{"id":7020,"date":"2020-08-05T10:00:56","date_gmt":"2020-08-05T04:30:56","guid":{"rendered":"https:\/\/gtm360.com\/blog\/?p=7020"},"modified":"2022-03-25T16:20:00","modified_gmt":"2022-03-25T10:50:00","slug":"all-payments-are-not-equal-retail-payments-primer","status":"publish","type":"post","link":"https:\/\/gtm360.com\/blog\/2020\/08\/05\/all-payments-are-not-equal-retail-payments-primer\/","title":{"rendered":"All Payments Are Not Equal – Retail Payments Primer"},"content":{"rendered":"

This is a slightly edited version of my answer to the\u00a0following question on Quora<\/a><\/em>:<\/p>\n

\"\"<\/a><\/p>\n

I had a similar experience recently.<\/p>\n

I scanned the Merchant\u2019s QR code at a restaurant with my PayTM app. PayTM asked me to link my bank account to complete the payment via UPI. I refused to do so because I wanted to make the payment with my credit card on file in the PayTM app.<\/p>\n

I then asked the cashier for the PayTM-only QR. He told me that their establishment accepted PayTM only for UPI – not Wallet or Credit Card.<\/p>\n

So it\u2019s not PayTM. It\u2019s the Merchant who tells PayTM which payment options to offer or not on the app.<\/p>\n

\n

This brings us to the topic of payment “rails” i.e. the backend systems involved in processing cashless payments. The leading electronic payment rails are listed below:<\/p>\n

<\/a><\/p>\n

\n
\n
Top Payment Rails<\/a><\/h5>\n
    \n
  1. Prepaid Wallet \/ Card:<\/strong> Closed-loop i.e. stored value is kept inside a PSP’s app or plastic card. Examples: PayTM \/ PayZapp \/ PhonePe (India); Venmo \/ Square (USA); PayPal (global)<\/li>\n
  2. Bank Real Time Payment:<\/strong> Money gets transferred in real time from Payer’s bank account to Payee’s bank account. To qualify as a retail payment method, at least one party among the Payer or Payee must be an individual while the other can be an individual or a business. This is also called Account-to-Account Real Time Payment (A2A RTP). Examples: UPI \/ NEFT \/ IMPS (India); FPS \/ PayM \/ PayByBank (UK); Zelle \/ Venmo \/ PopMoney (USA); iDEAL (Netherlands); EBA myBank (EU); AliPay \/ WeChat Pay (China)<\/li>\n
  3. Bank Bulk \/ Batch Payment:<\/strong>\u00a0Bulk payments processed in a batch. Typically used for salary, vendor and government benefits payments. Examples: NACH (India); ACH (USA); BACS (UK)<\/li>\n
  4. Card:<\/strong> Open-loop credit card and debit card. Examples: Visa \/ MasterCard (global); RuPay (India); China Union Pay (China, Global)<\/li>\n
  5. Carrier Billing:<\/strong> Offered by Mobile Network Operators and other (nonbank) third parties that have an ongoing billing relationship with the consumer, this rail does not involve banks at all. Examples: Boku \/ Zong-PayPal (global)<\/li>\n
  6. Check Imaging:<\/strong> Allows Merchants to accept checks, just as they accept cash, at the point of sale. It verifies the account balance of the Consumer and guarantees that the check will not bounce when it’s presented to the Drawee bank later. It also does all of this while the Consumer is still standing in the checkout line. Example: Fed Check 21 (USA).<\/li>\n<\/ol>\n<\/div>\n<\/blockquote>\n

    Different rails have different pedigree and value proposition in different markets. For example,<\/p>\n

      \n
    1. Card Rail is by far the largest rail in developed markets in terms of transaction volumes and values<\/li>\n
    2. Bank RTP has a strong value proposition in emerging markets where there’s a low penetration of credit cards and POS terminals but it has a weak value proposition in developed markets where credit cards and POS terminals are ubiquitous. More at Don\u2019t Go Global Without Cracking The Value Proposition For Foreign Markets<\/a>.<\/li>\n<\/ol>\n

      A Payment Service Provider (PSP) \/ Digital Payment App can work off of some rails and not the others. For example, PayTM and PayZapp work off of rails #1, 2 and 4; PhonePe works off of #1 and #2; and Google Pay works off of #2 in India and #4 in USA.<\/p>\n

      Given below is a partial list of who offers these various electronic payment rails:<\/p>\n

        \n
      • Banks typically offer rail #2 to a wide swathe of Merchants.<\/li>\n<\/ul>\n
        \n

        Going by the ubiquity of UPI QR in the market, whichever company has acquired micro merchants has done a fantastic job. Also banks are offering POS at throwaway prices. Little confusing, considering MDR was supposed to become zero after budget!https:\/\/t.co\/1j6AdEtfes<\/a><\/p>\n

        — Ketharaman Swaminathan (@s_ketharaman) November 8, 2019<\/a><\/p><\/blockquote>\n