Payment Stack
1. Customer Interface (Frontend / Checkout)
This is the user-facing layer where the customer initiates a payment — online or in-store. It includes the point-of-sale (POS) or checkout interface, where payment details are entered or tapped/swiped.
Examples: Shopify, Apple Pay, Amazon, Square, Toast
2. Payment Gateway
The gateway captures, encrypts, and transmits card or payment data to the processor. It also performs basic fraud checks and routes the transaction to the appropriate processor.
Examples: Stripe, Adyen, Braintree, Shift4
3. Payment Processor
The processor acts as the bridge between merchant and the financial networks, handling authorization, settlement initiation, and fraud screening. Some processors are full-stack and also provide gateway and acquiring services.
Examples: Stripe, Adyen, Worldpay, PayPal, Toast, Amazon, Shopify
4. Acquiring Bank (Acquirer)
This bank holds the merchant’s account, receives the customer’s funds from the card network, and deposits them to the merchant (minus fees). It’s the merchant’s financial institution in the transaction.
Examples: JPMorgan Chase, Wells Fargo, Stripe, Adyen, Bank of America
5. Card Networks (Payment Rails)
These are the global networks that move data and money between issuing and acquiring banks. They authorize and clear payments, and take a cut via interchange fees.
Examples: Visa, MasterCard, Amex, Discover
6. Issuing Bank
This is the customer’s bank — it issues the credit or debit card, checks for available balance or credit limit, and approves or declines the transaction.
Examples: Chase, Capital One, Citi, Amex
7. Settlement & Clearing
This is the backend layer where actual money moves. After approval, funds are routed via clearing systems (e.g. ACH, VisaNet, SWIFT) and settle into the merchant’s account.
Examples: ACH, Fedwire, VisaNet, SWIFT, SEPA, Banknet
Key Players
| Company | Core Focus | Target Market | Strengths | POS Hardware | Crypto Support | Notable Customers |
|---|---|---|---|---|---|---|
| Stripe | Online payments, APIs, B2B, SaaS platforms | Internet-native businesses, SaaS, marketplaces, global platforms | Developer-friendly APIs, global coverage, advanced infrastructure | ❌ | ✅ USDC on Solana, Polygon, Ethereum | Amazon, Shopify, Lyft, Notion |
| PayPal | Online consumer payments, wallets, checkout | Consumers and merchants, mostly e-commerce | Massive user base, trusted consumer brand, easy checkout | ❌ | ✅ Buy/Sell/Transfer BTC, ETH, LTC, BCH; USDC on PayPal USD | eBay (past), many online retailers |
| Square (Block Inc.) | SMB POS, payments, Cash App, BNPL (Afterpay) | Small physical businesses, local commerce, consumers | In-person commerce, easy setup, ecosystem (POS + software + Cash App) | ✅ | ✅ BTC via Cash App | Coffee shops, food trucks, salons |
| Shift4 (FOUR) | POS payments, hospitality, sports, events | Hotels, stadiums, restaurants, enterprise POS | Deep integrations in hospitality/entertainment verticals | ✅ | ❌ | Caesar’s Palace, Allegiant Stadium, various restaurants |
| Toast | Restaurant-specific POS and management | Restaurants (quick service to fine dining) | Full-stack restaurant tech (ordering, payroll, loyalty) | ✅ | ❌ | Independent restaurants, fast casual chains |
| Adyen | Global enterprise payments | Large global enterprises, omnichannel | Unified commerce (POS + online), direct acquiring in many regions | ✅ | ❌ | Uber, Spotify, McDonald’s |
| Checkout.com | Online payments infrastructure | Mid-large enterprises, international e-commerce | Strong presence in Europe, Middle East; developer APIs | ❌ | ❌ | TikTok, Binance, Revolut |
Breakdown of Payment Fees Per Transaction
Note : Numbers below are illustrative close approximations as estimated by ChatGPT.
When a merchant accepts a credit card payment (say $100), the typical fee structure is around 2.5%–3.5% of the transaction. That fee gets divided as follows:
Standard Credit Card Fee Breakdown (Per $100)
| Fee Type | Paid To | Approx. % | $ Amount | Notes |
|---|---|---|---|---|
| Interchange Fee | Issuing Bank | 1.50%–2.00% | $1.50–$2.00 | Set by Visa/Mastercard, but paid to the issuer (your bank) |
| Assessment Fee | Visa / Mastercard | ~0.10%–0.15% | $0.10–$0.15 | Network fee for using their rails |
| Processing Fee | Processor (e.g. Stripe) | ~0.20%–0.30% | $0.20–$0.30 | Infrastructure cost, fraud tools, uptime |
| Gateway Fee | Gateway (e.g. Stripe) | ~$0.10 flat | $0.10 | Covers tokenization, fraud screening, checkout API |
| Other Fees | PCI, 3DS, cross-border | Varies | ~$0.05–$0.20 | Includes security, currency, or compliance charges |
Total Cost to Merchant: ~$2.70 – $3.20 per $100
Invest Alpha 