Everything You Need to Know About the Payments Industry (In Pictures!)
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Transcript of Everything You Need to Know About the Payments Industry (In Pictures!)
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Everything You Need to Know About the
Payments IndustryIn Pictures!
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In any payment transaction, there are four parties
Cardholder
Acquirer
Issuer
Merchant
(Cardholder Bank)
(Merchant Bank)
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Based on these four parties there are two transaction party systems
Four Party System
Three Party System
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The Four Party System
Used by Visa and MasterCard
Goods or
Services
Presents card
for payment
Bill for payment
Payment for bill
Asks for authorization
Approve/Denies transaction
and extends credit
Confirms transaction
Pays transaction fee
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$The Four Party SystemThese companies make
money from transaction fees and volume fees.
!These companies DO NOT
issue cards or extend credit.
Transaction fee!and
fee based on!gross dollar volume
$Transaction fee!and
fee based on!gross dollar volume
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The Three Party SystemUsed by Discover and
American ExpressGoods
or Services
Present card
for payment
Bill for payment
Payment for bill
Confirms transaction
Pays transaction fee
Note:!Issuer and
Acquirer are the same
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The Three Party SystemThese companies make
money from transaction fees and volume fees.
!Plus!!
!These companies DO issue
cards and extend credit
$Card fees!and
Interest fees
$Transaction fee!and
fee based on!gross dollar volume