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Settlement & Clearing

How authorized card transactions are submitted for clearing, how net positions are computed across thousands of banks, and how funds actually move. Covers clearing file formats, dispute timelines, and interchange fee economics.

Clearing File Formats

Each card network defines its own clearing file format. These files are submitted by acquirers (and sometimes directly by merchants) to the scheme's clearing system for processing. Modern clearing files are electronic batch submissions with no physical paper component.

Mastercard IPM (Interchange Processing Messages)

Mastercard's clearing system uses ISO 8583-based batch files transmitted through BankNet. The IPM format extends ISO 8583 with clearing-specific message types and data elements.

MTI	Name	Description
`1240`	Clearing Presentment	First presentment of a transaction for clearing. Includes full transaction data: DE2, DE4, DE12, DE14, DE22, DE41, DE42, DE48, DE49, DE55.
`1442`	Chargeback	Issuer initiates a chargeback against an acquirer. Includes original transaction reference and dispute reason code.
`1644`	Fee Collection	Scheme fees (assessments, NABU, APF) billed to member banks via the clearing file.

Clearing cycles: Mastercard processes multiple clearing cycles per day in major markets (up to 4 cycles in some regions). The final Mastercard Settlement File (MSF) aggregates all cycles and drives the settlement instruction to member banks.

Visa CTF / BASE II

Visa's clearing uses the Clearing Transaction File (CTF) submitted to BASE II — Visa's clearing and settlement system. Unlike Mastercard's IPM, BASE II is not ISO 8583 format; it uses Visa's proprietary record structure.

Record Type	Description
Transaction Summary Record (TSR)	Batch-level totals: count and amount of credits, debits, reversals. Used for reconciliation between acquirer and scheme.
Transaction Detail Record (TDR)	Individual transaction: PAN, amount, merchant data, processing codes, authorization code, terminal ID. One record per cleared transaction.
Fee/Interchange Record	Interchange billing details calculated by Visa per transaction based on card type, entry mode, MCC, and other qualifiers.

BASE II processing: Visa runs BASE II clearing after each business day. Acquirers submit CTFs within the scheme's cutoff window (typically up to 24 hours after authorization). Late submissions may result in reduced interchange rates or transaction rejection.