Want to invest in Visa stock but are confused about how does payment processing system actually work? Here are a few terms that you need to know to get a clearer picture of the payment processing system.
Payment Processing System – Payment Gateway
A term more commonly used in an e-commerce business. It functions as a mediator between the transactions placed on an online store and the payment processor. It is a requirement due to security protocols as it is not allowed to send transaction details from your site to a payment processor. Payment gateway providers such as PayPal is therefore part of most web-based merchant accounts. A payment gateway is necessary to do an inter-national business.
Payment Processing System – Payment service provider
A payment service provider (PSP) offers services (including payment gateway, invoicing, online payments) to accept payments e.g. Square, Stripe, Paypal, ApplePay and SamsungPay etc. A PSP offers shop online services for accepting electronic payments by a variety of payment methods including credit card, bank based payments such as direct debit, bank transfer and online banking. They typically use a software-as-a-service model to form a single payment gateway, for clients to have multiple payment modes.
Payment Processing System – Payment Processor
Companies like Visa and Mastercard are payment processors that uses special software to store and analyze the merchant’s transaction. It serves as a mediator between cardholder, merchant, acquiring banks, payment gateways and an issuing bank. (refer to the diagram above on VISA) One key benefit is the payment processor links to both payment gateway and the merchant account, and transmits info to and fro in a secure manner, allowing instantaneous transactions for end users.
Payment Processing System – Issuing Bank
An issuing bank is the customer’s bank used to pay for a product or service to a merchant.
Issuing bank is liable for consumer’s capacity to pay off the debt.
Payment Processing System – Acquiring bank
An acquiring bank (also known simply as an acquirer) is a bank or financial institution that processes credit or debit card payments on behalf of a merchant. An acquiring bank assumes the risk associated with the transaction they process. If a business becomes insolvent and unable to fund a reversal, refund or chargeback, the acquiring bank must provide the funds to make every cardholder whole.
Payment Processing System – Discount rate
Merchants pay a ‘merchant discount fees’ to their financial institution which is normally counted as a percentage per transaction.
Payment Processing System – Interchange fees
Interchange fees are fees charged against issuing and acquiring banks for each card transaction.
Payment Processing System – Visa
After understanding the key terms, it’s time to go deeper into one of the most powerful company in the system – Visa. VISA is known for its acceptance, security, convenience, speed and reliability. A trusted tech company (payment processor) that connects consumers, merchants, finance institution and partners business through electronic payment. Visa provides payment services which enables global commerce through the transfer of information and value among entities. In this Visa Stock Analysis Report, we strive to unveil to you the power of Visa and things you must know before investing in this company.
Here’s a video to find out more about payment processing system in 1 minute.
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