The essential guide to payment ecosystems

Digital payments are quickly becoming the norm, whether consumers shop online or in person. The global mobile payment market is forecast to grow by nearly 24% between 2021-2026, and the payment ecosystem will have to evolve to keep pace. The payment ecosystem supports all of these digital payments to make them run smoothly and efficiently for consumers and merchants alike.

But what is the payment ecosystem, and how does it work? In this guide, we’ll explain what the payment ecosystem is, how it works, and outline some of the trends for it.

What is the payment ecosystem?

At a basic level, the modern payment ecosystem is an interconnected system of technology, banking organisations, and non-banking financial enterprises that facilitate the transferring of funds between purchasers and vendors. The funds being transferred may take different forms, such as cash, electronic fund transfers (EFTs,) credit card payments, mobile wallets like Apple Pay and Google Pay, and more.

Looking more closely, it’s a combination of entities that interact during the payment process. Each has a specific role to play: acquirers, payment processors, payment networks, issuers, payment gateways, facilitators, independent sales organisations (ISOs,) value-added resellers (VARs,) member service provider (MSPs,) and integrated software vendors (ISVs.) The ecosystem is governed by various local, national, or regional laws covering everything from security, privacy, and taxation issues.

Here’s a selection of the biggest names involved globally:

The payment eco-system

The payment processing cycle

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The payment ecosystem operates on complex, secure, and fast communication channels previously established among the participating entities. Payments typically flow through each entity sequentially, meaning that a bottleneck at any point can prevent the payment from going through. This is why a few of the stages allow for orchestration to ensure payments are always successful through the purchase, authorization, and settlement processes. For example, allowing for multiple payment methods, gateways, and transaction routing at various stages of the process.

Understanding the payment ecosystem

Each entity and technology involved in the payment ecosystem typically plays a specific role in the payment process. Here is a quick breakdown of each one.


A bank or other financial company that issues payment cards to consumers on behalf of the card networks. These are the names that usually appear on the cards, such as Barclays, NatWest Group, Wise, or Revolut. The company issues payment to the merchant’s bank (the acquiring bank) on behalf of the consumer, meaning they assume liability for the money if the consumer cannot pay the money back.


A bank or financial company that enables merchants to accept card payments from a consumer’s card issuer within a payment network. They’re also known as merchant acquirers or acquiring banks. Acquirers primarily process credit or debit card payments on behalf of merchants and can also act as payment processor or ISO. They assume the risk and pass the transaction data to the card brand associations (card networks) and issuers to complete payment. FIS WorldPay, Valitor, Lloyds Bank Cardnet, and Global Payments are acquirers available in the UK.

Card networks

Visa, Mastercard, and American Express are examples of credit card networks that facilitate transactions between consumers, merchants, processors, banks, and financial companies. They oversee the payment processing activity and monitor settlement and sales clearing while regulating and managing their card network’s compliance policies. They charge fees to the issuing and acquiring companies for each transaction. American Express operates differently than Visa and Mastercard by issuing their own credit cards and consolidating the functions normally provided by the merchant bank, issuer, and card network.

Payment processors

Payment processors are companies working in the background to provide payment processing services to merchants. They handle the entire payment transaction to ensure merchants get paid by connecting merchants, consumers, card networks, issuers and acquirers. They may be associated with acquiring banks, like Barclays, or independent from them, like FIS WorldPay.

They are also referred to as payment service providers (PSPs,) merchant service providers, member service providers, and independent sales organisations (ISOs.) They all perform similar functions in the payment ecosystem, with some offering more and others just the basics.

Some offer additional security and fraud protections and regulatory compliance assistance, while others specialise in different card processing formats. For example, by only processing online, card-not-present transactions or by offering both credit and debit card payment options. Visa and Mastercard are considered ISOs or member service providers as they process payments on behalf of issuers. Square, Stripe, and Elavon are ISOs available in the UK.

Payment gateways

Payment gateways are software applications that enable merchants to accept payments made with credit and debit cards. They securely encrypt payment information and transfer the data between the merchant, the processor, and the card issuer. Gateways have robust security to protect cardholder data during the entire transmission process. They can be entirely digital as they process transactions from a website or physical through an in-store point of sale (POS) system at a bricks and mortarlive sale location.

Payment facilitators

These ISOs operate as a master merchant processing account for smaller merchants who wish to process online sales. It helps bring powerful and frictionless payment options to smaller merchants while reducing the cost of using these services. Similar to how cloud computing makes it easier for smaller companies to get access to powerful solutions, payment facilitators do the same for the payment ecosystem.

The facilitator controls the merchant’s end-to-end processing experience and settlement disbursements, while merchants enjoy lower costs and optimised functionality. One distinction is that facilitators do not hold the funds they process. The funds are routed from the consumer’s bank account to the merchant’s via any number of intermediaries.

Integrated software vendors (ISVs)

An ISV is a company that offers payment software for embedding in third-party software products such as in a mobile app or other web apps. Many ecosystem companies have ISV programs that offer secure and cost-effective integrated payment processing options for third-party vendors. ISVs can integrate the payment software through APIs, software developed kits (SDKs,) and other developer-friendly technologies, making it easy to offer more payment functionality without additional research and development costs. The ISVs make money from commissions based on transaction volumes.

The major players in the payment ecosystem

Successful digital ecosystems have an average of 40 partners as they use each relationship and channel to build powerful processes that offer financial and feature value to all participants. And the payments ecosystem is no different. Here is a list of some of the world’s leading payment ecosystem players with a foothold in the UK market.

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Card networks: American Express, JCB, Mastercard, UnionPay, and Visa.

Card issuers: Santander, Barclays, HSBC, Nationwide, CapitalOne, and MBNA.

Acquirers: Adyen, Bank of America Merrill Lynch Merchant Services, Barclays, JPMorgan Merchant Services, Nexi Payments, Sberbank, and Worldline.

Processors: Elavon, FIS Worldpay, Fiserve, Klarna, Square, and Stripe.

Payment gateways: 2Checkout, Authorize.NET, Braintree, and Shopify

Facilitators: Cardstream, Fiserv, Due, Square, and Stripe.

How digital payments are evolving

Even before the pandemic, the way people paid for purchases was changing. Digital payments were on the rise, online shopping increased, and new alternative payment methods were springing up everywhere.

The global mobile payment market is estimated to grow by nearly 24% annually until 2026.

Consumers began to expect a seamless payment experience everywhere online, whether on a website, web app, or mobile app. The payment ecosystem had to evolve with these increasing expectations and the need for integrated and secure ways to process payments globally.

Consumers have more payment options available

Today, we see a wider variety of payment options available to consumers. They can pay with credit and debit cards, mobile wallets, pay by instalments, and pay in their local currency no matter where the retailer is located.

It’s interesting to look at the different payment methods that are preferred globally, as it seems like each region and sometimes even different countries within them, use different payment options more than others. For example, only 30% of all American consumers shop on social media, while nearly half of all Chinese ones do. Klarna, the buy-now-pay-later payment service, nearly doubled their gross merchandise volume globally in the first part of 2021 to nearly $20 billion.

Payment companies are also enhancing the payment experience with value-added products and services. Consumers can get point-of-sale (POS) financing for high-value purchases as they go through the payment process. They can save their payment information in user accounts or mobile apps to make it easier to purchase in the future and even sign up to a subscription service for goods and services.

And it’s not just consumers who are enjoying a more seamless payment experience.

The payment ecosystem evolves in response

Payment ecosystem companies are gaining access to a range of products, services, and technologies that are helping them optimise processes, reduce costs, and ensure high acceptance rates for transactions. They’re combining global, local, and cross-border acquirers, gateways, and PSPs to create a unique blend of technologies and processes that serve their consumers and generate value for them too.

Having access to multiple acquirers, gateways, and PSPs allows merchants to ensure that payments will almost always be processed quickly and successfully. For example, if one company or service is bottlenecked or declining credit card transactions without a valid reason, there is always another one that can replace it, often automatically. This situation is not so far-fetched as some stats find that 25% of all eCommerce credit card transactions are declined without a valid reason.

For merchants who sell internationally, having the right combination of global, local, and cross-border acquirers, gateways, and PSPs can be vital to success. It ensures consumers always have access to the payment option they like and that merchants can accept payment. The right blend of payment tools and options can also lower scheme and interchange fees and speed up settlement timelines, helping merchants enjoy a higher return on their investment.

Potential trends in the payment ecosystem

As the payment ecosystem evolves, we’ll see several trends come to the surface.

Authentication and digital ID infrastructure will become a top priority for payment ecosystem players. Consumers are already embracing new authentication technologies elsewhere in their lives and will expect the same for online payments.

PayTech (payment ecosystem companies) will create new business models and payment processes to help the business world. They’re all on-board to help everyone from SMBs to large B2B firms process payments more efficiently and cost-effectively.

Consolidation of payment options into payment platforms will become the norm. Existing as-a-Service tech companies already know how to do this and will apply their expertise to the PayTech industry. With the mature APIs, data expertise, and enhanced payment processing capabilities like Open Banking available, PayTech will create robust foundations for payment platforms that’ll make it easier for anyone to get involved.

Cybersecurity and consumer data protection will become paramount as the payment ecosystem handles more sensitive data. Robust data sharing rules and enhanced data safeguards could become an industry differentiator.

Traditional banks and payment companies will continue to lose ground to PayTechs and other tech-forward payment companies unless they investigate ways to integrate some of these new technologies. Some banks have started to partner with PayTechs and Big Tech, such as Goldman Sachs, who partnered with Apple to develop the Apple Card, but more will be needed to remain competitive.

AI and machine learning (ML) will play an important role in payment ecosystems. They’ll personalise the customer experience through advanced data analytics and provide merchants and PayTechs with optimised payment processes and cost savings.

As the world of digital payments and commerce grows worldwide, the underlying payment systems will need to evolve in response. From the new technologies that will support ever-evolving payment methods and cross-border payments processes to the increased demands of data cybersecurity, the payment ecosystem will be ready. Consumers will demand more from their payment options, and PayTech companies should be ready to adapt.

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