The Electronic Payment Industry At A Glance

Over the last several decades, consumers worldwide have increasingly turned to card-based payment methods, such as credit, debit and gift cards, to replace checks and cash. Card-based payments require the use of a point-of-transaction terminal capable of reading the cardholder’s account information from the card’s magnetic stripe or chip, and combining this information with the amount of the sale. The payment terminal electronically captures and securely transmits this transaction information over a communications network to an authorized computer data center and then displays the returned approval or denial response.

The structure of the electronic payments industry is best described by examining the entities involved and their relationship to one another. Card associations, such as Visa®, and MasterCard® license their “brand” to card issuers, such as banks, and also define the standards that payment terminals must achieve in order to be certified for use in their respective networks.

Bank acquirers and their agents sign up merchants, install point-of-service/point-of-sale equipment, capture the transaction data, and route it through the credit or debit card network to obtain transaction approval. Payment processors authorize the customers’ transactions, provide a tally of these transactions to merchants, and transfer funds to merchants to cover card purchases.

Issuers provide consumers with the payment card and settle their accounts. Equipment manufacturers make the terminal hardware and software, and in Hypercom’s case, also make the high security network equipment upon which high-performance and secure payment processing networks rely. Transaction transport providers facilitate the delivery of the transaction data and provide the physical network framework between merchants and payment processors. This structure may vary in each geographic region or country where multiple functions may be performed by a single entity, such as a bank.

Card associations, bank card issuers/acquirers and payment processors are differentiating their offerings, in part, by offering value-added applications and incorporating innovative technologies including contactless/RF and biometrics. As a result, electronic payment systems that can run multiple value-added applications and incorporate emerging technologies are becoming increasingly important in today’s market.

Payment systems require an extremely high level of reliability and security, as even an apparently small system failure or security breach can have extremely serious consequences. The electronic payment industry operates in a sophisticated environment of dedicated systems, applications, specialized products and access networks. The industry will continue to evolve as demands of the market and the rules that govern standards and security change rapidly.

Media contact: Pete Schuddekopf, Hypercom Corporation: 480.642.5383 / pschuddekopf@hypercom.com