ISO 8583 — The Language Behind Every Card Payment

“Space… the final frontier. These are the voyages of the starship Enterprise. Its five-year mission: to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before!”

While Captain Kirk and his crew were planning to go boldly going where no man had gone before, their first stop would have been the payments ecosystem.

Why, you ask, well imagine this!

You are trying to order a Romulan ale at a space cantina, but you can get that ale only if you can successfully explain the significance of your Earth currency and payment method using hand gestures!

So, there would have been a need for a universal translator just like in Star Trek. And the payment ecosystem participants felt the same way and they figured out a common language.

Eager to learn the common language?

Here you go!

ISO 8583:

ISO 8583 — a global messaging standard that enables secure and efficient card-based transactions. It’s a set of rules that dictate how transaction information is packaged and sent between banks, merchants, and card networks.

When you use your card, a message containing details like the amount, your card number, and the merchant’s information needs to be transmitted securely. ISO 8583 defines exactly how this message should be structured — the order of numbers and letters, what each part represents, and so on. This is because different banks and systems need to “speak the same language” to process your payment correctly.

This standard covers various transaction types: purchases, withdrawals, deposits, refunds, balance checks, and even secure key exchanges between systems. It’s like a comprehensive instruction manual for all card-related communications.

How does ISO 8583 Work?

Imagine you purchase goods using your card, here is a breakdown of how ISO 8583 works in a card transaction:

1. You enter your card details online and proceed for payment. Behind the scenes, this triggers the creation of an ISO 8583 message. This message, formatted according to the standard, contains your card information, the transaction amount, and other relevant data.
2. The merchant’s bank (acquirer) receives this ISO 8583 message via a payment gateway. The gateway acts as a translator, ensuring the message is properly formatted and transmitted.
3. The acquirer forwards the ISO 8583 message to the appropriate card network. The network acts as a central hub, routing the message to the correct bank.
4. The card network sends the ISO 8583 message to your bank (the issuer). Your bank uses the information in the message to authenticate and to authorize.
5. Your bank sends a response back through the card network, acquirer, and payment gateway to the merchant. This response indicates whether the transaction is approved or declined.
6. The merchant receives the response and informs you whether the payment was successful.

Note: At each step, the same ISO 8583 format is used. This allows all the different systems involved (merchant, acquirer, card scheme, issuer) to understand the transaction details. Without this standardized format, communication would be impossible, and your payment wouldn’t go through.

ISO 8583 ensures that the right information gets to the right place in a secure and consistent manner.

Key Components of ISO 8583 Message

An ISO 8583 message, is structured into a well-organized form and here’s the breakdown:

1. Header:

• Think of this as the “envelope”.
• It’s network-specific and identifies the institutions involved (like Visa, Mastercard etc.).
• It might also contain the message size.
• Example: A header value of 0200 may indicate that the message size is 200 bytes, including the MTI, bitmap, and data elements.

2. Message Type Indicator (MTI):

• Think of this as a “return address” and “subject line” combined.
• It tells us the ISO 8583 version, the message’s purpose (authorization, reversal, etc.), and who initiated it.
• It’s a four-digit code.
• Example: An MTI of 0200 means:

0 → 1987 version of ISO 8583

2 → Financial transaction request

0 → Original request (not a response)

0 → Sent by the acquirer

3. Bitmap:

• This is a checklist of what information the message contains. It’s a series of bits, each representing a data element (field).
• Each ISO 8583 message has at least a primary bitmap (fields 1–64).
• If more fields (65–128) are needed, a secondary bitmap is included.
• Example: A bitmap of 1000000000000000 means that only the first data field (Field 1) is included, while all others are absent.

4. Data Elements (Fields)

• These are the actual pieces of information, like the card number, transaction amount, date, etc.
• Each data element has a specific meaning and format.
• Example:

Field 2 is the Primary Account Number (PAN),

Field 4 is the Transaction Amount [Example: Amount: C00000015000 (C indicates credit, followed by the amount 150.00)]

Field 7: Transaction Date & Time (e.g., 2402111230 → Feb 11, 2024, 12:30 PM)

In short,

• The header and MTI identify the message,
• The bitmap acts as an index, and
• The data elements carry the actual transaction details.

This structured approach ensures that all parties involved in the transaction understand the information being exchanged.

How are Messages Processed?

ISO 8583 message processing involves a request-response interaction between two parties to execute a transaction.

1. Connection Establishment: A communication channel is established between the two parties. This can be a TCP connection or other types like UDP, X.25, SDLC, SNA, HTTP, etc. or a custom connection.

2. Handshake (Optional): Before message exchange, the parties may perform a handshake. This process prepares both systems for communication and ensures they are ready to send and receive messages.

3. Message Exchange: Actual transaction processing occurs through the exchange of ISO 8583 messages. One party sends a request message initiating the transaction. The other party processes the request and sends back a response message.

4. Connection Handling: The connection established in step 1 can be handled in two ways:

• Persistent Connection: The connection remains open for multiple message exchanges, improving efficiency for a series of transactions.
• Non-Persistent Connection: The connection is closed after each message exchange and re-established for subsequent transactions.

In short, ISO 8583 messages are processed by establishing a connection, optionally performing a handshake, exchanging request and response messages over that connection, and managing the connection as either persistent or non-persistent.

Conclusion:

ISO 8583 is a standardized messaging format used for transactions made using cards. It defines the structure and content of messages exchanged between different systems, such as acquirers, issuers, and networks. The standard includes a header, message type indicator, bitmap, and data elements (fields) containing transaction details. ISO 8583 ensures interoperability and facilitates secure communication between various parties involved in payment processing, enabling frictionless transactions globally.

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P.S: What topic do you think we should explore next? Let us know in the comments.