
1.3 Processing: The amount is deducted after matching.

2- Commissions:
Commissions can be placed for each type of transaction "ATM - BOS - POC - online payment ".

3- Reports:
3.1- Settlement Report.
3.2- Commissions report.
3.3- Transaction reports.
3.3.1- Transaction existing in core bank not existing in the processor.
3.3.2- Transaction existing in processor not existing in core bank.
 Thanks
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