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Payments 101 - Visual Diagrams

The document is a detailed collection of personal notes on the payments industry, summarizing essential concepts and transaction flows for various payment methods such as card transactions, NEFT, IMPS, UPI, and Aadhaar payments. It compiles information from public sources including annual reports, publications, and whitepapers, outlining the roles of banks and payment processing entities. The notes highlight the operational processes for consumer-to-consumer (C2C) and consumer-to-merchant (C2M) transactions, providing an overview of the frameworks governing payments in India.

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Payments 101 – Visual Diagrams Kapish Kaushal https://in.linkedin.com/in/kapishkaushal
The following document is a collection of personal notes on understanding the basics of the payments industry. All the information in the document was accumulated from public sources – Annual Reports, Payments Publications, Newspaper Articles, Magazines etc. Source List (Not Exhaustive) Red Book – Published by BIS The Economist The Ken PYMNTS.com Let’s Talk Payments Investopedia Economic Times Annual Reports – Banks, Card Networks, Merchant Acquirers etc. Reserve Bank of India – Whitepapers / Statistics / Annual Publications Company Websites
Basics of Payments
CUSTOMER 1 CUSTOMER 1’s BANKCUSTOMER 2 CUSTOMER 2’s BANK C2C Transaction – Paying using a cheque Presents a cheque Presents a cheque Will click a photo of the cheque; gets Customer 1’s bank details Cheque Clearing House
CUSTOMER 1 CUSTOMER 2 CUSTOMER 2 BANKCUSTOMER 1 BANK ACH Operator ACH Operator C2C Transaction – Transfer from One Bank Account to Another Bank Account - Online
CARDHOLDER MERCHANT ACQUIRING BANK / ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR VISA / MASTERCARD C2M Transaction – Payment by Card (Debit or Credit) - POS
ATM Transaction Flow BANK A CARDHOLDER Bank B ATM Switch Bank A At the end of day Switch will net all transactions (Bank A card used on Bank B ATM and Bank B card used on Bank A ATM) and a net amount will be provided That settlement between banks will happen via RTGS
India Payments
ATM Transaction Flow – National Financial Switch ICICI CARDHOLDER HDFC Bank ATM NPCI ICICI At the end of day NPCI will net all transactions (ICICI card used on HDFC Bank ATM and HDFC Bank card used on ICICI ATM) and a net amount will be provided That settlement between banks will happen via RTGS
CUSTOMER 1 CUSTOMER 2 CUSTOMER 2 BANKCUSTOMER 1 BANK NEFT Service Centre NEFT Service Centre NEFT Clearing Centre (operated by National Clearing Cell, RBI) Sorts the fund transfer transactions destination bank-wise and prepares accounting entries to receive funds from ODFI and give the funds to RDFI Transfer from One Bank Account to Another Bank Account – INDIA - NEFT https://rbi.org.in/Scripts/faqview.aspx?Id=60
CUSTOMER 1 CUSTOMER 2 CUSTOMER 2 BANKCUSTOMER 1 BANK NPCI Transfer from One Bank Account to Another Bank Account in real time – INDIA – IMPS https://npci.org.in/sites/all/themes/npcl/images/PDF/IMPS-Procedural-Guidelines.pdf If the transaction is happening via mobile, then a MPSP (Mobile Payment Service Provider gets added to the process)
CUSTOMER 1 CUSTOMER 2 CUSTOMER 2 BANKCUSTOMER 1 BANK Central System (Hardware and software installed in a central location hosting RTGS application operated and managed by RBI Transfer from One Bank Account to Another Bank Account – Wire Transfer / RTGS https://rbidocs.rbi.org.in/rdocs/RTGS/PDFs/RTGSB111013_2013.pdf INFINET (Indian Financial Network)
CARDHOLDER MERCHANT ACQUIRING BANK / ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR VISA / MASTERCARD / NPCI Payment by Card (Debit or Credit) – POS – Visa / Mastercard / Rupay
Payment by Card (Debit or Credit) – Online and Mobile CARDHOLDER MERCHANT ACQUIRING BANK / ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR VISA / MASTERCARD / Rupay Merchant Acceptance (including Gateway)
Bharat QR – C2M Solution CARDHOLDER MERCHANT ACQUIRING BANK / ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR NPCI / Visa / Mastercard Cardholder has to download his/her bank’s Bharat QR enabled mobile banking app. User has to scan the Bharat QR code at Merchant store and select card to make payment Payment is done by the card, not by the bank account Acquirer Bank would have deployed the QR code at the merchant POS QR code can also be presented via the acquiring bank’s mobile application
AEPS / Aadhaar Pay – Cash Deposit AEPS can be used for Balance Inquiry, Cash Deposit, Cash Withdrawal and Funds Transfer (to a merchant or to a person) (Both the person and merchant should have Aadhaar linked bank accounts) (Funds cannot be transferred to non Aadhaar linked end points) If its an on-us transaction, acquirer bank might just authenticate details with UIDAI directly without involving NPCI The role of UIDAI is just to verify the Aadhaar number with fingerprint scan The role of NPCI after Aadhaar verification is to route the transaction from acquiring bank to issuing bank and then confirming the transaction validation message from issuing bank to acquiring bank Settlement between acquiring and issuing banks happens at 23:00pm every day via RTGS The cash will be deposited with the business correspondent who is carrying the micro ATM
AEPS / Aadhaar Pay – Cash Withdrawal AEPS can be used for Balance Inquiry, Cash Deposit, Cash Withdrawal and Funds Transfer (to a merchant or to a person) (Both the person and merchant should have Aadhaar linked bank accounts) (Funds cannot be transferred to non Aadhaar linked end points) The cash will be provided by the business correspondent carrying the micro ATM
AEPS / Aadhaar Pay – Funds Transfer – C2C Funds transfer to another person can only be done by the business correspondent of your bank (not any other bank) The remitting customer should necessarily have his / her Aadhaar enabled account with the remitting bank and the transfer will be effected only after a successful debit to this account A remitting customer is required to initiate an Aadhaar enabled inter bank remittance only from the micro ATM of a bank with whom he / she is holding an Aadhaar enabled account When a Funds Transfer transaction is initiated from a MicroATM of a BC, the Remitting Bank firstly, gets the transaction Aadhaar authenticated. Upon successful Aadhaar Authentication, the bank debits the Aadhaar enabled account of the initiating customer with the remittance amount and sends a Payment Request to the Beneficiary’s Bank based on the IIN provided, through the NPCI Switch. Beneficiary’s Bank would credit the Beneficiary’s Aadhaar enabled account and forward its positive response to the MicroATM that initiated the request, through NPCI switch. The customer will know the finality of the remittance from the Transaction Receipt. The movement of money is from one bank account to another bank account via RTGS (Aadhaar is only a verification tool to get a linkage to a bank account)
AEPS / Aadhaar Pay – Funds Transfer – C2M CUSTOMER Merchant Acquirer Bank ISSUING BANK / ISSUER NPCI UIDAI Customer enters the Aadhaar number on the merchant’s Aadhaar Pay app App will fetch the linked bank accounts Customer chooses the bank account Validates the transaction with fingerprint scan Merchant installs the Aadhaar pay on his / her smartphone Biometric scanner needs to be attached with POS 1 2 3 4 5 6 Settlement once a day at 23:00pm; so after 24 hours merchant gets the money in the bank account
Bharat Bill Pay – General (Next 3 slides for specific payment modes) CUSTOMER BBPOU BBPCU (NPCI) BBPOU Biller / Merchant Mobile Banking App Internet Banking Wallets (PayTM) Payment can’t be done by cheque (not in the initial phases at least) Input the details of the biller, your customer number and how you want to pay (Wallet, UPI, Bank Account, Debit Card, Credit Card) Bill Desk, Paytm, Other Aggregators 1 2 3 4 BSES Rajdhani, DHBVN etc. If it’s an on-us transaction that BBPOU has a direct relationship with merchant it will not go to NPCI BBPOU’s will onboard billers, aggregators, payment gateways, set up agent network and customer touch points to handle bill payments through different delivery channels. BBPOUs may be bank as well as non-bank entities In case of ON-US transactions, the BBPOUs will identify a settlement bank where the agents and the billers need to maintain their settlement accounts and the BBPOU will arrange to settle the amounts to the billers and agent institutions / agents through the settlement bank and designated settlement accounts. In case of OFF-US transactions, since the clearing and settlement to BBPOUs will be done by the BBPCU, the BBPOUs will have to indicate a designated settlement bank account through which the OFF-US settlement transactions will be processed by the BBPCU. In case of a non-bank BBPOU, the designated settlement account will be of its sponsor bank
Bharat Bill Pay – Payment by Cash CUSTOMER Agent (Collection Centre, Branch etc.) BBPS System / BBPCU BBPOU Biller / Merchant 1 2 7 8 Customer will share Biller ID, Customer ID, Amount and Type of Payment Agent inputs the details in BBPS system 3 4 Agent will validate all the information in the system with the customer 5 Payment by Cash Agents will be onboarded by BBPOUs 6 Biller will update the customer account and share the confirmation back with biller BBPOU. Biller BBPOU will share this confirmation with BBPCU who in turn will share will customer BBPOU / agent (Receipt generation etc.) Settlement done once in a day by BBPCU after netting with BBPOU or sponsoring bank of BBPOU
Bharat Bill Pay – Payment by Card CUSTOMER Agent (Collection Centre, Branch etc.) BBPS System / BBPCU BBPOU Biller / Merchant 1 2 9 10 Customer will share Biller ID, Customer ID, Amount and Type of Payment Agent inputs the details in BBPS system 3 4 Agent will validate all the information in the system with the customer 5 Payment by Card Agents will be onboarded by BBPOUs 8 Biller will update the customer account and share the confirmation back with biller BBPOU. Biller BBPOU will share this confirmation with BBPCU who in turn will share will customer BBPOU / agent (Receipt generation etc.) Need to get a positive authorization from acquirer bank BBPOU’s Bank (Acquirer Bank) Visa / Mastercard / NPCI Issuing Bank 6 7 Settlement will happen between the issuing bank and the acquiring bank as it would happen in a normal card POS transaction 2nd settlement will be done by BBPCU The flow will be the same if the mode of payment is card irrespective of whether POS is physical or done through internet banking / mobile banking
Bharat Bill Pay – Payment by Bank Account (NEFT / IMPS / UPI) CUSTOMER BBPOU BBPS System / BBPCU BBPOU Biller / Merchant 1 2 6 7 Customer will input details on BBPOU’s internet site / mobile application or bank’s internet site / mobile application3 Payment by Net Banking Biller will update the customer account and share the confirmation back with biller BBPOU. Biller BBPOU will share this confirmation with BBPCU who in turn will share will customer BBPOU / agent (Receipt generation etc.) Need to get a positive authorization that there are funds available in bank account BBPOU’s Bank (Acquirer Bank) NPCI / NEFT Clearing Centre Issuing Bank 4 5 Settlement will be a normal bank to bank transfer between customer bank and BBPOU bank 2nd settlement done by BBPCU between the 2 BBPOUs Internet Banking – Bank Mobile Banking App BBPOU Website / App – Choosing Net Banking as an option to pay
UPI – C2C – Mobile and Online – Pay Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Receiving Customers / Payee PSP and Receiving Customers’ Bank / Beneficiary Bank Pay Request 1. Customer sends a push Request by entering the Virtual Address of the Payee 2. Payer PSP sends the same to UPI 3. UPI sends it to the respective Payee PSP for address resolution and authorization 4. Payee PSP sends relevant account details of the Payee to UPI 5. UPI sends the debit request to Payer bank. 6. Remitter bank debits the Payer’s account and sends the confirmation to UPI. 7. UPI sends the credit request to the Beneficiary Bank 8. Beneficiary Bank credits the customer’s account and confirms the same to UPI 9. UPI sends the successful confirmation to the Payer PSP. Payer PSP sends the confirmation to the customer
UPI – C2C – Mobile and Online – Collect Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Receiving Customers / Payee PSP and Receiving Customers’ Bank / Beneficiary Bank Collect Request 1. Customer sends a Collect Request by entering the Virtual Address of the Payer customer. 2. Payee PSP sends the same to UPI 3. UPI sends it to the respective Payer PSP for address resolution and authorization 4. Payer PSP sends a notification to the Payer customer for authorization. Customer enters the PIN & confirms the payment. Payer PSP sends the same to UPI 5. UPI sends the debit request to Remitter bank. 6. Remitter bank debits the Payer’s account and sends the confirmation to UPI. 7. UPI sends the credit request to the Beneficiary Bank 8. Beneficiary Bank credits the customer’s account and confirms the same to UPI 9. UPI sends the successful confirmation to the Payee PSP. Payee PSP sends the confirmation to the customer
UPI – C2M – Mobile and Online – Pay Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Merchant’s PSP and Merchant’s Bank The flow of the transaction will be same as in case of C2C payment
UPI – C2M – Mobile and Online – Collect Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Merchant’s PSP and Merchant’s Bank The flow of the transaction will be same as in case of C2C payment
UPI – C2M – POS UPI Merchant Apps / Digital POS Some PSPs offer merchants an app through which a storefront cashier can accept payments, either by generating a dynamic QR code which customer can scan and pay using their app or by entering amount and VPA of customer to initiate a collect request which customer can accept. These apps create an acceptance infrastructure using the mobile of storefront cashier, suited for small merchants. This category of apps might soon merge with Bharat QR and become digital POS apps, if not already (Apps: BHIM Lotza Merchant App, HDFC Bank SmartHub App, IDBI UPI POS, ICICI EasyPay) UPI @ POS While merchant apps are best suited for small shops with low volumes, the PoS machine is nearly inseparable in modern retail and a few POS products support UPI as an additional payment mode separated. The PoS machine generates a QR code which a user can scan and make payment and unique features of this solution as it creates paper trail for the transaction which increases trust to both merchant and customer, and solves pain point of storefront cashier in reconciling digital payments end of day (Devices: BonusHub, HDFC DiGiPoS, Innoviti, Platus, PineLabs) The transaction flow in this case should be the same as has been described earlier
UPI – C2M – POS Transaction flow should be similar Merchant PSP >> NPCI >> Customer PSP >> NPCI >>> Issuer Bank >>> NPCI >>> Acquirer Bank >>> NPCI >>> Merchant PSP
C2C and C2M – Mobile – Paytm and Phone Pe The transaction flow will be the same as defined in “Payment by Card – Online and Mobile”. Paytm and PhonePe will be the “merchants” here whenever consumer is loading money in these wallets Interchange fees for Paytm and PhonePe will obviously be greater for credit cards and lowest for bank accounts Transactions within Paytm and PhonePe should be movements like in a general ledger whether they are C2C or C2M Usable for M2C and M2M as well (same transaction flow) Sources of Revenue: 1. Interest Rate – Money held in wallets (Escrow Account) 2. Merchant Acceptance – Online and Mobile – Charging Commissions (Paypal calls this “Transaction Processing” 3. Commissions to merchants for bill payment, recharge services, merchants shown on “Paytm Mall” 4. Payments Bank 5. Advertising 6. Other Products – Commissions – Mutual Funds, Insurance, Gold For Phone Pe, they are also manufacturing their own POS devices (calculator based POS)
Merchant Acceptance – CC Avenue Avenues ▪ CC Avenue: Helping merchants to accept online payments o Merchant PSP (Payment Gateway) o On opting of CC Avenue’s services, gateways of multiple banks are assigned across your account. Transactions are routed to the best performing gateway o Banks may have a different payment gateway than CC Avenue o Variable Amount Interface and Shopping Cart Interface o C2M and Online / Mobile ▪ Bill Avenue: BBPOU CUSTOMER Merchant Customer goes to the merchant website, chooses items and then clicks on the “Check Out Button” CC Avenue (Payment Gateway) Merchant re-directs to a CC Avenue Page The page provides a list of options for which the payment can be done – Net Banking, Debit Card, Credit Card etc. Card Net Banking Money gets transferred from customer’s account to merchant’s account using NEFT / RTGS / IMPS UPI Payment Gateway Acquiring Bank Will go to Visa / MA and subsequently to issuing bank Directly entering card details or using Apple Pay / Samsung Pay etc.
Merchant Acceptance – Bill Desk ▪ Merchant PSP (Payment Gateway) and Payments Aggregator (definition same as in case of Paypal) ▪ The role of payments aggregator is to onboard merchants with a joint account rather than having a single account for each merchant ▪ Initially, all merchants tied up with Bill Desk because it was the largest player around. Merchants didn’t want to go through the process of integrating with newer aggregators as it was technically demanding ▪ So, newer payment apps such as PhonePe which wanted to offer bill payments simply tied up with Bill Desk as it gave them access to Bill Desk’s roster of over 80 billers (Customer has a PhonePe account and Bill Desk has a Phone Pe account) ▪ While Google Tez and Phone Pe are connected to Bill Desk, there is nothing stopping either of these entities from becoming aggregators themselves ▪ C2M and Online / Mobile CUSTOMER Merchant Customer goes to the merchant website, chooses items and then clicks on the “Check Out Button” Bill Desk (Payment Gateway) Merchant re-directs to a Bill Desk Page The page provides a list of options for which the payment can be done – Net Banking, Debit Card, Credit Card etc. Card Net Banking Money gets transferred from customer’s account to merchant’s account using NEFT / RTGS / IMPS UPI Payment Gateway Acquiring Bank Will go to Visa / MA and subsequently to issuing bank Directly entering card details or using Apple Pay / Samsung Pay etc.
US Payments
ATM Transaction Flow BANK A CARDHOLDER Bank B ATM STAR / NYCE / PULSE Bank A At the end of day Switch will net all transactions (Bank A card used on Bank B ATM and Bank B card used on Bank A ATM) and a net amount will be provided That settlement between banks will happen via RTGS
CUSTOMER 1 CUSTOMER 2 CUSTOMER 2 BANKCUSTOMER 1 BANK ACH Operator (Federal Reserve, EPN) ACH Operator (Federal Reserve, EPN) Transfer from One Bank Account to Another Bank Account – US - ACH
CUSTOMER 1 CUSTOMER 2 CUSTOMER 2 BANKCUSTOMER 1 BANK Fedwire, CHIPS Fedwire, CHIPS Transfer from One Bank Account to Another Bank Account – Wire Transfer / RTGS
Payment by Wallets – Paypal, Apple Pay, Google Pay, Samsung Pay, Venmo, Visa Checkout, Masterpass, Banking Apps Criteria Paypal Apple Pay Samsung Pay Venmo Google Pay Visa Checkout Masterpass C2C Yes Yes No6 Yes (Google Pay Send) No No C2M Yes Yes Yes Yes Yes Yes M2C No1 No No No No No M2M Yes2 No No No No No Mobile Yes Yes Yes Yes Yes Yes Online Yes Yes No Yes Yes Yes POS No4 Yes Yes Yes No No Contactless N/A Yes Yes Yes Yes Yes MST N/A No Yes No No No Merchant Acceptance Yes No No No Yes Yes Prepaid Instrument No3 No5 No No No No Other Comments No Tokenization Can’t use bank account as a payment source Can’t use bank account as a payment source More of a social experience; similar features to Paypal Can’t use bank account as a payment source Can be integrated with other wallets Can be integrated with other wallets
Footnotes 1. If there is a refund because of transaction cancelled etc., Amazon can return the balance in customer’s Paypal account but certainly insurance payouts, government disbursements can’t happen on Paypal 2. Paypal is developing partnerships to increase presence in B2B payments – HSBC, Sage etc. 3. There can be balance maintained in Paypal but it also gives the option of transacting without maintaining a balance 4. Paypal started with the service where the user opens the app in store, chooses In Store Checkout, the store uses the phone’s internet and shows the stores that accept Paypal, choose the store and it displays a code on the mobile and that code is then entered as a PIN on the touchpad. This was however discontinued on Mar 31, 2018 because of limited usage and created friction with Visa / MA. Since then Paypal has launched debit / prepaid card in partnership with Mastercard and Extras card (credit card) in partnership with Symphony 5. Apple Pay Cash is there like Paypal balance 6. Only in limited countries; this is not promoted as a top use case Article Links Apple Pay vs Samsung Pay vs Google Pay: https://www.cnet.com/news/apple-pay-vs-samsung-pay-vs-google-pay-which-mobile-payment-system-is-best-chase-pay/
C2C Transaction Flow – Paypal – Funding by a bank account – Online and Mobile CUSTOMER A CUSTOMER B Customer A wants to transfer $50 to Customer B and doesn’t have a Paypal balance Paypal Paypal has a priority list in which it will get the balance funded Paypal Bank Account (ODFI) ACH Operator Customer A Bank (RDFI) Money will go instantly (but there are actually 2 transactions that are taking place); Customer A will need to provide Customer B’s email address or phone number – Payment Transaction Funding Transaction Now if Customer B wants to transfer the money from Paypal balance to bank account, a third transaction is needed Customer B >>> Paypal Bank Account >>> ACH Operator >>> Customer B Bank Paypal will now become ODFI and Customer B Bank will become RDFI
C2C Transaction Flow – Paypal / Google Pay / Apple Pay – Funding by a debit / credit card – Online and Mobile CUSTOMER A CUSTOMER B Customer A wants to transfer $50 to Customer B and doesn’t have a Paypal balance Paypal Paypal has a priority list in which it will get the balance funded Paypal Bank Account Card Network Customer A Bank Money will go instantly (but there are actually 2 transactions that are taking place); Customer A will need to provide Customer B’s email address or phone number – Payment Transaction Funding Transaction Now if Customer B wants to transfer the money from Paypal balance to bank account, a third transaction is needed Customer B >>> Paypal Bank Account >>> ACH Operator >>> Customer B Bank Paypal will now become ODFI and Customer B Bank will become RDFI If you use your card to send money to someone for personal reasons (not to pay for something), we charge a small fee. (https://www.paypal.com/ai/smarthelp/article/why-should-i-link-a-bank-account-or-a-card-to- my-paypal-account-faq3349) Google Pay and Apple Pay don’t allow to add bank account but the customer can transfer money from Apple Pay / Google Pay to bank account (https://support.apple.com/en-in/HT207882) Again there will be two separate transactions – Payment Transaction and Funding Transaction
C2M Transaction Flow – Paypal – Funding by bank account – Online and Mobile CUSTOMER MERCHANT Customer A wants to purchase something from eBay and wants to pay by Paypal Customer Bank Account Customer clicks the checkout button and selects Paypal as the payment method Paypal Gateway Paypal Bank AccountACH Operator If the customer has Paypal balance, then it will be a simple general ledger transaction Merchant transferring from his Paypal account to his bank account will be a separate transaction If the customer is paying via card, then Paypal’s bank account will route the transaction to the appropriate card network which takes it to the customer’s bank account
C2M Transaction Flow – Google Pay / Apple Pay – POS, Online and Mobile A Google pay user adds a credit or debit card to their Google Pay app. Google pay requests a token to represent the card the user is trying to add from the bank that issued the card. Once this token is issued, this card is now “tokenized”, meaning it has a unique identification number associated with it. Google Pay encrypts the newly tokenized card and it is ready to be used for payments https://support.google.com/pay/merchants/answer/6345242?hl=en You cannot add a bank account to Google Pay (has to be a card or Paypal) Google Pay – only for C2M Google Pay Send – for C2C CUSTOMER Merchant When the customer taps their device on an NFC-enabled terminal at the store’s point-of-sale, the device sends the token, token expiry date, and cryptogram to the terminal via the NFC protocol. PSP / Acquiring Bank / Acquirer Processor Card NetworkCustomer Bank The token service provider (TSP) validates the cryptogram, then translates the token into the customer’s actual card number (TSP can be a separate entity or the bank might be doing it or Mastercard might be doing it on behalf of bank) Paypal If customer chooses the payment method as “Paypal” in Google Pay. After which Slide 56 transaction flow should be followed
Merchant Acceptance – Square Mobile POS (The merchants are able to accept payments by adding a small reader on their mobile phones) Enabled businesses to accept card payments (substitute to physical POS machine) Also helps merchants in online acceptance Card Payment Acceptance for Merchants Customers can also pay via Apple Pay C2M Square doesn’t accept ACH payments CUSTOMER Merchant Customer goes to the merchant website / app, chooses items and then clicks on the “Check Out Button” (Works even in person) Square (PSP) Square POS sends the transaction information to Square Acquiring Processor / Acquiror Visa / Mastercard Issuing Bank Square pays a small fixed fee per transaction Square pays assessment fees and other fees to Visa/MA Square will ultimately pay the Issuing Bank an interchange fee as a percentage of the amount of the transaction plus a fixed fee per transaction, which together average between 1.5% to 2.0% of the transaction amount. However, this percentage can vary significantly based on the card type, transaction type, and transaction size Square transfers the funds to the seller’s bank account, net of the fee charged by Square. Square provides sellers with fast access to funds, typically settling with them by the business day after the date of the transaction via Automated Clearing House (ACH) transfers, or the same day via its Instant Deposit service for an additional transaction fee. Square pays a very small fee for each ACH transfer.
Merchant Acceptance – Stripe and Braintree ▪ Online and mobile acceptance for merchants; no physical POS ▪ Stripe built software that businesses could plug into websites and applications to instantly connect with card and banking systems and receive payments ▪ C2M ▪ M2C in a way (Lyft pays its drivers using Stripe) ▪ Their services replaces the traditional model of sourcing a payment gateway and merchant account from different providers ▪ Acceptance from Apple Pay / Google Pay etc. CUSTOMER Merchant Customer goes to the merchant website / app, chooses items and then clicks on the “Check Out Button” Braintree / Stripe (PSP)Acquirer ProcessorCard Network Issuing Bank ▪ If the customer chooses to pay via bank account using ACH, then Merchant >>> Stripe >>> Acquirer Bank / Acquirer Processor >>> ACH Operator >>> Issuing Bank ▪ ACH payments can be only for online and mobile ▪ One link mentions that Braintree doesn’t accept ACH payments

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Payments 101 - Visual Diagrams

  • 1.
    Payments 101 –Visual Diagrams Kapish Kaushal https://in.linkedin.com/in/kapishkaushal
  • 2.
    The following documentis a collection of personal notes on understanding the basics of the payments industry. All the information in the document was accumulated from public sources – Annual Reports, Payments Publications, Newspaper Articles, Magazines etc. Source List (Not Exhaustive) Red Book – Published by BIS The Economist The Ken PYMNTS.com Let’s Talk Payments Investopedia Economic Times Annual Reports – Banks, Card Networks, Merchant Acquirers etc. Reserve Bank of India – Whitepapers / Statistics / Annual Publications Company Websites
  • 3.
  • 4.
    CUSTOMER 1 CUSTOMER 1’sBANKCUSTOMER 2 CUSTOMER 2’s BANK C2C Transaction – Paying using a cheque Presents a cheque Presents a cheque Will click a photo of the cheque; gets Customer 1’s bank details Cheque Clearing House
  • 5.
    CUSTOMER 1 CUSTOMER2 CUSTOMER 2 BANKCUSTOMER 1 BANK ACH Operator ACH Operator C2C Transaction – Transfer from One Bank Account to Another Bank Account - Online
  • 6.
    CARDHOLDER MERCHANT ACQUIRING BANK/ ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR VISA / MASTERCARD C2M Transaction – Payment by Card (Debit or Credit) - POS
  • 7.
    ATM Transaction Flow BANKA CARDHOLDER Bank B ATM Switch Bank A At the end of day Switch will net all transactions (Bank A card used on Bank B ATM and Bank B card used on Bank A ATM) and a net amount will be provided That settlement between banks will happen via RTGS
  • 8.
  • 9.
    ATM Transaction Flow– National Financial Switch ICICI CARDHOLDER HDFC Bank ATM NPCI ICICI At the end of day NPCI will net all transactions (ICICI card used on HDFC Bank ATM and HDFC Bank card used on ICICI ATM) and a net amount will be provided That settlement between banks will happen via RTGS
  • 10.
    CUSTOMER 1 CUSTOMER2 CUSTOMER 2 BANKCUSTOMER 1 BANK NEFT Service Centre NEFT Service Centre NEFT Clearing Centre (operated by National Clearing Cell, RBI) Sorts the fund transfer transactions destination bank-wise and prepares accounting entries to receive funds from ODFI and give the funds to RDFI Transfer from One Bank Account to Another Bank Account – INDIA - NEFT https://rbi.org.in/Scripts/faqview.aspx?Id=60
  • 11.
    CUSTOMER 1 CUSTOMER2 CUSTOMER 2 BANKCUSTOMER 1 BANK NPCI Transfer from One Bank Account to Another Bank Account in real time – INDIA – IMPS https://npci.org.in/sites/all/themes/npcl/images/PDF/IMPS-Procedural-Guidelines.pdf If the transaction is happening via mobile, then a MPSP (Mobile Payment Service Provider gets added to the process)
  • 12.
    CUSTOMER 1 CUSTOMER2 CUSTOMER 2 BANKCUSTOMER 1 BANK Central System (Hardware and software installed in a central location hosting RTGS application operated and managed by RBI Transfer from One Bank Account to Another Bank Account – Wire Transfer / RTGS https://rbidocs.rbi.org.in/rdocs/RTGS/PDFs/RTGSB111013_2013.pdf INFINET (Indian Financial Network)
  • 13.
    CARDHOLDER MERCHANT ACQUIRING BANK/ ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR VISA / MASTERCARD / NPCI Payment by Card (Debit or Credit) – POS – Visa / Mastercard / Rupay
  • 14.
    Payment by Card(Debit or Credit) – Online and Mobile CARDHOLDER MERCHANT ACQUIRING BANK / ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR VISA / MASTERCARD / Rupay Merchant Acceptance (including Gateway)
  • 15.
    Bharat QR –C2M Solution CARDHOLDER MERCHANT ACQUIRING BANK / ACQUIRER ISSUING BANK / ISSUER ISSUER PROCESSOR ACQUIRER PROCESSOR NPCI / Visa / Mastercard Cardholder has to download his/her bank’s Bharat QR enabled mobile banking app. User has to scan the Bharat QR code at Merchant store and select card to make payment Payment is done by the card, not by the bank account Acquirer Bank would have deployed the QR code at the merchant POS QR code can also be presented via the acquiring bank’s mobile application
  • 16.
    AEPS / AadhaarPay – Cash Deposit AEPS can be used for Balance Inquiry, Cash Deposit, Cash Withdrawal and Funds Transfer (to a merchant or to a person) (Both the person and merchant should have Aadhaar linked bank accounts) (Funds cannot be transferred to non Aadhaar linked end points) If its an on-us transaction, acquirer bank might just authenticate details with UIDAI directly without involving NPCI The role of UIDAI is just to verify the Aadhaar number with fingerprint scan The role of NPCI after Aadhaar verification is to route the transaction from acquiring bank to issuing bank and then confirming the transaction validation message from issuing bank to acquiring bank Settlement between acquiring and issuing banks happens at 23:00pm every day via RTGS The cash will be deposited with the business correspondent who is carrying the micro ATM
  • 17.
    AEPS / AadhaarPay – Cash Withdrawal AEPS can be used for Balance Inquiry, Cash Deposit, Cash Withdrawal and Funds Transfer (to a merchant or to a person) (Both the person and merchant should have Aadhaar linked bank accounts) (Funds cannot be transferred to non Aadhaar linked end points) The cash will be provided by the business correspondent carrying the micro ATM
  • 18.
    AEPS / AadhaarPay – Funds Transfer – C2C Funds transfer to another person can only be done by the business correspondent of your bank (not any other bank) The remitting customer should necessarily have his / her Aadhaar enabled account with the remitting bank and the transfer will be effected only after a successful debit to this account A remitting customer is required to initiate an Aadhaar enabled inter bank remittance only from the micro ATM of a bank with whom he / she is holding an Aadhaar enabled account When a Funds Transfer transaction is initiated from a MicroATM of a BC, the Remitting Bank firstly, gets the transaction Aadhaar authenticated. Upon successful Aadhaar Authentication, the bank debits the Aadhaar enabled account of the initiating customer with the remittance amount and sends a Payment Request to the Beneficiary’s Bank based on the IIN provided, through the NPCI Switch. Beneficiary’s Bank would credit the Beneficiary’s Aadhaar enabled account and forward its positive response to the MicroATM that initiated the request, through NPCI switch. The customer will know the finality of the remittance from the Transaction Receipt. The movement of money is from one bank account to another bank account via RTGS (Aadhaar is only a verification tool to get a linkage to a bank account)
  • 19.
    AEPS / AadhaarPay – Funds Transfer – C2M CUSTOMER Merchant Acquirer Bank ISSUING BANK / ISSUER NPCI UIDAI Customer enters the Aadhaar number on the merchant’s Aadhaar Pay app App will fetch the linked bank accounts Customer chooses the bank account Validates the transaction with fingerprint scan Merchant installs the Aadhaar pay on his / her smartphone Biometric scanner needs to be attached with POS 1 2 3 4 5 6 Settlement once a day at 23:00pm; so after 24 hours merchant gets the money in the bank account
  • 20.
    Bharat Bill Pay– General (Next 3 slides for specific payment modes) CUSTOMER BBPOU BBPCU (NPCI) BBPOU Biller / Merchant Mobile Banking App Internet Banking Wallets (PayTM) Payment can’t be done by cheque (not in the initial phases at least) Input the details of the biller, your customer number and how you want to pay (Wallet, UPI, Bank Account, Debit Card, Credit Card) Bill Desk, Paytm, Other Aggregators 1 2 3 4 BSES Rajdhani, DHBVN etc. If it’s an on-us transaction that BBPOU has a direct relationship with merchant it will not go to NPCI BBPOU’s will onboard billers, aggregators, payment gateways, set up agent network and customer touch points to handle bill payments through different delivery channels. BBPOUs may be bank as well as non-bank entities In case of ON-US transactions, the BBPOUs will identify a settlement bank where the agents and the billers need to maintain their settlement accounts and the BBPOU will arrange to settle the amounts to the billers and agent institutions / agents through the settlement bank and designated settlement accounts. In case of OFF-US transactions, since the clearing and settlement to BBPOUs will be done by the BBPCU, the BBPOUs will have to indicate a designated settlement bank account through which the OFF-US settlement transactions will be processed by the BBPCU. In case of a non-bank BBPOU, the designated settlement account will be of its sponsor bank
  • 21.
    Bharat Bill Pay– Payment by Cash CUSTOMER Agent (Collection Centre, Branch etc.) BBPS System / BBPCU BBPOU Biller / Merchant 1 2 7 8 Customer will share Biller ID, Customer ID, Amount and Type of Payment Agent inputs the details in BBPS system 3 4 Agent will validate all the information in the system with the customer 5 Payment by Cash Agents will be onboarded by BBPOUs 6 Biller will update the customer account and share the confirmation back with biller BBPOU. Biller BBPOU will share this confirmation with BBPCU who in turn will share will customer BBPOU / agent (Receipt generation etc.) Settlement done once in a day by BBPCU after netting with BBPOU or sponsoring bank of BBPOU
  • 22.
    Bharat Bill Pay– Payment by Card CUSTOMER Agent (Collection Centre, Branch etc.) BBPS System / BBPCU BBPOU Biller / Merchant 1 2 9 10 Customer will share Biller ID, Customer ID, Amount and Type of Payment Agent inputs the details in BBPS system 3 4 Agent will validate all the information in the system with the customer 5 Payment by Card Agents will be onboarded by BBPOUs 8 Biller will update the customer account and share the confirmation back with biller BBPOU. Biller BBPOU will share this confirmation with BBPCU who in turn will share will customer BBPOU / agent (Receipt generation etc.) Need to get a positive authorization from acquirer bank BBPOU’s Bank (Acquirer Bank) Visa / Mastercard / NPCI Issuing Bank 6 7 Settlement will happen between the issuing bank and the acquiring bank as it would happen in a normal card POS transaction 2nd settlement will be done by BBPCU The flow will be the same if the mode of payment is card irrespective of whether POS is physical or done through internet banking / mobile banking
  • 23.
    Bharat Bill Pay– Payment by Bank Account (NEFT / IMPS / UPI) CUSTOMER BBPOU BBPS System / BBPCU BBPOU Biller / Merchant 1 2 6 7 Customer will input details on BBPOU’s internet site / mobile application or bank’s internet site / mobile application3 Payment by Net Banking Biller will update the customer account and share the confirmation back with biller BBPOU. Biller BBPOU will share this confirmation with BBPCU who in turn will share will customer BBPOU / agent (Receipt generation etc.) Need to get a positive authorization that there are funds available in bank account BBPOU’s Bank (Acquirer Bank) NPCI / NEFT Clearing Centre Issuing Bank 4 5 Settlement will be a normal bank to bank transfer between customer bank and BBPOU bank 2nd settlement done by BBPCU between the 2 BBPOUs Internet Banking – Bank Mobile Banking App BBPOU Website / App – Choosing Net Banking as an option to pay
  • 24.
    UPI – C2C– Mobile and Online – Pay Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Receiving Customers / Payee PSP and Receiving Customers’ Bank / Beneficiary Bank Pay Request 1. Customer sends a push Request by entering the Virtual Address of the Payee 2. Payer PSP sends the same to UPI 3. UPI sends it to the respective Payee PSP for address resolution and authorization 4. Payee PSP sends relevant account details of the Payee to UPI 5. UPI sends the debit request to Payer bank. 6. Remitter bank debits the Payer’s account and sends the confirmation to UPI. 7. UPI sends the credit request to the Beneficiary Bank 8. Beneficiary Bank credits the customer’s account and confirms the same to UPI 9. UPI sends the successful confirmation to the Payer PSP. Payer PSP sends the confirmation to the customer
  • 25.
    UPI – C2C– Mobile and Online – Collect Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Receiving Customers / Payee PSP and Receiving Customers’ Bank / Beneficiary Bank Collect Request 1. Customer sends a Collect Request by entering the Virtual Address of the Payer customer. 2. Payee PSP sends the same to UPI 3. UPI sends it to the respective Payer PSP for address resolution and authorization 4. Payer PSP sends a notification to the Payer customer for authorization. Customer enters the PIN & confirms the payment. Payer PSP sends the same to UPI 5. UPI sends the debit request to Remitter bank. 6. Remitter bank debits the Payer’s account and sends the confirmation to UPI. 7. UPI sends the credit request to the Beneficiary Bank 8. Beneficiary Bank credits the customer’s account and confirms the same to UPI 9. UPI sends the successful confirmation to the Payee PSP. Payee PSP sends the confirmation to the customer
  • 26.
    UPI – C2M– Mobile and Online – Pay Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Merchant’s PSP and Merchant’s Bank The flow of the transaction will be same as in case of C2C payment
  • 27.
    UPI – C2M– Mobile and Online – Collect Request There will be a maximum of 4 parties that will be involved in the transaction – Sending Customers / Payer PSP, Sending Customer’s Bank / Remitter Bank, Merchant’s PSP and Merchant’s Bank The flow of the transaction will be same as in case of C2C payment
  • 28.
    UPI – C2M– POS UPI Merchant Apps / Digital POS Some PSPs offer merchants an app through which a storefront cashier can accept payments, either by generating a dynamic QR code which customer can scan and pay using their app or by entering amount and VPA of customer to initiate a collect request which customer can accept. These apps create an acceptance infrastructure using the mobile of storefront cashier, suited for small merchants. This category of apps might soon merge with Bharat QR and become digital POS apps, if not already (Apps: BHIM Lotza Merchant App, HDFC Bank SmartHub App, IDBI UPI POS, ICICI EasyPay) UPI @ POS While merchant apps are best suited for small shops with low volumes, the PoS machine is nearly inseparable in modern retail and a few POS products support UPI as an additional payment mode separated. The PoS machine generates a QR code which a user can scan and make payment and unique features of this solution as it creates paper trail for the transaction which increases trust to both merchant and customer, and solves pain point of storefront cashier in reconciling digital payments end of day (Devices: BonusHub, HDFC DiGiPoS, Innoviti, Platus, PineLabs) The transaction flow in this case should be the same as has been described earlier
  • 29.
    UPI – C2M– POS Transaction flow should be similar Merchant PSP >> NPCI >> Customer PSP >> NPCI >>> Issuer Bank >>> NPCI >>> Acquirer Bank >>> NPCI >>> Merchant PSP
  • 30.
    C2C and C2M– Mobile – Paytm and Phone Pe The transaction flow will be the same as defined in “Payment by Card – Online and Mobile”. Paytm and PhonePe will be the “merchants” here whenever consumer is loading money in these wallets Interchange fees for Paytm and PhonePe will obviously be greater for credit cards and lowest for bank accounts Transactions within Paytm and PhonePe should be movements like in a general ledger whether they are C2C or C2M Usable for M2C and M2M as well (same transaction flow) Sources of Revenue: 1. Interest Rate – Money held in wallets (Escrow Account) 2. Merchant Acceptance – Online and Mobile – Charging Commissions (Paypal calls this “Transaction Processing” 3. Commissions to merchants for bill payment, recharge services, merchants shown on “Paytm Mall” 4. Payments Bank 5. Advertising 6. Other Products – Commissions – Mutual Funds, Insurance, Gold For Phone Pe, they are also manufacturing their own POS devices (calculator based POS)
  • 31.
    Merchant Acceptance –CC Avenue Avenues ▪ CC Avenue: Helping merchants to accept online payments o Merchant PSP (Payment Gateway) o On opting of CC Avenue’s services, gateways of multiple banks are assigned across your account. Transactions are routed to the best performing gateway o Banks may have a different payment gateway than CC Avenue o Variable Amount Interface and Shopping Cart Interface o C2M and Online / Mobile ▪ Bill Avenue: BBPOU CUSTOMER Merchant Customer goes to the merchant website, chooses items and then clicks on the “Check Out Button” CC Avenue (Payment Gateway) Merchant re-directs to a CC Avenue Page The page provides a list of options for which the payment can be done – Net Banking, Debit Card, Credit Card etc. Card Net Banking Money gets transferred from customer’s account to merchant’s account using NEFT / RTGS / IMPS UPI Payment Gateway Acquiring Bank Will go to Visa / MA and subsequently to issuing bank Directly entering card details or using Apple Pay / Samsung Pay etc.
  • 32.
    Merchant Acceptance –Bill Desk ▪ Merchant PSP (Payment Gateway) and Payments Aggregator (definition same as in case of Paypal) ▪ The role of payments aggregator is to onboard merchants with a joint account rather than having a single account for each merchant ▪ Initially, all merchants tied up with Bill Desk because it was the largest player around. Merchants didn’t want to go through the process of integrating with newer aggregators as it was technically demanding ▪ So, newer payment apps such as PhonePe which wanted to offer bill payments simply tied up with Bill Desk as it gave them access to Bill Desk’s roster of over 80 billers (Customer has a PhonePe account and Bill Desk has a Phone Pe account) ▪ While Google Tez and Phone Pe are connected to Bill Desk, there is nothing stopping either of these entities from becoming aggregators themselves ▪ C2M and Online / Mobile CUSTOMER Merchant Customer goes to the merchant website, chooses items and then clicks on the “Check Out Button” Bill Desk (Payment Gateway) Merchant re-directs to a Bill Desk Page The page provides a list of options for which the payment can be done – Net Banking, Debit Card, Credit Card etc. Card Net Banking Money gets transferred from customer’s account to merchant’s account using NEFT / RTGS / IMPS UPI Payment Gateway Acquiring Bank Will go to Visa / MA and subsequently to issuing bank Directly entering card details or using Apple Pay / Samsung Pay etc.
  • 33.
  • 34.
    ATM Transaction Flow BANKA CARDHOLDER Bank B ATM STAR / NYCE / PULSE Bank A At the end of day Switch will net all transactions (Bank A card used on Bank B ATM and Bank B card used on Bank A ATM) and a net amount will be provided That settlement between banks will happen via RTGS
  • 35.
    CUSTOMER 1 CUSTOMER2 CUSTOMER 2 BANKCUSTOMER 1 BANK ACH Operator (Federal Reserve, EPN) ACH Operator (Federal Reserve, EPN) Transfer from One Bank Account to Another Bank Account – US - ACH
  • 36.
    CUSTOMER 1 CUSTOMER2 CUSTOMER 2 BANKCUSTOMER 1 BANK Fedwire, CHIPS Fedwire, CHIPS Transfer from One Bank Account to Another Bank Account – Wire Transfer / RTGS
  • 37.
    Payment by Wallets– Paypal, Apple Pay, Google Pay, Samsung Pay, Venmo, Visa Checkout, Masterpass, Banking Apps Criteria Paypal Apple Pay Samsung Pay Venmo Google Pay Visa Checkout Masterpass C2C Yes Yes No6 Yes (Google Pay Send) No No C2M Yes Yes Yes Yes Yes Yes M2C No1 No No No No No M2M Yes2 No No No No No Mobile Yes Yes Yes Yes Yes Yes Online Yes Yes No Yes Yes Yes POS No4 Yes Yes Yes No No Contactless N/A Yes Yes Yes Yes Yes MST N/A No Yes No No No Merchant Acceptance Yes No No No Yes Yes Prepaid Instrument No3 No5 No No No No Other Comments No Tokenization Can’t use bank account as a payment source Can’t use bank account as a payment source More of a social experience; similar features to Paypal Can’t use bank account as a payment source Can be integrated with other wallets Can be integrated with other wallets
  • 38.
    Footnotes 1. If thereis a refund because of transaction cancelled etc., Amazon can return the balance in customer’s Paypal account but certainly insurance payouts, government disbursements can’t happen on Paypal 2. Paypal is developing partnerships to increase presence in B2B payments – HSBC, Sage etc. 3. There can be balance maintained in Paypal but it also gives the option of transacting without maintaining a balance 4. Paypal started with the service where the user opens the app in store, chooses In Store Checkout, the store uses the phone’s internet and shows the stores that accept Paypal, choose the store and it displays a code on the mobile and that code is then entered as a PIN on the touchpad. This was however discontinued on Mar 31, 2018 because of limited usage and created friction with Visa / MA. Since then Paypal has launched debit / prepaid card in partnership with Mastercard and Extras card (credit card) in partnership with Symphony 5. Apple Pay Cash is there like Paypal balance 6. Only in limited countries; this is not promoted as a top use case Article Links Apple Pay vs Samsung Pay vs Google Pay: https://www.cnet.com/news/apple-pay-vs-samsung-pay-vs-google-pay-which-mobile-payment-system-is-best-chase-pay/
  • 39.
    C2C Transaction Flow– Paypal – Funding by a bank account – Online and Mobile CUSTOMER A CUSTOMER B Customer A wants to transfer $50 to Customer B and doesn’t have a Paypal balance Paypal Paypal has a priority list in which it will get the balance funded Paypal Bank Account (ODFI) ACH Operator Customer A Bank (RDFI) Money will go instantly (but there are actually 2 transactions that are taking place); Customer A will need to provide Customer B’s email address or phone number – Payment Transaction Funding Transaction Now if Customer B wants to transfer the money from Paypal balance to bank account, a third transaction is needed Customer B >>> Paypal Bank Account >>> ACH Operator >>> Customer B Bank Paypal will now become ODFI and Customer B Bank will become RDFI
  • 40.
    C2C Transaction Flow– Paypal / Google Pay / Apple Pay – Funding by a debit / credit card – Online and Mobile CUSTOMER A CUSTOMER B Customer A wants to transfer $50 to Customer B and doesn’t have a Paypal balance Paypal Paypal has a priority list in which it will get the balance funded Paypal Bank Account Card Network Customer A Bank Money will go instantly (but there are actually 2 transactions that are taking place); Customer A will need to provide Customer B’s email address or phone number – Payment Transaction Funding Transaction Now if Customer B wants to transfer the money from Paypal balance to bank account, a third transaction is needed Customer B >>> Paypal Bank Account >>> ACH Operator >>> Customer B Bank Paypal will now become ODFI and Customer B Bank will become RDFI If you use your card to send money to someone for personal reasons (not to pay for something), we charge a small fee. (https://www.paypal.com/ai/smarthelp/article/why-should-i-link-a-bank-account-or-a-card-to- my-paypal-account-faq3349) Google Pay and Apple Pay don’t allow to add bank account but the customer can transfer money from Apple Pay / Google Pay to bank account (https://support.apple.com/en-in/HT207882) Again there will be two separate transactions – Payment Transaction and Funding Transaction
  • 41.
    C2M Transaction Flow– Paypal – Funding by bank account – Online and Mobile CUSTOMER MERCHANT Customer A wants to purchase something from eBay and wants to pay by Paypal Customer Bank Account Customer clicks the checkout button and selects Paypal as the payment method Paypal Gateway Paypal Bank AccountACH Operator If the customer has Paypal balance, then it will be a simple general ledger transaction Merchant transferring from his Paypal account to his bank account will be a separate transaction If the customer is paying via card, then Paypal’s bank account will route the transaction to the appropriate card network which takes it to the customer’s bank account
  • 42.
    C2M Transaction Flow– Google Pay / Apple Pay – POS, Online and Mobile A Google pay user adds a credit or debit card to their Google Pay app. Google pay requests a token to represent the card the user is trying to add from the bank that issued the card. Once this token is issued, this card is now “tokenized”, meaning it has a unique identification number associated with it. Google Pay encrypts the newly tokenized card and it is ready to be used for payments https://support.google.com/pay/merchants/answer/6345242?hl=en You cannot add a bank account to Google Pay (has to be a card or Paypal) Google Pay – only for C2M Google Pay Send – for C2C CUSTOMER Merchant When the customer taps their device on an NFC-enabled terminal at the store’s point-of-sale, the device sends the token, token expiry date, and cryptogram to the terminal via the NFC protocol. PSP / Acquiring Bank / Acquirer Processor Card NetworkCustomer Bank The token service provider (TSP) validates the cryptogram, then translates the token into the customer’s actual card number (TSP can be a separate entity or the bank might be doing it or Mastercard might be doing it on behalf of bank) Paypal If customer chooses the payment method as “Paypal” in Google Pay. After which Slide 56 transaction flow should be followed
  • 43.
    Merchant Acceptance –Square Mobile POS (The merchants are able to accept payments by adding a small reader on their mobile phones) Enabled businesses to accept card payments (substitute to physical POS machine) Also helps merchants in online acceptance Card Payment Acceptance for Merchants Customers can also pay via Apple Pay C2M Square doesn’t accept ACH payments CUSTOMER Merchant Customer goes to the merchant website / app, chooses items and then clicks on the “Check Out Button” (Works even in person) Square (PSP) Square POS sends the transaction information to Square Acquiring Processor / Acquiror Visa / Mastercard Issuing Bank Square pays a small fixed fee per transaction Square pays assessment fees and other fees to Visa/MA Square will ultimately pay the Issuing Bank an interchange fee as a percentage of the amount of the transaction plus a fixed fee per transaction, which together average between 1.5% to 2.0% of the transaction amount. However, this percentage can vary significantly based on the card type, transaction type, and transaction size Square transfers the funds to the seller’s bank account, net of the fee charged by Square. Square provides sellers with fast access to funds, typically settling with them by the business day after the date of the transaction via Automated Clearing House (ACH) transfers, or the same day via its Instant Deposit service for an additional transaction fee. Square pays a very small fee for each ACH transfer.
  • 44.
    Merchant Acceptance –Stripe and Braintree ▪ Online and mobile acceptance for merchants; no physical POS ▪ Stripe built software that businesses could plug into websites and applications to instantly connect with card and banking systems and receive payments ▪ C2M ▪ M2C in a way (Lyft pays its drivers using Stripe) ▪ Their services replaces the traditional model of sourcing a payment gateway and merchant account from different providers ▪ Acceptance from Apple Pay / Google Pay etc. CUSTOMER Merchant Customer goes to the merchant website / app, chooses items and then clicks on the “Check Out Button” Braintree / Stripe (PSP)Acquirer ProcessorCard Network Issuing Bank ▪ If the customer chooses to pay via bank account using ACH, then Merchant >>> Stripe >>> Acquirer Bank / Acquirer Processor >>> ACH Operator >>> Issuing Bank ▪ ACH payments can be only for online and mobile ▪ One link mentions that Braintree doesn’t accept ACH payments