Moat deepdive on payment giant: Visa 💳
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How does the payment industry actually work?
The payment industry has a long and fascinating history that dates back thousands of years. In ancient times, people used barter systems to exchange goods and services, but as societies grew more complex and trade became more common, people began to develop new forms of payment. The first coins were minted around 600 BCE, and paper money was introduced in China around 800 CE.
Today, the payment industry is a complex and rapidly evolving ecosystem that encompasses a wide range of players and technologies. At a high level, the payment industry can be broken down into three main categories: payment networks, payment processors, and payment gateways.
Payment networks such as Visa and Mastercard provide the infrastructure for electronic payments, including the rules and standards that govern how transactions are processed. Payment processors such as Stripe and Square act as intermediaries between merchants and payment networks, helping to facilitate transactions and manage the associated risks. Payment gateways such as PayPal and Adyen provide the software and tools that merchants need to accept payments from customers, including online checkout systems and mobile payment apps.
When a customer makes a payment using a credit or debit card, the payment is typically processed through several steps. First, the merchant sends the payment details to a payment processor or gateway, which verifies the transaction and sends it to the appropriate payment network. The payment network checks the customer's account balance and verifies that the payment is authorized, then sends the payment details back to the payment processor or gateway. The payment processor or gateway sends the payment to the merchant's bank account, minus any fees and charges.
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