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Week 1-2: Topics to Research

Week 1: Money Flow & Core Entities​

1.1 The Four-Party Model​

Research Focus:

  • Cardholder role and relationship with issuing bank
  • Merchant role and relationship with acquiring bank
  • How issuing banks authorize and fund transactions
  • How acquiring banks enable merchant acceptance
  • The concept of interchange and who pays whom

Key Terms to Define:

  • Issuer / Issuing Bank
  • Acquirer / Acquiring Bank
  • Interchange fee
  • Assessment fee
  • Merchant discount rate (MDR)

1.2 Card Network Role​

Research Focus:

  • What Visa, Mastercard, Amex, and Discover actually do
  • Network rules and why they matter
  • How authorization routing works
  • The difference between open-loop and closed-loop networks
  • Network fees and how they're structured (including passthrough fees like APF, NABU)
  • Evolution of open/closed loop models (Amex OptBlue, co-branded cards)

Key Terms to Define:

  • Card scheme / Card network
  • Open-loop vs closed-loop
  • Network assessment
  • BIN (Bank Identification Number)
  • Card-present vs card-not-present
  • APF (Acquirer Processing Fee)
  • NABU (Network Access & Brand Usage)

1.2.1 BIN/IIN Evolution and Structure​

Research Focus:

  • BIN (Bank Identification Number) structure and meaning
  • Transition from 6-digit to 8-digit BINs (IIN - Issuer Identification Number)
  • Why BIN exhaustion occurred
  • Impact on payment system development
  • Network prefix identifiers (4=Visa, 5=MC, 3=Amex, 6=Discover)
  • International networks (JCB, UnionPay)

Key Terms to Define:

  • BIN (Bank Identification Number)
  • IIN (Issuer Identification Number)
  • BIN exhaustion
  • ISO/IEC 7812 standard

1.2.2 Network Tokenization (Introduction)​

Research Focus:

  • What network tokenization is (Visa Token Service, Mastercard MDES)
  • Difference between network tokens and merchant/gateway tokens
  • How network tokens enable card-on-file and digital wallets
  • Benefits: fraud reduction, automatic card updates, lower interchange
  • When to use network tokenization vs gateway tokenization

Key Terms to Define:

  • Network token
  • Visa Token Service (VTS)
  • Mastercard Digital Enablement Service (MDES)
  • Token requestor
  • Device PAN vs. Token PAN

1.3 Transaction Lifecycle Basics​

Research Focus:

  • Authorization phase: what happens when a card is swiped/tapped
  • Capture/clearing phase: batch processing and settlement
  • Funding phase: when and how merchants receive money
  • The role of time in each phase
  • What happens when things go wrong at each stage

Diagram to Create:

  • Draw the complete money flow for a $100 credit card purchase
  • Include all fees deducted at each step
  • Show timing for each phase

1.4 Debit Networks & Routing​

Research Focus:

  • PIN debit networks (PULSE, STAR, NYCE, Accel, Interlink)
  • Signature debit vs PIN debit routing
  • Durbin Amendment implications and debit interchange caps
  • Debit network fees vs credit interchange rates
  • Routing optimization for debit transactions
  • When debit routing decisions are made
  • Debit network selection criteria

Key Terms to Define:

  • PIN debit
  • Signature debit
  • Durbin Amendment
  • Debit network
  • Routing optimization
  • Network selection

Week 2: Industry Players & PayFac Model​

2.1 Payment Processors​

Research Focus:

  • What a payment processor actually does
  • Front-end vs back-end processing
  • Examples: First Data (Fiserv), TSYS, Worldpay
  • How processors connect to card networks
  • Processor selection criteria

2.2 Payment Gateways​

Research Focus:

  • Gateway role in e-commerce transactions
  • How gateways differ from processors
  • Gateway security responsibilities
  • Examples: Authorize.net, Braintree, NMI
  • When a business needs a gateway vs direct processor connection

2.3 Acquiring Banks​

Research Focus:

  • The acquiring bank's legal and financial role
  • How acquirers bear merchant risk
  • Relationship between acquirers and processors
  • Examples: Chase Paymentech, Wells Fargo Merchant Services
  • Why acquirers matter for underwriting

2.4 ISOs (Independent Sales Organizations)​

Research Focus:

  • ISO business model and revenue structure
  • Registered ISO vs non-registered ISO
  • ISO responsibilities vs acquirer responsibilities
  • How ISOs recruit and manage merchants
  • ISO residual income model

2.5 ISVs (Independent Software Vendors)​

Research Focus:

  • Why software companies want embedded payments
  • ISV integration models (referral, PayFac-as-a-Service, full PayFac)
  • Revenue sharing in ISV partnerships
  • Examples of ISV payment integrations
  • ISV vs ISO: different motivations, different needs

2.6 The Payment Facilitator Model​

Research Focus:

  • Definition: master merchant with sub-merchants
  • How PayFac differs from traditional merchant acquiring
  • PayFac liability and risk ownership
  • Faster merchant onboarding: how and why
  • PayFac economics: revenue vs risk tradeoff
  • Examples: Stripe, Square, PayPal

Key Terms to Define:

  • Payment Facilitator (PayFac)
  • Master Merchant
  • Sub-merchant
  • Aggregator model
  • PayFac-as-a-Service

2.7 Comparing Models​

Create a Comparison Table:

AspectTraditional AcquiringISO ModelPayFac Model
Merchant relationship
Underwriting responsibility
Risk liability
Onboarding speed
Revenue model
Regulatory burden

2.8 Alternative Payment Methods​

Research Focus:

  • ACH processing and NACHA rules
  • Digital wallets (Apple Pay, Google Pay, PayPal, Venmo)
  • Buy Now Pay Later (BNPL) integration models
  • Real-time payment rails (RTP, FedNow, SEPA Instant)
  • Cryptocurrency payment acceptance
  • When to support alternative payment methods
  • Integration complexity and cost considerations

Key Terms to Define:

  • ACH (Automated Clearing House)
  • NACHA
  • Digital wallet
  • BNPL (Buy Now Pay Later)
  • Real-time payments
  • RTP (Real-Time Payments)
  • FedNow