International transactions made with payment cards are often categorized based on the merchant’s location. This categorization relies on a system of regional data aggregators (RDAs) that collect and process transaction information from specific countries. When a purchase is made with a credit card from a merchant located outside the cardholder’s home country, the transaction is routed through the appropriate RDA for processing and settlement. For example, a purchase made in Japan with a U.S.-issued credit card would be processed through the Japanese RDA. This system helps facilitate cross-border payments and ensures accurate record-keeping for financial institutions.
This geographic categorization of transactions plays a vital role in several aspects of international finance. It enables banks and credit card companies to accurately assess risk, detect fraudulent activity, and apply appropriate currency conversion rates. Additionally, this system facilitates international trade by streamlining payment processing and reducing the complexities associated with cross-border transactions. Historically, this system has evolved from simpler methods of international payment processing, reflecting the growth of global commerce and the increasing use of electronic payment methods.
