The payment industry facilitates billions of euros in transactions daily. But have you ever wondered how the revenue is distributed among the key players: issuers, schemes, acquirers, and processors? This post, complemented by an informative video, will guide you through the complex maze of the payment system value chain, revealing who earns what and why.
Every time you buy something online, like a pair of shoes, it might seem like you're paying the store directly. However, the reality is more complex. The store typically has a contract with an entity known as an acquirer, representing them. For the transaction to occur, the acquirer must communicate with your bank, the issuer. Given the vast number of banks globally, direct communication between all would be unfeasible. Here's where the schemes, or networks like Visa/MC, play their pivotal role. They act as the intermediaries, bridging the communication gap between acquirers and issuers.
How much each entity earns varies significantly depending on the region. For instance, in Europe, the fees that schemes, acquirers, and issuers can levy are regulated and capped. Contrastingly, in the US, issuers have the liberty to charge as they deem fit.
Payments are more than just a simple transaction. They encompass a myriad of components, from the Merchant Service Charge (MSC) components such as interchange fee, acquirer markup, and scheme fees to the varied costs associated with bank transfers. The nature of the transaction also plays a role. Whether you're buying groceries, hailing an Uber in Spain, or booking a transcontinental flight, each transaction carries its unique pricing structure.
Grasping the essence of payments isn't about understanding a single transaction. It's about piecing together the broader narrative, seeing the bigger picture. For those keen on diving deeper into the world of payments, the PaymentGenes Academy Foundation course offers comprehensive insights, especially in 'Module 1: The Payments Value Chain'. Explore chapters 9 and 10 to enrich your knowledge. Dive into the PaymentGenes Academy foundation curriculum on our website for a holistic view.
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