Deep Dive: Payments

Credit Card Digital PaymentNinety percent of Americans have used a credit card, but far fewer understand the underlying systems enabling their payments. So let’s dive in to see what happens when you swipe your card!
Suppose you purchase some carrots from the grocery store. You take out your credit card to complete the purchase, and see a logo with “Visa” on it. That’s the card association. You’d usually see one of the four major card associations: Visa, Mastercard, American Express, or Discover.
When the merchant swipes your card, it will most likely be on a First Data point-of-sale terminal (or a Square terminal, particularly if you’re in a hipster coffee shop). Swiping or inserting a card (or tapping a smartphone or smartwatch) at this terminal kicks off the transaction process. Many online systems use payment gateways, such as Stripe or Braintree, which provide a set of tools for interacting with the network, conducting analytics and detecting fraud. The gateway then hits the processor used by the acquiring bank (i.e., the bank of the grocery store). The processor is the main party responsible for conducting the transaction with the acquiring bank.
Once your request hits the processor, it is then forwarded to the card association (Visa, Mastercard, etc.), often interchangeably called the network since it has a relationship with several banks that issue credit cards to consumers. The bank of the cardholder (i.e., you, in this scenario) is the issuing bank, which finally receives the request, determines if you are who you say you are, checks if you have enough funds available for the purchase, and decides whether the transaction can be authorized. American Express and Discover are the issuing banks along with being networks, unlike Visa and Mastercard, which only serve as the network.

[Read More From Affirm]

Posted March 10, 2017 by & filed under FinTech, News.