CPP Payment Networks & Card Scheme Rules Flashcards

What is a 'soft decline' in payment processing?

Answer: A transaction declined due to a temporary issue that may succeed if retried

A soft decline (e.g., 'insufficient funds' or 'do not honor' with retry eligibility) indicates a temporary condition, whereas a hard decline signals a permanent block.

Which Mastercard program monitors merchants with excessive chargeback ratios?

Answer: Mastercard Excessive Chargeback Program (ECP)

The Mastercard Excessive Chargeback Program (ECP) identifies merchants whose chargeback-to-transaction ratios exceed defined thresholds, imposing fines and potential termination.

What is 'network tokenization' in the context of card payments?

Answer: Replacing a real card PAN with a network-issued token specific to a merchant or device

Network tokenization (offered by Visa Token Service, Mastercard MDES, etc.) replaces the PAN with a payment token bound to a specific merchant, device, or channel, reducing fraud exposure.

What does 'issuer authorization rate' measure?

Answer: The percentage of authorization requests approved by the issuing bank

The issuer authorization rate is the proportion of transaction authorization requests that the issuing bank approves, a key performance metric for both issuers and merchants.

What is the key difference between a 'credit card' and a 'charge card' from a payment network perspective?

Answer: A charge card requires full balance payment each month; a credit card allows revolving balances

Charge cards (e.g., classic American Express cards) require the full balance to be paid each billing cycle, while credit cards allow cardholders to carry a revolving balance with interest.

What is 'cross-border interchange' and why is it typically higher than domestic interchange?

Answer: Fees applied when the issuer and acquirer are in different countries, reflecting added currency conversion and risk costs

Cross-border interchange applies when the issuing country differs from the acquiring country, and is set higher to compensate for foreign exchange risk, regulatory complexity, and increased fraud exposure.