The card payment system is operated by the card centre Nets Estonia AS, which was founded by the banks in 1993. The card payment centre provides card payment processing services for intermediating card payment information and for clearing, and the system processes card transactions around the clock, 24 hours a day and 7 days a week. Nets Estonia provides card payment processing services to seven banks:
- AS Eesti Krediidipank
- AS LHV Pank
- AS SEB Pank
- Danske Bank AS Estonia branch
- Nordea Bank Finland AB Estonia branch
- Swedbank AS
- Tallinna Äripanga AS
The system transmits payment requests from payment terminals and the banks or international payment networks like VISA, MasterCard, JCB and American Express if an international card has been used. The system gathers the transactions together, processes them, and sends clearing information to the banks and the international payment networks. The liabilities that banks have to each other as a result of the processing of card transactions in the card payment system are settled in the interbank payment systems. If a card payment is made using a card issued by one bank, and it has to reach the recipient in another bank, the STEP2 interbank payment system is used.
The card payment system allows the cross-usage of payment cards, so a card from one bank can be used at a merchant who is a client of another bank.
The scheme below shows the debit card payment process and what the participants do.
- A card owner initiates payment by inserting the card in the payment terminal of the merchant and entering the PIN.
- The card payment system sends the authorisation request from the payment terminal to the issuer bank. The exception is when card payments are made where Swedbank is the bank of both the person making the card payment and the merchant receiving the money. If a Swedbank card is used in a Swedbank terminal, the transaction is not processed by the card payment system but is settled as an internal transfer in the bank. A payment terminal may be connected to the card system directly or through the acquirer bank, and the request is sent accordingly. With international cards, the card payment system sends the request to the corresponding international card organisation.
- During the authorisation the issuer bank verifies the PIN entered by the payer, makes sure there are sufficient funds on the payer’s account and that the payment is within the daily limits, and confirms the validity of the card and other data. If all verifications are successful, the issuer bank reserves the corresponding amount in the payer’s account pending authorisation. The amount paid for the purchase is actually debited from the payer’s bank account within one to ten days.
- Confirmation of the success of the card transaction appears on the screen of the payment terminal.
- The payment terminal provides a receipt as confirmation of the transaction. If the authorisation was unsuccessful, if there were not sufficient funds on the payer’s account for example, the card payment is not made. A receipt is also provided if the payment is unsuccessful.
- An electronic list of purchase transactions is sent from the payment terminal of the merchant to the card payment system.
- The card payment system processes the transactions and sends information about the amounts to be paid to banks and international payment networks for clearing. The card system collects together all the transactions made with the cards of each bank and the money is moved from one bank to another in a single block. The banks balance out those amounts between themselves.
- The banks make the final settlements for card transactions through an interbank settlement system. The merchant’s bank credits the merchant’s account using the data processed by the card payment system. It is up to the issuer bank to debit the card owner’s account for the card payment.
- Transactions are shown on the account statement of the card owner.