FinTech

Payment Tokenization – Clearing Flow

In the first part of Tokenization articles we covered the basic understanding of tokenization and in the second part we covered the Authorization flow. In this article, we’ll dive deeper to understand the clearing flow as part of the transaction lifecycle:

The following are the steps :

Step 1: Merchant at the end of it’s business day initiate the process to capture the transaction for settlement. The Payment Token will be passed in the existing PAN field of the Capture File, along with other token and standard data elements, and sent to the Acquirer.

Step 2: The Acquirer will perform processing checks on the data elements, and will use the following Payment Token data fields to create the Clearing File to be sent to the Payment Network:
a. Token will be passed in the existing PAN field.
b. POS Entry Mode will be set to the standard POS Entry Mode for the specific transaction channel
c. Token Assurance Level will be included in the Clearing File in a new data field
d. Token Requestor ID will be passed as an optional field in the Clearing file.

Step 3: The Payment Network will communicate with the Token Service Provider to:
a. Fetch the PAN.
b. Verify the active PAN mapping in the Token Vault and other checks to ensure Token.
c. Validate the Token Domain Restriction Controls to ensure the channel.

Step 4: The Payment Network will send following information in the Clearing File to the Issuer:
a. Replace Payment Token with PAN.
b. Add an indicator that conveys to the Card Issuer that an on-behalf-of validation has been completed by the Token Service Provider of that Payment Token.
c. Pass the following Payment Token-related fields in the Clearing File. These are new fields sent optionally to the Card Issuer in the Clearing File:

i. Payment Token
ii. Token Exp. Date (Optional)
iii. Token Requestor ID
iv. Token Assurance Level

Step 5: The Card Issuer performs validation on the Clearing File and completes the clearing process.

And that’s a wrap, this article conclude the Tokenization primer from Basic Know How to Authorization flow to Clearing cycle.