How to Build a Cross‑Border Card Acquiring System for Third‑Party Payment Platforms

Market Development

In recent years, with the expansion of cross‑border trade and services, the foreign‑card acquiring industry in China has entered a new development stage. By November 2023, Shanghai had over 36,000 foreign‑card POS terminals and more than 8,000 ATMs supporting foreign‑card cash withdrawals, while third‑party payment institutions are increasingly joining the market.

Key Characteristics of the Foreign‑Card Acquiring Market

Continuous Growth of Transaction Volume

According to the People’s Bank of China Zhejiang branch, during the 2023 National Day and Hangzhou Asian Games period, foreign‑card transactions approached 40,000. The number of transactions continues to rise year by year as more overseas cards are used.

Diversified Payment Methods

Beyond traditional offline POS terminals, online foreign‑card payments, mobile‑app binding, and other new methods are becoming common.

Increasing Risk‑Control and Compliance Requirements

Card‑network regulators have tightened standards for merchant onboarding, fraud‑rate and charge‑back‑rate thresholds, raising entry barriers for new players.

Fundamentals of Foreign‑Card Acquiring

Foreign‑card acquiring refers to the service where an acquiring institution processes payments made with international credit cards issued abroad, completing settlement between the merchant and the foreign issuer through the card network.

International Credit Cards and Card Networks

International credit cards are similar to domestic cards but bear the logos of global card organizations. The six major networks are VISA, MasterCard, American Express, JCB, Diners Club, and Discover.

Single‑Information and Double‑Information Modes

Double‑information mode requires the acquiring bank to upload a settlement file to the card network before funds are cleared, while single‑information mode settles automatically after the transaction information is received. Foreign networks generally use double‑information, whereas domestic networks use single‑information.

EDC and DCC

EDC (Electronic Data Capture) is the common acquiring mode where currency conversion is performed by the card network and the merchant receives settlement in local currency. DCC (Dynamic Currency Conversion) converts the foreign currency to the cardholder’s currency in real time, allowing the merchant or acquiring bank to retain the conversion margin.

Fraud Types

Counterfeit card transactions : use of forged cards or cloned magnetic/chip data.

Stolen card transactions : use of lost or stolen cards before the holder reports them.

Unauthorized transactions : transactions without the cardholder’s explicit consent.

Merchant fraud : merchants colluding with fraudsters to submit false orders or refunds.

Online fraud : phishing, malware, or other internet‑based attacks to obtain card data.

Chargebacks (拒付)

Card networks allow cardholders to dispute a transaction within a defined period (e.g., 120 days for Visa). Disputes are classified as fraud‑related or trade‑dispute‑related, and merchants must provide supporting evidence to contest chargebacks.

3‑D Secure (3DS)

3DS provides an additional authentication layer for online card transactions. When triggered, the cardholder is redirected to the issuer’s verification page to enter a password, fingerprint, or SMS code. Successful verification completes the transaction; failure may block it.

Arbitration and Pre‑Arbitration

These are the final steps in the chargeback process, where the card network makes a final decision after the merchant submits evidence.

Business Architecture for Third‑Party Payment Providers

To launch foreign‑card acquiring, a payment provider must build a system that includes foreign‑exchange modules, reporting/申报 modules, logistics‑information verification, and fund‑management modules. The architecture differs from domestic payment systems mainly in the need for currency conversion, regulatory reporting, and cross‑border logistics checks.

Core System Layers

Business System Layer : order management, unified payment, clearing, account, accounting, reconciliation, plus foreign‑exchange, fund‑management, and risk modules.

API & Service Layer : exposes ordering, refund, query, asynchronous notification, 3DS, exchange‑rate query, foreign‑exchange conversion, error handling, and reporting services.

Business Scenario Layer : supports offline POS, online e‑commerce, virtual‑goods overseas sales, and foreign‑resident consumption scenarios.

Key Functional Modules

Foreign‑exchange Module : provides real‑time rates and conversion for settlement.

Reporting (申报) Module : handles international fund‑inflow declarations required by Chinese foreign‑exchange controls.

Logistics Verification Module : requires merchants to upload shipment information for cross‑border transactions.

Fund‑Collection and Allocation Module : manages multi‑currency balances, automatic and manual fund transfers between domestic and overseas accounts.

Merchant Platform for Foreign‑Card Acquiring

A dedicated merchant portal is needed, separate from the domestic acquiring platform, with modules for homepage, transaction management, billing, fund management, logistics, error handling, and settings.

Cashier and API Interfaces

The cashier page must collect card number, expiry, CVV, calculate the amount in the settlement currency, and invoke the acquiring bank’s 3DS service. The API provides endpoints for order creation, refund, query, asynchronous notification, and 3DS verification, with additional parameters for pricing and device information.

Internal Operations Platform

Functions include merchant onboarding review, configuration management, withdrawal‑card verification, transaction query, fund‑movement query, guarantee‑deposit management, risk‑rule configuration, risk‑transaction review, reconciliation, and error handling.

Account Types and Accounting Rules

Three account types are defined: pending‑settlement, available balance, and frozen balance. Each has specific income and expense rules for order payment, refund, settlement, freezing, unfreezing, withdrawal, chargeback deduction, chargeback reversal, and guarantee‑deposit adjustments.

Reconciliation

Transaction and fund reconciliation between the payment provider and the acquiring bank is performed regularly, as illustrated in the accompanying flow diagram.