Introduction to the Payment System
Understand the payment system, its requirements, and the estimated resources required for its design.
We'll cover the following...
In today’s digital age, financial technology (fintech) is reshaping the landscape of e-commerce and digital marketing. Seamlessly connecting merchants and consumers, fintech enables transactions to happen with just a few clicks, making purchases faster, more convenient, and increasingly secure. Innovations like integrated payment platforms, digital wallets, and fintech-driven gateways are not only enhancing the customer experience but also streamlining business operations.
In this lesson, we’ll explore how digital payment systems work and their pivotal role in powering modern commerce.
What is a digital payment system?
A payment system is a mechanism or process that enables individuals, businesses, and organizations to transfer money or make transactions for the purpose of making a purchase. It encompasses various methods and technologies, both digital and traditional, that facilitate the exchange of money or goods. Payment systems encompass a wide range of transactions, including credit and debit card transactions, bank transfers, electronic funds transfers (EFTs), mobile payments, digital wallets, and cryptocurrencies. These systems ensure secure and efficient financial transactions between parties, supporting commerce and economic activities on various scales.
In this design problem, we’ll focus on payments made through credit and debit cards.
Let’s first understand the payment process in detail before moving to any aspect of the payment System Design.
The payment process
Multiple entities are involved in the payment process. Assume that a customer wants to pay for goods or services using a credit or debit card. First, they have to enter their credit or debit card details to pay online. However, this complex process entails multiple steps and interacting entities, including cardholder verification, payment processing and validation, and merchant registration.
The following figure illustrates the flow of a payment processing system:
The role of different entities involved in the ...