Infographic: A Guide to Core Payment Types Topic3

The World of Electronic Payments: A Deep Dive The World of Electronic Payments From massive corporate buyouts to daily coffee runs, electronic payments…

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Core Payment type ii infographic
Infographic: Core Payment Types

Core Payment Types II

An Infographic on Instant Payments & Card Systems

1. Instant Payments: The Need for Speed

Electronic retail payments available 24/7/365, resulting in immediate or near-immediate fund transfers.

Efficiency

Streamlines the payment process, reducing manual intervention.

Quicker Fund Access

Payees receive money in seconds, not days.

Enriched Data

Payment messages carry more detailed information.

Reduced Risk

More frequent settlement cycles minimize settlement risk.

Global Instant Payment Systems

  • UK
    Faster Payments Service (FPS): Launched in 2008. Processes single, forward-dated, and standing orders up to £1m.
  • EU
    TIPS & SCT Inst: Pan-European systems enabling euro transfers in seconds. TIPS settles in central bank money with no value limit.
  • Worldwide Adoption: Systems are live in Australia (NPP), Hong Kong (FPS), India (IMPS), and many others, with more in development.

Collaboration with Telecom Networks

Leveraging mobile phone numbers as proxies for bank accounts to simplify P2P payments.

India: IMPS
Sweden: Swish
Malaysia: PayNet
Peru: IPS (in development)

2. Card Payments: The Backbone of Digital Commerce

How plastic (and virtual) cards facilitate transactions through established networks and processes.

Three-Party Model (Closed Scheme)

The issuer and acquirer are the same entity. This entity controls the entire process.

Three-Party Model Diagram

Example: American Express

Four-Party Model (Open Scheme)

The issuer and acquirer are separate entities, connected by a card network (licensor).

Four-Party Model Diagram

Examples: Visa, Mastercard

The 3-Step Card Payment Process

1. Card Data Capture

Cardholder presents card at Point of Sale (POS). Data is captured via chip, swipe, tap (contactless), or manual entry (card-not-present).

2. Transaction Authorization

Merchant's system sends request to issuer via the card network. Issuer checks funds and approves or declines in seconds.

3. Clearing & Settlement

Authorized transactions are batched and sent to the acquirer. Funds are transferred to the merchant (T+1 to T+3 days).

Modern Card Applications

Card technology is the foundation for many new payment methods.

  • Mobile Wallets (e.g., Apple Pay): Use tokenization to replace physical card details (PAN) with a secure Device Account Number (DAN), leveraging existing card networks for settlement.
  • Contactless & Wearables: NFC technology in cards, fobs, and watches enables quick tap-to-pay transactions.

Evolution of Card Companies

Major players are expanding beyond cards into broader payment technology.

  • Visa: Acquired Earthport to expand from card-to-card payments to global bank account transfers.
  • Mastercard: Provides real-time payment infrastructure (e.g., powers UK's Faster Payments) and offers direct "Pay by Bank" apps.

Infographic created based on "Topic 4: Core payment types II".

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