Payment Network | B2B Finance Glossary
What is a Payment Network?
A payment network is, in the most simple terms, a system that allows for money to move from one party to another. More specifically, payment networks are an association of financial institutions facilitating payments between customers and merchants. A payment network can refer to any EFT network, ACH payment system, credit card association, or any other organization that facilitates transactions between two or more parties.
How do Payment Networks Work?
The way payment networks work varies depending on the type of payment network. Here are a few examples of the most common types of payment networks:
- Credit card networks. Credit card networks involve customers (ie, the cardholders), merchants, the issuing bank, the acquiring bank, and the credit card association. When customers enter their card numbers into a payment portal on a website, this signals the card issuer (the issuing bank) to loan them the money for the purchase. Next, the card network gathers information about the buyers and their intended purchase and sends it to the acquiring bank. This bank will then request payment authorization from the card-issuing bank via the card network before the payment can go through.
- EFT networks. EFT stands for electronic fund transfer and refers to any kind of payment supported by EFT technology that makes it possible to move money electronically among banks, individuals, businesses, and other parties. That includes various digital funds transfers, including ACH payments, eChecks, peer-to-peer payments, direct deposits, ATM transactions, phone payments, in-app purchases, mobile payments, and credit and debit card payments.
- ACH payments. ACH payments allow the electronic transfer of funds directly between two bank accounts. ACH stands for Automated Clearing House, the official electronic network that initiates payments from one bank account to another and connects over 10,000 financial institutions in the US. ACH is a form of EFT payment because it uses EFT technology to transfer funds between different bank accounts, but not all EFT payments are processed as ACH transactions. ACH payments are run by the National Automated Clearing House Association (NACHA) and include different payment categories such as direct deposits, peer-to-peer payments, eChecks, bill payments initiated by eCommerce platforms, and ACH payments initiated by paper checks.
What are Some of the Biggest Drawbacks Tied to Current Payment Networks?
Today, credit card networks require merchants to sacrifice 3.5% of transactions. That means businesses must give up 3.5% of all revenue that comes in via credit card payments to the card networks. For small consumer transactions, 3.5% might not be game-changing; however, for B2B transactions (which tend to be much larger than consumer transactions), businesses that accept credit cards might find themselves sacrificing tens of thousands of dollars in revenue per transaction.
At the same time, ACH payments can be very slow; they typically take between 3 and 5 days to process, which means they can significantly increase DSO and make it more difficult for companies to access their cash quickly.
What is the Paystand Bank Network?
The Paystand Bank Network is a zero-fee, direct-bank payment network that facilitates B2B payments much faster than ACH payments. The network operates electronically as a payment rail that gives finance teams access to real-time fund transfers and automated payment settlement. It also enables secure one-off and recurring bank payments that reduce chargeback requests.
On top of that, every in-network payment is recorded on Paystand’s Assurety blockchain, creating a notarized record trail that is secure, verified, and digitally auditable.
Due to its digital format, the Paystand Bank Network allows for easier, faster, and more secure transactions when compared to legacy options like debit or credit cards, helping businesses get paid more quickly and efficiently.
Paystand’s network also offers real-time fund verification and payment tracking, so you can immediately determine if your customer has sufficient funds to pay an invoice. This eliminates chargebacks, processing fees, and manual follow-ups.
What are the Benefits of the Paystand Bank Network
- No transaction fees, processing costs, or markups
- Auto-pay and recurring billing features
- Instant fund verification
- Proprietary Least Cost Routing (LCR) technology
- Real-time payment tracking
- Blockchain-assured payment history
- Digitally auditable record trails
- Reduced chargebacks
How Does the Paystand Bank Network Work?
The Paystand Bank Network enables secure, one-off, or recurring bank payments that do not require blanket authorization between trusted parties. Instead, it leverages cryptography and digital signatures to ensure the validity of each transaction.
Each payment is initiated by the customer, which shows clear authorization and intent to pay instantly, therefore dramatically reducing the refund and chargeback requests commonly associated with credit card payments.
How Secure Are Digital Payment Networks?
Today, credit card processors must abide by the Payment Card Industry Data Security Standard (PCI DSS). Additionally, most networks use a minimum level of encryption (usually 128-bit encryption) to protect sensitive data from fraud or other types of adversarial behavior.
Most digital payment networks are safe to use, but it’s important to make sure that you and your business are protected. It’s always a good idea to check that your payment network’s security methods operate at the industry standard. Protecting you and your customers should always be top of mind.
The Paystand Bank Network ensures secure transactions powered by cryptography and digital signatures. This ensures that every transaction is secure and valid – meaning you and your customers are always protected.
How to Choose the Right Payment Network for Your Business
When choosing a payment network for your business, it’s important to ask a series of questions to ensure you’re choosing the best method. Here are a few questions to help you through the process:
- Security. Is the payment network in question up to industry standards regarding security? The best payment networks will surpass what’s usually required and go above and beyond to protect you and your customers.
- Fees. What kind of fees are tied to the payment network you’re considering? Will you have to sacrifice a portion of every transaction, or is there a monthly flat rate designed especially for you and your business’s revenue?
- Reputation. How well-known is the payment network you’re researching? How many businesses in your industry use it? Have you heard of the payment network before?
- Customer support. What kind of customer support comes along with the payment network that you’re considering? Make sure that your chosen payment network has a robust customer support team that can help you and your business with any questions you might have or any issues that you might run into.
If you’re ready to try a well-known B2B payment network that’s unmatched in security and customer support and that involves zero transaction fees, make sure to schedule a time to speak to one of Paystand’s payment experts today.