Payments 101 - Visual Diagrams

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

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

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
happen via RTGS

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

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)

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
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
VISA / MASTERCARD /
Rupay
Merchant Acceptance
(including Gateway)

Bharat QR – C2M Solution
CARDHOLDER MERCHANT
ACQUIRING BANK /
ACQUIRER
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
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
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
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.

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
happen via RTGS

ACH Operator (Federal
Reserve, EPN)
ACH Operator (Federal
Reserve, EPN)
Transfer from One Bank Account to Another Bank Account – US - ACH

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
source
More of a social
experience; similar
features to Paypal
Can’t use bank
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

Payments 101 - Visual Diagrams

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