Skip to Contact an Expert Skip to Main Content
Carat logo
  • What we do
    What we do
    Explore the Carat Platform

    Orchestrate payments and commerce experiences.

    Alternative Payments

    Engage more customers and lower the cost of payments.

    Secure Commerce

    Protect your brand.

    Heading
    Control Center

    Take control of your business with data and insights.

    Omnichannel Commerce

    Imagine and realize new customer experiences.

    Payment Engine

    Simplify global payments and offer more choice.

    Payment Optimization

    Grow revenue, lower costs, reduce risk.

    Integration

    Simplify integration and get to market faster.

    Heading
    Local Payments & Wallets

    Unlock revenue in markets that matter to you.

    Stored Value and Loyalty

    Drive customer acquisition, retention, and loyalty.

    Currency Solutions

    Attract more customers and reduce cart abandonment.

    Pay by Bank

    Low-cost ACH payments without chargebacks.

    Payouts / Disbursements

    Deliver fast, more secure, cost-effective payouts.

    Online EBT

    Extend digital checkouts to all of your customers.

    Heading
    Fraud Mitigation

    Help reduce fraud losses and maximize acceptance.

    Encryption & Tokenization

    Help secure your business with multiple layers of end-to-end protection.

    Alternative Credit Data

    Help approve more customers, and manage and reduce risk.

    Driving Growth for Retailers cover image
    Driving Growth for Retailers
    Learn more
    Payment Optimization checklist cover image
    Payment Optimization Checklist
    Learn more
    Payment Optimization checklist cover image
    Payment Optimization Checklist
    Learn more
  • Who we serve
    Who we serve
    Retail
    Grocery
    Technology
    Gaming
    Platforms & Marketplaces
    Franchisors
  • Developers
  • Insights
  • location Country Selector
    Country Selector
    North America (English)
    Asia Pacific (English)
    Europe, Middle East & Africa (English)
    Brazil (Português)
  • Contact Us

Welcome to Payment Methods 101: Your Overview of an Evolving Landscape

Payment methods with Clover Station

More Channels/More Payment Options

 

Consumer Shopping Channels

  • Online (Desktops and Laptops)
  • On their Mobile Devices (Phones and Tablets)
  • In their Cars
  • In Stores
  • On the Phone
  • At the Pump
  • Virtual Assistants & the IoT

Consumer Payment Methods

  • Cash
  • Credit Card
  • Debit Card
  • Check/Electronic Check
  • Gift Card
  • P2P Payment Apps
 
 

The Players Involved in These Different Methods of Payment

Cash payments are simple. They are direct, physical transactions between consumers and merchants.

When consumers choose different methods of payment – such as credit, debit, or gift cards – the process becomes more complicated.

To get paid, merchants must have technology in place to:

  • Accept the card payments easily
  • Process these payments securely
  • Facilitate fund settlements quickly

However, closing a new sale doesn’t happen automatically. Below is a payment processing overview that outlines all the key players involved in a standard card-based transaction.

The Consumer

The Consumer

As the individual buying whatever goods or services you sell, the consumer plays a critical role by supplying his or her payment details at the point of sale.

The Merchant

The Merchant

Merchants initiate the process by capturing their customers’ information at a POS system, credit card terminal, payment gateway, or virtual terminal.

The Merchant Processor

The Merchant Processor

A processor is responsible for routing payment details through the card networks to the consumer’s issuing bank. It also returns payment approvals to the consumer, merchant, and the acquiring bank.

The issuing bank

The Issuing Bank

The issuing bank is the financial institution that provides consumers and other organizations with credit and debit cards. It is also responsible for transferring funds to pay merchants.

The Acquiring Bank

The Acquiring Bank

The acquiring bank is the financial institution that holds the merchant's bank account. It receives debit and credit card payments through the processor before depositing funds on the merchant’s behalf.

The Card Network

The Card Network

The four major credit card networks – Visa®, Mastercard®, Discover® and American Express® – serve as the connection between the merchant’s bank and the consumer's card-issuing bank.

Credit Cards

Explore

Debit Cards

Explore
 

Open Loop and Closed Loop Card Systems

Today, many stores offer both open and closed loop cards.

Open Loop

An open loop credit or debit card can be used to pay for purchases at any merchant or business. All cards that carry the Visa or Mastercard logo work on the open loop system.

Open loop payments are automatically processed through the network associated with the card, regardless of the:

  • Merchant
  • Processor
  • Customer
  • Bank

Closed Loop

Cards issued by merchants, like store-specific credit cards and gift cards, run on a closed loop system.

This restricts usage of the credit, debit, or gift card to businesses and merchants within that system. However, the advantages of this approach are that:

  • Merchants can benefit from lower transaction costs and increased customer loyalty
  • Cardholders can receive more targeted offers based on purchases and spending
Examples of Closed Loop Cards:

There are many different methods of payment that fall into this closed loop category. Below are three of the most popular types:

  • Store-specific cards offered by big-box merchants like Target and Macy’s
  • Brand-specific cards offered by brands under a single corporate umbrella. For example, The Gap offers a card that can be used at all three of its brands: The Gap, Old Navy, and Banana Republic
  • Private-issue cards such as American Express and Discover. Although both are widely accepted, they process their own payments instead of relying on the card networks

Card Payment Acceptance
and Transaction Fees

Explore

Alternative Payment
Methods

Explore
 

What Is a Payment Method, and Why Should You Care?

In October 2010, First Data launched “Payment Methods 101,” a first-of-its-kind educational resource for the payments industry.

Our goal was to provide relevant stakeholders with:

  • A better understanding of what a payment method is
  • A basic overview of the credit and debit card markets
  • Insights into the trends and issues affecting the industry

Since then, that publication has been downloaded thousands of times and inspired numerous imitations. Yet with so many changes in the industry, we felt it necessary to publish an updated version of our payment processing overview.

Inside, you’ll find insightful information on the history of payments, as well as an in-depth look at:

  • How Americans pay today
  • The current trends in payments
  • Critical issues affecting the industry
  • The future of debit and credit card payments

The revised payment processing overview also features an exhaustive glossary of key terms and concepts.

Consider it your go-to resource when developing new payment acceptance strategies that help:

  • Prevent payment fraud
  • Meet customer expectations
  • Grow your business
 

Understanding the Changing Landscape of Payment Methods

“Cash, check, debit or credit?”

For more than 50 years, these were the only four payment methods available to the U.S. consumers. They just chose the best option based on personal preference and how they were making the purchase, whether:

  • In person
  • By phone
  • Via mail

In 1991, the World Wide Web completely disrupted the way consumers shopped, creating a need for remote, online payment processing (i.e., eCommerce1).

Since then, the pace of change has only accelerated.

Today, consumers can choose from a range of shopping channels and different methods of payment to buy the products and services they need.

Latest Ideas & Resources

A man in workshop

PYMNTS: How Embedded Finance Drives Logistics and Wholesale Trade

Looking at mobile screen

PYMNTS: How Embedded Finance Drives Software Publishing Platform innovation

A girl shopping for Sweatshirt

PYMNTS: How Embedded Finance Drives Retail Platform Innovation

Explore more solutions from Carat

  • Local Payments & Wallets
  • Pay by Bank
  • Stored Value and Loyalty
  • Currency Solutions
  • Payouts / Disbursements
  • Online EBT
  • Fraud Mitigation
  • Encryption & Tokenization
  • Alternative Credit Data
  • Facebook
  • Twitter
  • LinkedIn

© 2025 Fiserv, Inc. Fiserv is a registered trademark of Fiserv, Inc. All trademarks referenced here are the property of the respective owners. Merchant services provided by First Data Merchant Services LLC, doing business as Carat, is a registered Independent Sales Organization of Wells Fargo Bank, N.A., Concord, CA; Deutsche Bank AG, New York, NY; PNC Bank N.A., Pittsburgh, PA; MVB Bank, Fairmont, WV; Pathward, N.A., Sioux Falls, SD; and Citizens Bank, N.A., Providence, RI..

  • About Fiserv
  • Investors
  • Careers
  • Payments 101
  • Developers
  • Contact
  • Legal
  • Privacy Notice
  • Site Map

Site Selector