The Payments Ecosystem Explained: From Cardholders to Card Networks
Payments industry is a complex and rapidly evolving landscape, with a multitude of players and technologies involved in the process of moving money from one place to another.
Fintech startups are finding new opportunities among so many payment companies by offering innovative solutions, targeting niche markets, or partnering with established players. PayPal, Stripe, and Square are some of the leading payment companies that provide online and mobile payment processing services for businesses and individuals.
Payment Process
Cardholder and Merchant
- cardholder opens an account in the issuing bank and gets the debit/credit card
- merchant registers with ISO (Independent Sales Organization) or MSP (Member Service Provider) for in-store sales. ISO/MSP partners with payment processors to open merchant accounts
Acquiring Process
- payment gateway accepts the purchase transaction and collects payment information. It is then sent to a payment processor, which uses customer information to collect payments
- acquiring processor sends the transaction to the card network. It also owns and operates the merchant’s account during settlement, which doesn’t happen in real-time
- card network routes the transaction to the issuing processor, which talks to the card network on the issuing bank’s behalf. It validates and operates the customer’s account
Issuing Process
- issuing processor validates the transaction and sends an authorization code to the acquiring processor
- acquiring processor sends the authorization code to the payment gateway, which sends it to the merchant
- merchant completes the transaction and receives the payment
Examples fordifferent verticals
- Payment Gateways: PayPal, Adyen, Flutterwave, Coda Payments, Chipper Cash
- Payment Processors: PayPal, Adyen, M10, Rapyd, CloudWalk
- Card Networks: Visa, Mastercard, American Express
- Issuing Processors: Marqeta, Galileo, Stripe Issuing
- Issuing Banks: Wells Fargo, Bank of America, Chase
- ISO/MSP: First Data, Worldpay, TSYS
Conclusion
The payments ecosystem is a complex and dynamic landscape that requires careful consideration and planning for businesses and individuals. By understanding the payment process, choosing the right payment solutions, and keeping up with the latest trends and innovations, you can stay ahead of the competition and provide a seamless payment experience for your customers.
