Chapter 2:

Payment card systems

Definition of  Payment Card Definition: A payment card, commonly referred to
as a debit or credit card, is a financial instrument that enables
Payment Card electronic transactions between a cardholder and a merchant.
and Payment cards come in various forms, such as physical plastic
cards, virtual cards, or digital wallets, and they facilitate the
Requirements exchange of funds for goods and services.
 Requirements of Payment Card Systems: Payment card systems
of Payment must meet certain essential criteria to ensure secure, efficient, and
Card Systems reliable transactions.
Payment Card
Stages in a
credit card
payment

O'Mahony, D., Pierce, M., & Tewari, H. (2001). Electronic payment systems for e-
commerce. Artech.
  a. Security: Payment card systems must employ robust security
measures to protect cardholder information and prevent fraud. This
includes encryption, tokenization, and multi-factor authentication.
Some key  b. Authorization: The system must verify the cardholder's identity and
the availability of funds or credit to complete the transaction.
requirements Authorization processes involve communication between the
for Payment cardholder's bank (issuing bank) and the merchant's bank (acquiring
bank).
Card Systems  c. Clearing and Settlement: After authorization, the system must
facilitate the clearing and settlement of transactions. Clearing involves
the exchange of transaction data between the issuing and acquiring
banks, while settlement ensures that funds are transferred accordingly.
  d. Interoperability: Payment card systems must work across various
financial institutions, payment networks, and merchants, enabling
customers to use their cards at different locations, both domestically
Some key and internationally.
requirements  e. Compliance: Adherence to legal and regulatory requirements is
crucial. Payment card systems must comply with industry standards and
for Payment government regulations, such as the Payment Card Industry Data
Security Standard (PCI DSS) and anti-money laundering (AML) laws.
Card Systems  f. Customer Service: Providing accessible customer support is
essential. Cardholders should have a way to address issues like lost or
stolen cards, unauthorized transactions, or billing disputes.
  g. Innovation: Adapting to emerging technologies and consumer
preferences is important. Payment card systems should incorporate
new features and services to stay competitive and convenient.
Some key  h. Fraud Prevention: Implementing fraud detection and prevention
mechanisms is vital to protect cardholders and financial institutions
requirements from fraudulent activities.
for Payment  i. Transaction Records: Maintaining accurate transaction records
and providing statements to cardholders is necessary for
Card Systems transparency and financial management.
 j. Cost Efficiency: Payment card systems should be cost-effective
for both cardholders and merchants. This includes reasonable fees
and interchange rates.
Payment
process

Source: Arora, V., Leekha, R. S., Lee, K., & Kataria, A. (2020). Facilitating user
authorization from imbalanced data logs of credit cards using artificial
intelligence. Mobile Information Systems, 2020, 1-13.
The difference
between card  Transaction environment:
payment in e- EC: Card payment in EC usually occurs online through the internet
or mobile applications. Buyers use credit or debit cards to directly
commerce (EC) purchase products or services on e-commerce websites or mobile
and card apps.
TC: Card payment in TC typically takes place at physical stores
payment in when buyers present their credit or debit cards to the merchant to
pay for products or services.
traditional
commerce (TC):
e-commerce  Convenience:

(EC) VS card EC: Card payment in EC is generally considered more convenient

payment in as buyers can shop from anywhere with an internet connection
traditional without the need to visit a physical store.

commerce TC: Card payment in TC requires buyers to physically go to a store,

(TC): which may take time and effort.
  Security:

e-commerce EC: Online payments have the potential security issues, such as
(EC) VS card credit card information being compromised. However, e-commerce

payment in services usually implement strong security measures to protect the

traditional personal information of buyers.

commerce TC: Payment at a physical store can be safer because the buyer's
(TC): card does not leave their possession, and transactions can be
verified in person.
e-commerce  Transaction fees:
(EC) VS card EC: There are transaction fees associated with using credit or debit
payment in cards for online purchases. These fees are typically set by banks or
payment service providers.
traditional TC: Transaction fees may be applied when using cards for
commerce payments at traditional stores, but they are usually lower compared
to online payments in EC.
(TC):
 Shopping experience:

EC: Online shopping often allows buyers to easily search and

compare products, view product ratings, and read reviews from
other customers.
TC: Shopping in physical stores provides a hands-on shopping
experience, allowing buyers to try products and interact directly
with store staff.
  Debit card

 This is a type of payment card that allows the cardholder to make

transactions within the available balance in their account at a bank.
The card's usability is limited by the amount of money in the
Most Popular
account. Among these, the ATM card is the most basic form of a
Payment debit card, used only for withdrawing cash from ATMs and cannot
Gateway be used for payment transactions (also known as card swiping).
Providers  Advantages: You don't need to carry a lot of cash with you because
you can withdraw money from your account at an ATM without
visiting a bank branch or office. You can withdraw money whenever
you need it, even on weekends or holidays when the bank is closed.
 Other functions: Debit cards can help you check your account
balance, print statements, make transfers, and more.
  Credit card
 This is a type of payment card that allows the cardholder to borrow money from the bank in
advance and pay it back on a specified payment date. Even if there is no money in the
account, you can still make purchases within a certain credit limit that the bank provides to
each individual based on their creditworthiness. Typically, banks evaluate and determine the
credit limit based on an individual's income statement and credit history. Common
Most Popular international credit card types include MasterCard, Visa, American Express, JCB, and
others.
Payment
Gateway  Currently, in Vietnam, Visa and MasterCard are the most widely used credit cards. JCB has
also entered the Vietnamese market and offers various benefits, targeting a younger
Providers demographic.

 Advantages: You can optimize your cash flow for spending and investment because you can
borrow money from the bank for a specific period. Additionally, credit cards provide
convenience for online payments and reduce the risk of losing cash when traveling to
various places around the world.
  Make and take payments quickly and easily.

A payment
 Keep your customer's data (information) and money secure.
gateway
allows you to −  Gain trust of your customers, so they are willing to hand over their
money.
  PAYPAL − You can find all the terms and conditions of their business
model on their URL – https://www.paypal.com/. PayPal is one of the
longest established and probably the best-known service for
Most Popular transferring money online
 Amazon Payments − The URL of this immensely popular payment
Payment getaway provider is – https://payments.amazon.com/. It was created in
2007, Amazon Payments provides your customers with the same
Gateway checkout experience they get on Amazon.com
Providers  MasterCard is an international payment card issued through
partnerships between MasterCard Worldwide, a multinational
corporation headquartered in Purchase, New York, USA, and various
banks. MasterCard credit cards enable you to make payments for
transactions both domestically and internationally.
https://www.mastercard.com.vn/vi-vn.html
 VISACard also provides credit cards (known as VISA Credit or VISA
International Credit cards). A credit card is essentially an unsecured
loan from a bank. You can use the card to pay bills and make purchases
just like a debit card. https://www.visa.com.vn/vi_VN/pay-with-
visa/find-a-card/credit-cards.html
  The VNPAY-QR payment gateway is an intermediary gateway that
connects businesses with banks, allowing customers to use their
bank cards/accounts and QR code-based mobile banking technology
Most Popular to make transactions. Website: www.vnpayqr.vn

Payment
 ZaloPay is a mobile payment application (e-wallet) owned by Zion
Gateway Joint Stock Company, licensed by the State Bank of Vietnam on
Providers in January 18, 2016. ZaloPay offers various unique features, enabling
users to deposit/withdraw money and make quick and convenient
VN payments, including bill payments. https://zalopay.vn/

 Momo e-wallet is an online payment method through the Momo

wallet, which is a popular electronic wallet. Creating an account and
using it is quick and straightforward. https://momo.vn/
  The card holder − Customer

The actors in  The merchant − seller of product who can accept credit card
payments.
the credit card  The card issuer bank − card holder's bank
system.  The acquirer bank − the merchant's bank
 The card brand − for example , visa or Mastercard.
Mastercard.
VS
Mastercard.
Source: https://www.corporatetools.com/credit-card-processing/payment-process/