Clearing and Settlement of Interbank Card Transactions: A MasterCard Tutorial for Federal Reserve Payments Analysts

Abstract

The Payment Cards Center organized a meeting at which senior officials from MasterCard shared information with Federal Reserve System payments analysts about the clearing and settlement functions that MasterCard performs for its client banks. These functions involve the transfer of information pertaining to card-based transactions (clearing) and the exchange of monetary value (settlement) that takes place between the banks whose customers are cardholders and those banks whose customers are card-accepting. This document summarizes some of the key points from that meeting.

Keywords: Card network clearing and settlement, single-message transactions, dual-message transactions, settlement risk management

JEL Classification: G2, G28, L14