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!)
Everything You Need to Know About the
Payments IndustryIn Pictures!
!
In any payment transaction, there are four parties
Cardholder
Acquirer
Issuer
Merchant
(Cardholder Bank)
(Merchant Bank)
Based on these four parties there are two transaction party systems
Four Party System
Three Party System
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
$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
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
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