What Was Interbank Network for Electronic Transfer (INET)?
Interbank Network for Electronic Transfer (INET) processed credit and debit card transactions between financial institutions (FIs). It handled the transferring of funds from cards bearing the MasterCard Inc. (MA) logo, prior to the introduction of Banknet.
- Interbank Network for Electronic Transfer (INET) processed MasterCard’s debit and credit card transactions.
- INET orchestrated the transfer of funds, while MasterCard’s Interbank National Authorization System (INAS) processed card authorizations.
- The two systems were later combined into Banknet, a single entity tying together all MasterCard data processing centers and issuing members into one financial network.
Understanding Interbank Network for Electronic Transfer (INET)
Interbank Network for Electronic Transfer (INET) dealt with the transfer of funds, while MasterCard’s Interbank National Authorization System (INAS) processed card authorizations.
Interbank National Authorization System (INAS) was the first component of MasterCard’s global telecommunications network, providing electronic authorization to replace earlier phone authorization technology. Interbank Network for Electronic Transfer (INET) followed later, offering electronic settlement services to replace the previous system in which banks sent each other paperwork.
Eventually, Interbank Network for Electronic Transfer (INET) and Interbank National Authorization System (INAS) were combined into a single entity named Banknet: a global telecommunications network linking all MasterCard card issuers, acquirers, and data processing centers into one financial network.
Banknet facilitates payments across the world. It has been in operation since 1997 and can handle millions of secure transactions each hour via its thousand-plus data centers littered all over the globe.
Before Banknet, a payment through MasterCard took approximately 650 milliseconds to process. Banknet has cut down that time to 210 milliseconds.
Banknet’s architecture is based on a peer-to-peer protocol that routes transactions to various endpoints. Data centers are equipped with technology that provides redundancy and automatic activations of backup services in the event that a shutdown occurs.
Banknet’s architecture allows the regulation of bandwidth in accordance with demand. This function is crucial to regulate the capacity of the system at peak times, such as during the holiday shopping season. For this technology and others, Banknet primarily partners with AT&T Inc.
Banknet also provides a transaction research service for chargeback requests. This makes it possible for cardholders to get approved chargebacks in just a few hours.
The Banknet hub and data warehouse is one of the largest in the world and can be used by issuers and analysts to research payments and retail transactions.
MasterCard vs. Visa
MasterCard Inc. (MA) runs one of the largest credit and debit card networks. According to creditcard.com, there were "249 million Mastercard credit cards in the U.S. and 725 million cards in the rest of the world at the end of March 2021."
MasterCard’s Banknet technology gives it a big advantage over its rival Visa Inc. (V). Instead of using a peer-to-peer network, Visa handles transactions through a centralized, or “star-based” system. This type of network connects its many endpoints to only a few main data centers.
In other words, that means that if one of MasterCard's data centers fails there should be many others online, whereas if one of Visa malfunctions a larger portion of transactions are likely to be affected.
Still, in terms of global dominance, MasterCard continues to play catch up to Visa. The company has about a quarter of the global payments market, trailing behind Visa’s massive 61.5% share.
Creditcard.com data shows that "Visa is the largest of the four major U.S. credit card networks. There were 343 million Visa credit cards in circulation in the U.S. and 798 million Visa credit cards in circulation outside of the U.S. at the end of September 2020."