ISO8583 : A Must know for Card processors and Fintechs
A Beginner’s Guide to Glory
This article does not cover deeply the technical intricacies of the ISO8583 protocol, neither does it cover data elements and components of the message format. But this article will cover the what, how and why surrounding the ISO8583 giving a large oversight about its use cases and importance.
In the past decades, we have witness how financial inclusion has brought about different channels of performing financial transactions, increasing transaction volumes across multiple platforms and also ensuring any and everybody can transact seamlessly at any time.
With financial inclusion, transactions can be carried out on the ATM, POS terminal as agency banking may be the case, and these transactions are carried out between parties , or financial institutions as the case may be.
Almost everyone would have swiped a card or two at the ATM , or a POS terminal (at a supermarket), the card at its very least serves as an identity factor and contains sensitive data and information of the card holder.
You would agree with me when I say the financial institutions involved in card transactions are very much interoperable, what do I mean by this ? A bank customer holding a card issued by a Bank A can perform transactions on ATMs of a Bank B, and this is also the same for the POS terminals, there are obviously exchange of data between these parties (many many many parties :) ) and somehow these parties are able to understand what each other are sending and receiving. Yes, a standard has to be in place.
Swiping your card on a POS terminal, ATMs , basically any card reader essentially involves passing the ‘identity’ of the card to the electronic subsystem of the transacting device, representing the card in a digital format for easy flow of the data.
So ISO8583 ?
The International Organization for Standardization (ISO) declared a standard called the 8583 to facilitate the flow of transaction information seamlessly.
The ISO8583 standard specifies a message format that describes credit card and debit card data that is exchanged between devices and card issuers. -IBM
The ISO 8583 standard is officially titled “Financial Transaction Card-Originated Messages — Interchange Message Specifications”.
It’s one of the many standards that denotes how to ‘pack and unpack’ certain data fields when processing certain financial transactions — in this case, the processing of debit and credit cards.
ISO 8583 is a complete specification that enables card-originated financial transactions such as:
- Purchases
- Withdrawals
- Deposits
- Reversals
- Refunds
- Balance inquiry
- Payments
- Inter-account transfers
- Administrative messages
- Security key exchanges, etc .
So this standard helps the electronic system which reads the card number, the transaction amount and other relevant data fields to pack it all up so that it could be transmitted electronically to a transaction processing system where it could then be unpacked back into individual data components and then processed. It also helps the transaction processing system pack and send the response back to the initiating device where it could again be unpacked and the customer be intimated of the transaction response.
How does it work
A card-based transaction typically travels from a transaction-acquiring device, such as a POS device or an ATM, through a series of networks, to a card issuing system for authorization against the card holder’s account. The transaction data contains information retrieved from the card (e.g., the card number or card holder details), the terminal (e.g., the terminal number, the merchant number), the transaction (e.g., the amount), together with other data which may be generated dynamically or added by intermediary systems. Based on this information, the card issuing system will either authorize or decline the transaction and generate a response message which must be delivered back to the terminal within a stipulated time frame.
An ISO 8583 message is made of:
- Message type indicator (MTI)
- One or more bitmaps, indicating which data elements are present. It consists of primary bitmap and secondary bitmap. The first bit of the primary bitmap indicates whether the secondary bitmap is present or not.
- Data elements, the actual information fields of the message
Conclusion
At this point I believe you have quite a handful of information of what it takes to build card processing solutions like card payment systems, agency banking solutions , POS solutions , etc.
You can read more about the ISO8583 protocol , its usage, more about the message format and fields below:
Cheers!
