Payout: Refers to the process of receiving funds. Payout typically describes the act of a mer-chant or individual actually receiving funds, without involving specific payment processing steps. Common scenarios include platforms like Wish, eBay, or Amazon requiring merchants to provide virtual bank accounts to receive settlements. This process is called payout.

Payout Service Providers: Companies like Yeepay, LianLian Pay, PingPong, Airwallex, Payoneer (P-Card), and Xunhui hold domestic RMB licenses or partner with licensed financial institutions to legally settle foreign income into China.

Acquiring: Refers to merchants or institutions accepting cardholder payments through agreements with banks or payment providers. During acquiring, merchants use an acquirer(acquiring bank/service provider) to process transactions, handle workflows, and settle funds to merchants. Acquiring involves interactions among card networks, banks, mer-chants, and cardholders to ensure secure and smooth transactions.

Local Payment methods: Beyond card payments, local payment methods refer to region-specific options like bank transfers, e-wallets, cash payments, or convenience store payments. Offering these improves customer satisfaction, boosts transaction success ratesand reduces fees from currency conversion.

Let’s break down these roles—while technical, understanding them is critical for selecting payment partners.

A cardholder refers to an individual or entity that holds a credit card, debit card, or other payment card.

An individual or entity holding a credit/debit card. Includes specialty cards like corporate cards, prepaid cards, gift cards, and travel cards.

Under card schemes (such as Visa and Mastercard), a "merchant" refers to any business or entity that accepts customer credit or debit card payments as a form of payment for goods or services. Merchants include various types of businesses, such as retail stores, restaurants, online retailers, service providers, virtual service providers, and more.

MSPs act as intermediaries between businesses, customers, and financial institutions. Key services:

Authorized third-party companies or individuals that sell or lease payment processing services to merchants. ISOs act as intermediaries between merchants and financial institutions offering payment processing services. They provide a range of services, including setting up merchant accounts, supplying payment processing hardware and software, collaborating closely with payment processors, and delivering tailored solutions based on business needs. ISOs typically earn compensation through commissions or fees paid by payment processors or banks for the clients they onboard.

A technology or service that securely transmits payment information between consumers, merchants, and payment processors. It acts as a bridge connecting all parties involved in a transaction. Think of it as the online equivalent of a physical retail store’s POS (Point of Sale) terminal.

Using a payment gateway ensures sensitive payment information is securely processed. This is achieved by adhering to strict security standards and encryption protocols, such as the Payment Card Industry Data Security Standard (PCI DSS).

Payment gateways primarily serve merchants, enabling them to securely complete online transactions. They act as technical providers that relay transaction approvals ("Approve") or declines ("Decline") between merchants and consumers.

A service provider that allows businesses to process credit card payments and mobile transactions without setting up their own merchant accounts with banks or card networks. Instead, the aggregator manages a single merchant account and consolidates all clients under this account.

Payfac simplifies the merchant account registration process. As a type of payment aggregator, Payfac typically offers a more comprehensive suite of services, such as payment gateway integration, hardware for in-person payments, fraud prevention protection, transaction reporting, and customer support. Payfac operates as an Independent Sales Organization (ISO) sponsored by an acquiring bank. They maintain a master merchant account and enable submerchants to process transactions under this account. Each submerchant can have its own unique Merchant Identification Number (MID) and Merchant Category Code (MCC), depending on the partnership agreement between the Payfac and the acquiring bank. Whether each submerchant is required to submit full KYC documentation and MCC details for approval by the acquiring bank depends on this partnership.

The diagram below primarily highlights the key differences between Payment Aggregators and Payfac.

What is a Merchant of Record (MOR)?

A Merchant of Record (MOR) is the legal entity that becomes the official "seller" in a transaction.

For digital products, SaaS, and e-commerce, most MORs operate on a reseller model. This means you, the business, enter into a reseller agreement with the MOR. You sell your product to them, and they then resell it to your end customer. This critical distinction is what allows them to legally assume all responsibility for the sale.

In simple terms: The MOR acts as your global sales and compliance department, letting you focus entirely on building your product and acquiring customers.

So, Think of a Merchant of Record not as a payment processor, but as a strategic compliance partner. MOR companies responsible for processing transactions, handling compliance, and assuming financial and legal liabilities in sales transactions. When a customer buys a product or service, the MOR is the official "seller" on record, managing:

• Payment processing
• Tax calculation, collection, and remittance
• Compliance with local regulations (e.g., VAT, GST, sales tax)
• Fraud prevention and chargeback management
• Invoicing and customer service for payment-related issues

For example, if a company uses Paddle or Lemon Squeezy as its MOR, customers pay these platforms directly, and the MOR handles all backend complexities.

Focuses on in-person payments (POS hardware for brick-and-mortar stores).

Serve mobile businesses (food trucks, pop-up stalls) via smartphone-compatible systems.

Cater to industries with elevated chargeback/fraud risks (e.g., gaming, adult content), often at higher fees.

These clients, typically high-transaction-volume banks and financial institutions, maintain direct partnership agreements with card schemes for co-developing payment products and executing joint marketing initiatives. While mandatory scheme participation fees apply, acquirers retain maximum operational autonomy in managing platform functionalities and bear full compliance responsibility for all activities under their assigned BIN ranges.

The official designation for certified acquirers within card scheme frameworks is "Principal Members"

A payment processor acts as a technical intermediary between the consumer's issuing bankand the merchant' s bank, it handles the transaction process by verifying the customer'spayment information, checking for fraud, ensuring compliance with relevant regulationsand ultimately authorizing or declining the transaction.

Typically, acquiring banks and issuing banks collaborate with their respective payment pro-cessors. However, in some cases, acquiring banks or issuing banks may also act as paymentprocessors themselves.

A payment processor is a backend technology provider that operates between the consumer’s issuing bank and the merchant’s acquiring bank, specializing in payment processing and authorization. Its primary role is to ensure the secure transfer of funds from the consumer’s account to the merchant’s account.

Payment networks, such as Visa, Mastercard, American Express, and Discover, provide theinfrastructure that enables card-based transactions. These networks act as intermediariesbetween acquiring institutions (acquirers) and issuing institutions (issuers), routing transac.tion messages between them to authorize and settle payments. Additionally, payment net-works establish the communication protocols and standards that acquirers and issuers mustfollow to ensure interoperability and security.

The terms "international card schemes" and "local card schemes" refer to the payment net-works displayed on credit or debit cards, differentiated primarily by their global acceptanceand geographic reach, Below are examples of common international and local cardschemes:

Visa、Mastercard、American Express、Discover、UnionPay、JCB

China UnionPay, RuPay (india), interac (Canada), Troy (Turkey), Mada(Middle East), Knet (Kuwait)

Both models have a significant drawback: the Merchant Category Code (MCC) is fixed, making it difficult to flexibly adapt to each merchant’s specific business model. This directly impacts the optimization of transaction success rates. As a result, these approaches are more suitable for small to medium-sized merchants in the early stages, who prioritize establishing a functional payment process over customization.