How do McDonald's debit card payments get processed in under a second in Italy?

[ceoloide]

Hello fellow HN readers, I have a question that has been puzzling me for a long time now.

When you pay with Debit Card at a McDonald's in Italy, your payment get "processed" in under a second. By "processed" I mean that, after you have confirmed your PIN code, you receive confirmation and you are prompted to retrieve your card in under a second.

How does McDonald's do that? I haven't seen any other retail store or merchant that can achieve the same result, all the others take a lot more than 1 second (and in some cases more than a minute).

Does anyone have good reading recommendation to learn more about bank transfer protocols or systems?

Thank you all for your inputs!

Marco

[eduardordm]

Hi Marco, I own a credit card company/bank/gateway and I can answer that:

They are using a small protocol (XML or plain ISO8583) over a somewhat fast connection (X.25, GPRS, 3G or the store's internet - ADSL, etc). Connections are always kept alive for a certain amount of time.

The bank side of processing is very simple and shouldn't take long. Keep in mind that the data used to authorize a transaction is minimal. After the authorization is given, the bank will process the actual payment, which is a two-step job with the first step being executed minutes after the purchase and the second one usually at night.

I wouldn't recommend you digging too much into banking standards without a specific purpose. There are just so many and almost no one strictly follows them. This is a good start: http://www.aba.com/Pages/default.aspx and https://www.pcisecuritystandards.org/

[ceoloide → eduardordm]

Thank you very much Eduardo! You are the first that gives me a possible technical explanation.

McDonald's are in most cases wired with ADSL or faster connection, since they serve free wifi in the store. I would guess they use the same connection for the POS.

My two guesses were:

1) Fast connection with fast standard and maybe custom software to keep the channel open. 2) Pre-authorization, given the small sums paid and the low probability of frauds.

I do also think that McDonald's might have a specific agreement with a gateway or a bank. They use Ingenico's POS, so I ruled out custom hardware.

I will update the thread if I find anything interesting! Thank you again!

Marco

[adyus]

This is just an un-researched hunch, but I believe that for the small average sums transacted at McDonalds, the merchant (or the bank) takes on the fraud risk. Thus, they instantly approve your transaction, as long as the number of fraudulent transactions never overshadow the convenience of instant payment and short queues. That's why they don't ask for a signature under $20 in some places.

[ceoloide → adyus]

This was one of my hunches...

[alberto_rico]

I'm not sure about McDonald's Italy system, but one that's frequently used in places with low/expensive cellular signal, and/or a big number of small transactions, used deferred debit.

Basically, it consists of updating the system every certain period of time, with the list of the revoked numbers, and assuming that the rest are cleared by default. Then, every time the process runs, it submits the transactions while obtaining the revocation list.

This makes every transaction as fast as a look up on a local database table, and it is for example how it works at certain toll booths in Spain.

[benologist]

In Australia we have a system called EFTPOS that does that nationally. It's the default way to pay with a card.

http://en.wikipedia.org/wiki/EFTPOS

[ceoloide → benologist]

Very interesting! Thank you for the reference.

[TheSmoke]

it's not about mcdonalds, it's about the banking system. this also applies to turkey as well. every payment we make by our credit cards or debit cards are processed right in that moment. nobody waits for the night, nobody wonders if there's any more amount will be charged for anything. you see the amount, enter your pin, bank transfers money from your account to merchant's account and it's done.

[ceoloide → TheSmoke]

This is completely true, the point of my question was how fast this is done at McDonald's. Almost every merchant that accepts debit card payments in Italy has very long wait times for authorization (>10 sec), while McDonald's are instantaneous (<1 sec).