1. Prologue — Payments

‘Life moves’… so do people and money… In my short career, I worked in companies that are specialised in moving people and moving money.

First half of my career (Pre-MBA), I worked as software developer with Automotive Giants in different geographies and developed software that are critical for life saving ECUs on car (Braking System, Airbags). In second half (Post-MBA), I worked with companies that move money between people and companies. Both the sectors I worked are dynamic… things change every other day and every other day is a new problem for which new solution has to invented.

People have to move from Point A to point B. So the automotive industry has to keep working to make sure people move faster, safer and cosier. Similarly, money has to move between two parties so the payment industry needs to keep innovating to make sure payments are done efficiently, securely and economically. I would say, we are living in a time where spending money is much easier than it was ever in human history and I am glad that I am working that domain.

When I wanted to restart writing, I couldn’t think of better topics than payments. The domain looks like ‘jungle’ with never ending list of payment method with various entities moving money in intricate ways. So I will try to explain payment domain, its players and processes.

Let’s start with basics then… Usual Suspects that you will come across

Merchant: Entity that intends to collect funds. It can be e-commerce company or utility company or grocery store or education institute.

Acquiring banks: Bank that processes transactions (through processor) and settles funds to merchant (Acquiring Banks: HDFC, SBI, IMSL, UBI, CITI, Axis, Kotak, Yes etc. Processors: CyberSource, MIGS, FSS etc.)

Issuing banks: Bank that issues the card (credit, debit or prepaid) (E.g.: ICICI, HDFC, SBI)

Card network: Entities who issues the card (through bank) and decide where card is accepted. (E.g.: Visa, MasterCard, RuPay etc.)

Net-Banking: Allows customer to transact through bank account (E.g.: ICICI, HDFC, SBI, 50 more banks etc.)

Wallets: PPI (Prepaid Instrument) licensed entities that allow users to load money through credit / debit card, net-banking and wallet amount can be used in designated merchants (E.g.: PayTM, Mobikwik etc.)

Prepaid cards: Customer can load the money on card spend at designated merchants (E.g. Sodexo)

Payment Containers: They allow customer to make payment through wallet, credit cards, debit cards, UPI. (E.g. PhonePe, AmazonPay etc.)

Payment Aggregators: Payment companies who integrate with acquiring banks, net-banking, containers, wallets and provide single point of integration and settlement to merchants. (E.g.: BillDesk, TechProcess, PayU, RazorPay etc.)

Among these entities, aggregator is the most common entity. As a merchant you would need one aggregator to start online payment that gives merchant good payment coverage (Cards, Net-Banking, Wallets, UPI, prepaid cards, containers etc.).

So most of the next topics will be around aggregator, its processes.