The above diagram shows, in relation to a purchase transaction using a Visa card, the flow of funds from the cardholder to the merchant (orange arrows) and the flow of the various fees or incentives that are deducted from the transaction value in connection with the transaction (blue arrows).
The Blue arrows show that:
1. the cardholder pays the transaction value to its issuer;
2. the issuer pays the transaction value to the card scheme;
3. the card scheme pays the transaction value to the acquirer; and
4. the acquirer pays the transaction value to the merchant.
Although this diagram indicates the flow of payments, the timing of payments would generally vary. For example, in a credit card transaction, the cardholder would generally settle the transaction with its issuer at a later date than the settlement of transactions between the issuer/acquirer and Visa, and the settlement of transactions between the acquirer and the merchant.
The Orange arrows show that, in relation to the transaction:
1. the merchant pays the merchant discount to its acquirer;
2. the acquirer pays interchange fees plus acquirer network fees to the card scheme;
3. the card scheme pays the interchange fees less issuer network fees to the issuer; and
4. the issuer provides rewards/rebates/privileges to the cardholder.
Although interchange fees are settled daily between Visa and the issuers/acquirers as part of the net settlement amount which includes the relevant transaction values, and not collected separately, other fees or incentives, such as the provision of rewards, may be settled separately from the settlement of the relevant transaction value.
Annex B: Glossary of Terms
“Acquirer” means an entity that has a contract with a merchant to facilitate the merchant’s acceptance of a payment card.
“Notification” means a voluntary application to CCS by a party to an agreement for a decision on whether the agreement has infringed the section 34 prohibition of the Competition Act.
“Card Schemes” means an entity that operates a payment card network. The main card schemes in Singapore are Visa, MasterCard, American Express, and NETS.
“Issuer” means an entity that issues a payment card to a cardholder to facilitate the cardholder’s usage of the payment card.
“MIF” means the Multilateral Interchange Fee, which is a multilaterally determined fee payable by the acquirer to the issuer for a payment card transaction.
“Visa Worldwide” means Visa Worldwide Pte. Ltd., which is a wholly-owned subsidiary of Visa International. Visa International’s payment card business in Singapore was transferred to Visa Worldwide in April 2009, following a global corporate restructuring of Visa International, which resulted in Visa International becoming a wholly-owned subsidiary of Visa Inc.