On Payments
By popular demand, we will be releasing episode notes to accompany episodes with lots of technical jargon. To get us started some notes on the episode “On Payments”
We all leverage payment systems in our day-to-day lives, but not many of us know what happens behind the scenes to make payments made during your weekly grocery store visits, or daily coffee shop visits, work seamlessly. We apologise in advance because this post will be somewhat Nigeria specific to start with. Here are the players in a typical transaction:
Payment transaction flow
Who exactly are these players?
Customer: Everyone
Merchant: Grocery store, Coffee shop etc
Payment Gateway: Technology used by merchants to accept debit or credit card purchases from customers. The term includes not only the physical card-reading devices (Point of Sale (POS) terminals) found in retail stores but also the payment processing portals found in online stores.
Payment Processor: The payment processor communicates information from the customer's card to the merchants' bank and finally back to the customer's bank.
Card Networks: Facilitate transactions between merchants and card issuers. Visa, Mastercard, American Express, Discover
Issuing Bank: The Customer’s Bank. Issues the card or provides the app customer uses to make payment.
Acquiring Bank: Merchants Bank typically issues the POS or provides the payment gateway (built in house or partnership with existing players)
There is often some confusion between payment gateways and payment processors. An easy way to differentiate is the payment gateway is the beginning and end of the transaction, where the customer will enter their credit card information and receive an approval or denial of the transaction. The payment processor moves the information between the customer's bank and the merchant bank.
With regards to licensing, typically more mature players in the market acquire licenses just to have them and the newer players acquire licenses that enable them to build out an identified customer journey.
