Cross-border payment is an indispensable part of the daily work of overseas enterprises. If you encounter these 6 questions in the article at work, this article will be your starting point for finding the answers.
01 What is acquiring and what is collection
Payout: The process of accepting or receiving a payment.
Collections are usually the actual receipt of money by a merchant or individual, and do not involve a specific payment process.
The specific scenario takes place on platforms such as Wish, Ebay, and Amazon, where merchants need to provide a virtual bank account to receive settlement payments from the platform - this process is called collection.
Receiving money: eBox, Lianlian Pay, pingpong, Aircloud Exchange, payoneer (P card), Xunhui, etc., which hold a domestic RMB license or cooperate with a financial institution that holds a RMB license to remit the merchant's overseas income to China in compliance with the settlement and exchange.
Acquiring: The process by which a merchant or institution enters into an agreement with a bank or payment institution to accept payment from a cardholder. During the acquiring process, the merchant makes a transaction with the cardholder through an acquirer (also known as an acquiring bank or acquiring service provider), and the acquirer is responsible for handling the transaction process and settling the money to the merchant. Acquiring often involves complex interactions between card networks, banks, merchants, and cardholders to ensure that payment transactions are secure and smooth.
Local payment methods: In addition to card payments, there are also local payment methods in acquiring, which refers to the payment methods that are popular in a specific country or region, and are usually the payment methods that people are used to.
These payment methods can be specific online banking transfers, local e-wallets, cash payments, convenience store payments, etc. By offering local payment methods, merchants are better able to meet consumer needs, increase transaction success rates, and reduce fees incurred due to currency conversion or foreign currency transactions.
02 Major players in the acquiring industry
directory
- 持卡人 Card Holder
- Merchant 商户
-
Merchant Service Provider 商家服务提供商
3.1: Independent Sales Organization ISOs
3.2: 支付网关 Payment Gateway
3.3: 支付服务提供商 Payment Service Provider
3.3.1: Payment Aggregator
3.3.2: 支付服务商 PayFacilitators
3.4: 传统商户服务提供商 Traditional Merchant Service Provider
3.5: Mobile Payment Processors
3.6: 高风险商家服务提供商High Risk Merchant Services Providers
- Acquiring Bank 收单行
- Payment Processor 支付处理商
- Card Scheme/Network 卡组织
Let's talk about each of the above roles, although these concepts seem too professional, but this is for the factors we need to consider when choosing a payment company in the future, we need to understand these underlying definitions.
Key Players
1. Cardholder
means a person or entity holding a credit, debit, or other payment card.
In addition to regular credit and debit cards, there are also some special types of cards, such as business cards, prepaid cards, gift cards, and travel cards.
2. 商户 Merchant
In the context of credit card schemes such as Visa and Mastercard, "Merchant" refers to any business or entity that accepts credit or debit card payments from customers as a form of payment for goods or services. Merchants include various types of businesses, including retail stores, restaurants, online retailers, service providers, virtual service providers, and more
Operational Knowledge Sharing MID: A merchant identifier assigned by the acquirer as a unique identifier, this MID helps track and process transactions, and is used by card networks, acquiring banks, and payment processors to identify and route transactions to the correct merchant account. It is also worth mentioning that the chargeback rate is also calculated and counted based on the MID
3. Merchant Service Provider 商家服务提供商
Merchant services are provided by merchant service providers (MSPs) or payment processing companies, which act as a key component of the intermediary between businesses, customers, and financial institutions such as banks and credit card networks.
Include:
- 支付处理 Payment Proessing
- POS system
- 支付网关 Payment Gateaway
- 商户账户 Merchant Account
- Fraud prevention and security measures
- Analytics, tracking, and reporting
- customer support
There are several different types of merchant service providers in the market, each offering different services to meet a variety of business needs.
Some common types of MSPs include the following:
3.1. 独立销售组织 ISOs (Independent Sales Organization)
ISOs is a third-party company or individual authorized to sell or lease payment processing services to merchants. ISO acts as an intermediary between merchants and financial institutions that provide payment processing services. ISO offers a range of services, including setting up merchant accounts, providing payment processing hardware and software, working closely with payment processors, and providing customized solutions based on the specific needs of the business. ISOs are usually paid by paying commissions or fees to payment processors or banks for the customers they bring.
Operate knowledge sharing ISOs: It will only be responsible for introducing customers and helping customers open merchant accounts, but will not actually process transactions, and the actual transaction processing and settlement actions are not responsible for ISO. You can simply think of it as an outsourced sales team for banks and payment processors to find merchant leads and solve sales strategy problems.
3.2. 支付网关 Payment Gateway
A payment gateway is a technology or service that securely transmits payment information between consumers, merchants, and payment processors. It acts as a bridge between the parties to the transaction. It can be understood as the point-of-sale POS of a physical retail store, and the payment gateway is equivalent to the online POS role. Using a payment gateway ensures that sensitive payment information is handled securely. This is because payment gateways follow strict security standards and encryption protocols, such as the Payment Card Industry Data Security Standard (PCI DSS)
Payment gateways are primarily used by merchants to help merchants securely complete online transactions, and are technology providers that deliver transaction approval Approves or Decline declines between merchants and consumers.
3.3. 支付服务提供商 Payment Service Provider
3.3.1. Payment Aggregator
A payment aggregator is a service provider that allows businesses to process credit card payments and mobile transactions without having to set up their own merchant account with a bank or credit card network. Instead, aggregators manage only one merchant account and bring all customers under this one merchant account.
Payment Aggregator is mainly suitable for some small and medium-sized enterprises, and Payment Aggregator is not so strict on merchant review and the account opening online speed is also very fast, but the risk is that your transaction and other sub-merchants are under the same MID. If this PA is due to the transaction risk of some sub-merchants, it will directly affect the normal transaction of their entire MID account. In addition, the risk of settlement delay is also a large cash flow risk here
3.3.2. 支付服务商 PayFacilitators
Payfac simplifies the merchant account registration process. Payfac is a type of payment aggregator but typically offers a more comprehensive suite of services such as payment gateway integration, hardware for in-person payments, fraud protection, transaction reporting, and customer support. Payfac is an Independent Sales Organization (ISO) registered under the sponsorship of acquiring banks. They maintain a master merchant account and allow submerchants to use that account to process transactions. Each sub-merchant can have its own independent MID and MCC code, depending on the relationship between Payfac and the acquirer, whether each sub-merchant needs to submit all KYC information and MCC to the acquirer for review.
The following diagram shows the main differences between Payment Aggregator and Payfac:
3.4. 传统商户服务提供商 Traditional Merchant Service Provider
Primarily focused on providing payment processing services for brick-and-mortar stores. They typically offer POS systems and hardware, such as card swipes and terminals, to facilitate face-to-face transactions.
3.5. Mobile Payment Processors
Focus on providing payment processing solutions for businesses that need to accept payments at any time, such as food trucks, market stalls, or mobility service providers. They typically offer a mobile card swipe or mobile POS system that works with a smartphone or tablet
3.6. 高风险商家服务提供商High Risk Merchant Services Providers
Committed to working with businesses that are considered high risk due to the nature of their products, services, or industry. High-risk businesses may face higher rates of chargebacks (disputed transactions) and fraud. Traditional merchant service providers may be reluctant to work with them. High-risk merchant service providers provide these businesses with customized payment processing solutions and risk management tools, often at higher fees.
4. 收单行 Acquiring Bank
These customers are typically high-volume banks and financial institutions that can work directly with the card set for product development and marketing. While there are some service fees that must be paid, acquirers have the most flexibility in terms of the functions they are able to manage and are fully responsible for all activities related to the assigned BINs.
收单行在卡组那边认证的全称是 ‘’Principal Members/Clients 主要成员‘’
Query Links:
https://b2b.mastercard.com/move/partner-program/find-a-partner/
https://partner.visa.com/site/partner-directory.html
Operational knowledge to assess whether a payment company is an acquirer to the following latitudes1. Regions: Each country needs to apply separately2. Visa/Mastercard/JCB/Discover Each card set is also applied for separately3. Capabilities, such as BNPL, card issuance, Gateway, Merchant acquirer, processor, etc.4. Business models such as Gaming & Gambling & Online Gambling, Ecommerce, Marketplace
5. Payment Processor 支付处理商
A payment processor is a technical intermediary between the consumer's card issuer and the merchant's bank. They process transactions that require verifying customers' payment information, checking for fraud, and ensuring compliance with relevant regulations. Ultimately, authorize or reject the transaction. In general, acquirers and issuers work with their own payment processors.
Of course, in some cases, both the acquirer/issuer may be the payment processor itself.
Payment processors are back-end technology providers that focus on payment processing and authorizing Authorize between consumer issuers and merchant acquirers. It mainly guarantees the safe transfer of funds from consumer accounts to merchant accounts.
6. Card Networks
Definition: Examples of payment networks include Visa, Mastercard, American Express, and Discover. These payment networks provide the infrastructure for card-based transactions to take place. They sit between the acquirer and the card issuer and pass messages back and forth to complete the transaction.
Payment networks also set communication rules and standards that acquirers and card issuers need to follow.
International and local decks refer to the payment networks indicated on a credit or debit card, and the difference is mainly in the international acceptance and usage of the card scheme.
Here are some common international and local decks:
1. 国际卡组:Visa、Mastercard、American Express、Discover、UnionPay、JCB2. 本地卡组:China UnionPay(中国银联)、RuPay(印度)、Interac(加拿大)、Troy(土耳其)、Mada(中东)、Knet(科威特)等 。
Operational knowledge: The key card group has a provision that the country where the merchant partner is located can only cooperate with the acquirer or third-party payment institution of the same country. For example, if you use a Hong Kong entity, you can only use a Hong Kong acquirer to cooperate in processing global transactions. This is the most compliant practice. Of course, some current payment companies can skip this rule, and there are two possibilities One is the compliant MOR model, which needs to help you withhold and pay consumption tax, and there are generally more third-party payment institutions in the virtual industry. For example, Xsolla, Terminal3, Paddle, Lemonsqeeze and other other payment companies themselves act as the main body of merchant registration in Europe, report to the acquirer in the form of merchants, and then delegate their own channels to merchants.
In fact, both models have a big drawback, that is, MCC is fixed, and there is basically no way to be flexible and applicable to the business model of each merchant, which will directly affect the optimization of the success rate, so this method is more suitable for small and medium-sized merchants who have just started, and the pursuit is to run through.
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