What it means
When a customer taps or inserts a card, the shop's bank (the acquirer) must find out whether the cardholder's bank (the issuer) will approve the payment. That question and answer, called authorisation, has to happen within seconds.
INAS was one of the networks that carried these messages between banks. An authorisation checks several things.
The issuer confirms that the card is valid, that there is enough available balance or credit, and that the transaction does not look like fraud. It then replies with an approval or a decline, and the shop completes or cancels the sale.
Authorisation is different from clearing and settlement. Authorisation is the approval at the moment of purchase, while clearing is the later exchange of transaction details and settlement is the movement of money between the banks.
Historically, a companion network called INET handled the transfer side, and both were later brought together within Mastercard's network, known as Banknet. For businesses, the main point is understanding how a card sale really works.
The approval a merchant sees at the till is only a promise to pay, and the money arrives after clearing and settlement, usually after fees are deducted. The name belongs mainly to the history of card payments.
Anyone reading older finance texts or payments documentation may come across INAS, but in modern practice the networks are described by their brand names, and the individual systems have been merged and upgraded many times. Finance teams that accept cards care about authorisation rates, which show the share of attempted payments that are approved.
A drop in authorisation rates costs sales directly, and the cause may be fraud filters, card expiry or technical problems.
In practice
Real-world examples.
Example
A customer buys a $120 jacket with a card. The shop's bank sends an authorisation request across the network, the cardholder's bank approves it within seconds, and the customer leaves with the jacket. The bank behind the card checks the balance in a fraction of a second, so the customer barely notices the process happening.
Example
An online retailer sees that some orders are declined at checkout. Its payments manager checks the decline codes returned by issuing banks and finds that many are due to expired cards, so she adds a prompt asking customers to update their details.
Example
A student writing a paper on payments history reads that INAS handled authorisation for Mastercard transactions and that INET handled the transfer of money between banks. She notes that both were later combined into a single network. She also notes in the paper that today's networks handle many millions of such requests every day, which shows how much the underlying systems have developed since the early versions.
Case study
Seen in the real world.
Cobbleston Outfitters is an illustrative, fictional clothing retailer that sells online and in four shops. The finance manager noticed that the share of card payments approved at checkout had dropped from 94% to 90% in a quarter.
On annual card sales of $5,000,000 the four-point fall meant roughly 5,000,000 x 0.04 = $200,000 of attempted sales were being declined. She worked with the payment provider to review the decline reasons and found that a new fraud setting was rejecting too many genuine customers.
The provider adjusted the rule and the approval rate recovered to 93%. In this illustrative story, the manager added the approval rate to the monthly report so that any future drop would be noticed in weeks rather than months. She also asked the provider to break the figures down by card type and by country, because declines are often concentrated in one group of customers, and knowing which group helps to find the cause quickly. An authorisation also reserves the amount on the cardholder's account, so the available balance falls straight away even though the money has not yet moved. Later, the shop's bank submits the final amount for clearing, which can differ slightly where a tip or a hotel bill is added.
Watch out
Common mistakes.
- Assuming an approved card payment means the money has arrived, when authorisation only confirms the cardholder's bank will pay and settlement comes later.
- Mixing up authorisation, clearing and settlement, which are three distinct steps in a card payment.
- Treating a decline as always meaning the customer lacks funds, when expired cards, fraud rules and technical errors are also common reasons.
Questions
People also ask.
What does INAS stand for?
It stands for Interbank National Authorization System, a network linked with Mastercard for approving card transactions.
How is authorisation different from settlement?
Authorisation is the approval given at the time of purchase, while settlement is the later transfer of money between the banks.
Do merchants need to know about INAS today?
Not usually, since modern payment providers handle the network connections, but understanding the steps helps explain delays and declines.
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