Transactions need to be accurate and processed quickly, especially when reconciling payments. After a merchant closes off their daily batch, the clearing process becomes crucial in ensuring that all transactions are settled correctly between Mastercard and Visa and their members. Understanding this process is key to maintaining operational efficiency and compliance with regulatory standards for issuers and acquirers.

In this blog, we’ll explain how Mastercard and Visa handle clearing, the key differences in their systems, and why this process is vital for smooth and secure payment transactions.


What is the clearing process?

The clearing process refers to the steps in which financial transaction values are calculated and distributed. It ensures that all transactions are properly recorded, reconciled, and settled between payment networks and their members. This process is essential for:


Merchants to receive their payments.

Issuers and acquirers to reconcile transaction records and maintain accurate financial statements.

Regulatory compliance to meet industry standards for financial reporting.

Once a merchant closes their daily transaction batch—a daily file that contains all approved transactions for which goods or services have been delivered—the data is sent to the acquirer for processing. This process includes payment settlement to merchants, accounting reconciliation, and tax documentation.

Visa’s BASE II system within VisaNet


Visa uses the BASE II system, part of VisaNet, to collect, validate, and transmit transaction data to receiving institutions for reconciliation and settlement. BASE II plays a vital role in ensuring that all Visa transactions are processed securely and efficiently.


BASE II generates reconciliation reports that summarize all completed transactions, helping issuers and acquirers with their financial operations.

The system supports global transaction processing, ensuring that all parties involved are working with the same data.


Mastercard’s Global Clearing Message System (GCMS)


Mastercard uses the Global Clearing Message System (GCMS) , which is based on a version of ISO 8583 called IPM (Integrated Product Messages). GCMS validates, calculates totals for settlement, handles currency conversion, and generates reconciliation reports.


GCMS ensures that all Mastercard transactions are processed consistently and accurately, facilitating both domestic and international clearing.


The system routes messages between financial institutions, processes fees, and ensures proper transaction settlement.

Contactless credit card transaction on POS terminal, illustrating seamless payment continuity.


Confirmation and processing

Once members send their files to Visa or Mastercard (Visa: Outgoing, Mastercard: R111), the networks perform a validation process. This process ensures that all fields within the messages are correct, and then Visa or Mastercard sends the updated files back to the members, including incoming transaction records and confirmation of the transactions.


Visa’s Incoming (Visa: Incoming) and Mastercard’s T112: These confirmation reports provide issuers and acquirers with transaction details received from other members and confirmation of those transactions.

For issuers and acquirers, these reports provide the data needed for their day-to-day operations, such as:


Issuers: Use the data to reflect transactions in cardholders' accounts, calculate interest and fees, and process billing.

Acquirers: Use the data for reconciliation processes, back-office operations, risk monitoring, and accounting records.



Rules and regulations in the clearing process

Clearing involves the distribution of files, but it also applies rules for calculating both domestic and international interchange. Mastercard and Visa establish processing standards that all members must follow to remain compliant.

These standards ensure:


Regulatory compliance: Mastercard and Visa's rules help issuers and acquirers stay compliant with industry regulations.

Consistency and accuracy By adhering to processing standards, all parties involved can be certain that the transaction data is handled correctly.

Tools for validation and optimization

Mastercard and Visa provide specialized tools to help their members optimize the clearing process and ensure the data is accurate.


Mastercard: Clearing Optimizer


The Clearing Optimizer is an optional software tool that includes a set of utilities to validate the content of clearing files based on the IPM message. It generates reports in both test and production environments, ensuring the validity of message elements and edits made within GCMS.


Clearing Optimizer helps acquirers validate data and ensure the integrity of transaction records before they are processed. By identifying incorrect information in the batches prior to submission, it helps prevent rejects. The tool also allows acquirers to make the necessary adjustments to correct any errors detected during validation.


Visa: Edit Package


The Edit Package is a value-added tool designed for Visa members. It validates, formats, and creates outgoing transaction data while also ensuring the integrity of incoming transaction data and reports.


Edit Package ensures that Visa’s clearing data is correctly formatted and compliant with Visa’s processing standards.

Optimizing the clearing process for issuers and acquirers

Understanding the clearing process for Mastercard and Visa is essential for both issuers and acquirers. Financial institutions can ensure that payments are settled accurately and efficiently by knowing how transaction data is processed, validated, and reconciled.

With the right tools, a strong understanding of the process, and compliance with regulatory standards, issuers and acquirers can improve operational efficiency and reduce the risk of errors in payment processing.