The sequence behind a transaction.
WHAT THE PARTIES ARE
The payer, sending money The payee, receiving it The payer's financial institution The payee's financial institution Intermediaries connecting them A scheme or network defining the rules
WHAT THE STAGES ARE
- Initiation: the payer instructs a payment
- Authorisation: establishing the payer can and may pay
- Clearing: exchanging the instruction between institutions
- Settlement: money actually moving between institutions
WHY AUTHORISATION AND SETTLEMENT ARE DIFFERENT
Authorisation confirms funds are available and reserved. Settlement is when money moves, which may be days later.
WHAT THAT MEANS PRACTICALLY
A successful payment does not mean you have the money.
WHAT A MERCHANT SEES
An approval immediately, and funds later, net of fees.
WHAT A SCHEME PROVIDES
Rules binding every participant: how disputes work, what fees apply, what timelines hold.
WHY THAT MATTERS
Most of what seems arbitrary about payments is scheme rules.
WHAT VARIES BETWEEN PAYMENT TYPES
Speed Reversibility Cost Who bears the risk of fraud
WHAT TO ESTABLISH FOR ANY PAYMENT METHOD
Those four things.
