What is original credit transaction (OCT)? Visa and Mastercard
As faster and immediate/real-time payments have become a norm in the Fintech industry, the end-user anticipates the same from payouts to cards, refunds, or disbursements. Original Credit Transaction (OCT) is a payment method that is backed by two of the major card schemes Visa and Mastercard and was initially created to accelerate payout by providing direct transfer of funds to eligible credit, debit, or pre-paid cards. Businesses can make convenient payouts, refunds, or facilitate disbursements without triggering any sensitive data by pushing real-time payments directly to cardholder’s bank account, which is linked to their payment card.
Both Visa Direct and Mastercard Send and MoneySend services enable fast fund transfers through the Original Credit Transaction (OCT) payment method. Visa Direct is a part of Visa Net processing and enables P2P payments, bill pay, funds disbursements, and cross border remittances directly to eligible payment cards.
Similar to Visa Direct, Mastercard Send is another global payment network’s approach towards real-time payments, which provides disbursements, domestic, and cross-border P2P payments available to consumers.
In contrast, the Mastercard MoneySend is a transaction code 28 type service that was developed for real-time transfers by issuers connected to the Mastercard network and is compatible with all consumer cards worldwide.
How does Original Credit Transaction work?
Visa Direct, Mastercard Send, and MoneySend use the similar principle of Account Funding Transactions (AFTs) to debit funds from card account and Original Credit Transactions (OCTs) to credit funds to the card account. In person-to-person (P2P) transfers, funds are debited from originators’ account using AFT, then credited to the recipient’s account using OCT. During the funds’ disbursement transactions such as business to consumer (B2C), business to business (B2B), and government disbursements (G2C), the business originator credits the funds to a holder of Mastercard or VISA card account using OCT. If an original credit transaction is declined, Account Funding Transaction Reversal (AFTR) is used in order to return the funds to the customer.
How is Original Credit Transaction used?
As mentioned before Account Funding Transactions (debit), Original Credit Transactions (credit) and Account Funding Transaction Reversals (reversal) are used in OCT transfer operations, although it is necessary to take a look at the possible use cases.
Portals with large client and supplier base such as freelance and transportation services can benefit from direct payouts. Original Credit Transaction (OCT) allows them to optimise direct payouts to employees. While payouts to employees can be facilitated through OCT, they must meet tax legislations of the specific country. This way direct payments can be made to a driver or freelance employee payment cards significantly simplifying the process and reducing costs.
Original credit transaction Visa or original credit transaction MasterCard can also be used as a supplement to already well-established payment methods for immigrant transfers. People that live and work abroad seek simple and cost-efficient payment methods in order to send money to their families. Even though wire transfers are still amongst the most commonly used payment methods, Original Credit Transaction is becoming extremely popular. Additionally, microfinance companies can issue short term loans directly to client’s payment card which in result reduces the cost of issuing the loan and provide an even more convenient way of loan repayment.
How to enable Visa Direct?
To enable Visa Direct OCT programme, it is necessary to connect to Visa Net processing via the following methods: payment gateway, processor, or acquirer. All Visa Direct programmes must be initially approved by Visa. This can be done by completing the Visa Direct Programme Information Form (PIF). The PIF features the overall scope of the proposed program and controls, which includes BIN information, domestic and cross-border parameters, processor, and third-party agents.
Firstly, the applicant should become a partner of a bank which is the Principal Member of Visa card network (Visa acquiring bank) which will agree to provide the applicant with BIN number. Application and implementation process times vary depending on the level of financial resources and technical capabilities of the applicant. For acquirers and PSPs willing to integrate with original credit transactions provided by Visa, the process may include managing and amending: Payment Card Industry Data Security Standard (PCI) compliance with payment gateway, customers notifications and alerts support, widget and white label portal, user authentication, Know Your Customer (KYC), customer service processes, API integration to send payment instructions to payment gateway. It is also necessary to ensure that there are sufficient funds available for settlement with Visa. A new settlement account with an acquiring bank may be required.
How to enable Mastercard MoneySend?
To enable Mastercard MoneySend OCT programme all potential members must submit the Mastercard MoneySend Participating Institution Form (Form 1060) and obtain approval, a separate enrollment is required to use the MoneySend API.
All potential members are responsible for ensuring that they comply with all applicable legal and regulatory requirements such as laws governing foreign currency transactions, money transfers, and anti-money laundering (AML). Potential members must also implement such a system that will limit MoneySend transaction maximum value to EUR2,500 per month per sender. All further MoneySend transactions must be submitted through Mastercard Worldwide Network via MoneySend API, Dual or Single Message System. To connect to Mastercard Worldwide Network and access original credit transactions Mastercard, it may be necessary to use Mastercard solution, build its own platform, or use a third-party service provider.
How can PSP Lab help you?
If you wish to learn more about Original Credit Transaction (OCT) and enable OCT programme reach out to us. PSP Lab can assist you throughout the whole process.