The Payment Ecosystem

Basics of Payments

It is very useful to have a basic understanding of the card payment ecosystem when developing any solution that uses payment technology. Whilst a fundamental part of the mercantile world, the role of some payment ecosystem entities can be unclear to anyone who has not encountered them before. Here, Payter attempt to provide Integrators with a good overview of the role that the Terminal plays, and signpost some key terms for future investigation.

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The Flow of Funds

In the flow above, Transaction Authorization requests are routed by the Payter terminal to a Payment Gateway, who then pass it on to the Acquirer. The Acquirer are contracted by the Merchant to settle cardholder funds to the Merchant's Bank.

Wider Payment Chain Explanation

In this expanded view of the above, the wider role of the Acquirer can be seen, connecting to the Scheme who then gain approval from the Card Issuer before passing the responses back to the Acquirer.

Acquirer

Acquirers facilitate payments to merchants, also known as 'settling' funds to a merchant. The next sub-section of this page details this further.

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Acquirers are licenced and certified by the Schemes, but they must then adapt these certification requirements and apply them to organisations like Payter. As a result, Payter support a limited, but expanding, number of Acquirers in each territory or country. You can see details of these certifications on our Solution Overview pages.

Scheme

Schemes are the brands that appear on payment cards e.g Mastercard, Visa, Discover.

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The Schemes make the rules on payment card processing. Everyone else in the Payment Chain has to follow their rules.

Scheme's licence and certify both the Card Issuers and the Acquirers.

Card Issuer

Issuers provide consumers with their credit and debit cards. There are thousands of Issuers, usually financial institutions such as banks or credit card companies. By issuing, for example, a Visa Debit card to their customers, a bank has to agree to follow Visa's rules around how they process payment requests.

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It is possible for a Card Issuer to be able to only partially implement the Schemes rules. Schemes do not want to make it too hard for entities to use them. This can lead to inconsistent behaviour at times.

Note that Payter are at the opposite end of the Payment Chain from Issuers; We have nearly zero influence over their behaviour.

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This view is provided for information ONLY. Merchants will never need to contact Schemes or Card Issuers. Occasionally, however, Merchants may need to refer customers, or Cardholders, to their Issuer to help resolve any disputes that may occur.

Acquirers & Merchants

Acquirers play a critical role in distributing the proceeds of card payments to Merchants.

Acquirers control the flow of authorisation requests. They are also responsible, once the final amounts required are confirmed, for 'Settling' these funds to the Merchant's Bank. This process has two key requirements:

1. Payter Terminals are configured to identify the Merchant Identifier (MID) in their payment requests.
2. The Acquirer is aware of, and has fully vetted* and accepted the Merchant in their systems

With these two processes complete, the beneficiary of the funds from card payments is known as the Merchant of Record

Important

It is important to be clear in any solution who the Merchant of Record will be, and ensure they have engaged early with their chosen and supported Acquirer. Creating a new relationship with an Acquirer can take several weeks.

Other Acquirer Details

Acquirer Risk & Vetting

By settling funds to Merchants, Acquirers take on a substantial amount of risk. They are expected to meet legal and ethical standards, restrict fraudulent activity, and process refunds and settlements often before they have received the funds from the Card Issuer.

As a result, onboarding a new merchant with an Acquirer can take a long time. New merchants will be expected to provide extensive detail on their organization, as part of Anti-Money Laundering (AML) rules. Acquirers are expected to restrict or reject merchants where the beneficiaries are from certain high risk countries, or where the beneficiary is susceptible to corruption.

Prospective merchants will need to supply documentation that allows the Acquirer to complete Know Your Customer (KYC) checks on them, their owners, and the ultimate beneficiaries of funds. Documentation will include company registration details, passports or other ID for beneficiaries, and in some cases detailed and audited accounts.

Important

Payter are removed from this process, so we can only advise and encourage that this aspect of Payment Card acceptance is started as soon as possible, and completed in parallel with solution development.

Acquirers & Payment Gateways

Payter typically use a Payment Gateway to communicate with the Acquirer. This is a common approach that reduces barriers to entry; A single integration from Payter into a Gateway can unlock access to multiple Acquirers. Each individual Acquirer relationship still needs to be certified, but this overall simplifies communication for all entities involved in this part of the Payment Chain.

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Payter include this detail for completeness only. Not all Merchants need to deal with their Payment Gateway, and it is usually Payter who contract with this entity directly when it is used. Some of these gateways do however offer access to merchants, typically where advanced transaction management is required e.g. refund processing or detailed reconciliation.

Terminal Onboarding

The MID above needs to be allocated to the specific payment terminal(s) being activated. There are 3 key steps to getting a specific terminal ready to use:

Onboarding Details

This process should only be started when an Acquirer has finalised a Merchant's application process, and issued a MID.

Application

Complete a Terminal Registration form, available via Payter's website.

This provides Payter with all the information that we need to be able to configure the terminal so that Acquirer can allocate proceeds from card payments to the Merchant's Bank.

Boarding

Payter then 'board' the terminal with the Acquirer.

We confirm the MID and a Terminal Identifier (TID) so that the Acquirer is aware of the relationship between Payter and the Merchant, the mutual customer.

Activation

When boarding is complete, Payter arrange for the terminal(s) configuration to be updated.

This includes:

• The Merchant Identifier (MID)
• The Terminal Identifier (TID)
• All other relevant information from the Application for e.g. Mode of operation.

Onboarding can take some time, as the Boarding step is completed by a 3rd party, the Acquirer. Please complete the Application step at least two weeks in advance of any critical deadlines.

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Payter have decades of experience in the payment industry throughout the team and at all levels. Please Contact Us if you have any additional questions on this topic.