MasterCard and Visa are enhancing their communications networks, authorization systems, clearing and settlement systems and messaging protocols.
Both associations have embraced Internet protocols over secure networks for communications between merchants, members and regional processing centers.
MasterCard's Banknet uses a virtual private network (VPN) on a closed TCP/IP network, built with global alliance partner AT&T. The VPN gives Banknet on-demand telecom for usage spikes, eliminating the need to plan bandwidth for the "peak of peaks" that normally occurs the week before Christmas. "VPN gives us a managed bandwidth capacity," said Jerry McElhatton, senior executive vice president, global technology and operations at Purchase, N.Y.-based MasterCard. "The only time you pay for it is when you go over it."
VisaNet-Visa's core transaction system-has been upgraded to TCP/IP from IBM's 1970s-era Systems Network Architecture (SNA). Visa's Direct Exchange service provides merchants with an online connection to a Visa Interchange Center, which speeds up transactions and increases flexibility. "It's a very visible member benefit," said Inder Singh, global CIO of VisaNet at Visa International, New York. "It's the speed of the connection, the authentication of the source where the transaction is coming from, and making it simple for the members to connect."
The competition in processing should spur new form factors and terminal devices. "We're making that as inexpensive as possible," Singh said. "We're making sure that VisaNet will be the most cost-effective way to innovate."
MasterCard intends to do the same. "Every delivery method that's available, we're going to be right there, ahead of schedule, making sure our customers have those capabilities," said McElhatton.
Telecom enhancements speed authorization and help protect against fraud. At MasterCard's regional service centers, authorization time has been reduced to an average of less than 20 milliseconds through the use of software developed in collaboration with Oasis Technology, Toronto. MasterCard plans to install the authorization switch in 50 countries by the end of 2004.
On the clearing and settlement side, Visa's IT subsidiary, Inovant, spearheaded the BankCard Clearing Consolidation project, which in 2001 moved VisaNet's BASE II system to seven-day-a-week settlement within a 20-hour processing window. Also, Inovant synchronized the schedules for processing credit and debit transactions.
MasterCard launched its new clearing and settlement platform in January at its St. Louis data center. The system runs on an IBM DB2 database using hardware from IBM, Sun, EMC, StorageTek and SanDisk. The St. Louis facility, which opened in late 2001, has enough floor space to accommodate growth through 2010, said Mike Bray, vice president of managed services, MasterCard.
The MasterCard platform was built in a joint venture with Mascon Global Ltd., based in Chennai, India.
The associations are working with banks on the use of new message formats. One format, ISO 8583, includes a private data space for transferring small amounts of data to and from merchants and issuers, using the clearing network as a communications medium. "A bank can decide how to use it," said Robert Reeg, senior VP, systems development at MasterCard. "It removes the need to have bilateral agreements for transferring data."
Visa intends to include an XML-based format for flexible messaging within VisaNet's settlement system. "We are adding that in the batch format for clearing and settlement files that are transmitted at the end of the day," said Singh. "The XML format, at this stage, is not envisioned for online transactions."