Written by: Ian Chun, Research Analyst, Vontobel Quality Growth Investment Team
The global payments market is a vast, over $1-trillion industry that drives how we pay for goods and services. While the categories of industry participants are diverse and growing, there are four parties that make up the major steps in the payments model:
3. issuers – banks that issue cards and lend to consumers (e.g., Wells Fargo, HSBC)
4. merchant acquirers – companies that handle payment acceptance and processing on behalf of merchants (e.g., Worldpay, First Data, Cielo)
In a typical transaction, a consumer uses a card to pay for goods at a merchant such as a store. The store’s merchant acquirer submits the transaction to the Visa or Mastercard network that in turn reaches out to the consumer’s card issuing bank. The issuer then authorizes the transaction to the merchant through the network and merchant acquirer. Payments networks such as Visa and Mastercard make all this possible by providing the authorization, clearing and settlement of transactions.