Payments 101: Quick guide to how payments work
Watch this educational session hosted by Soltesz Institute
Payments have become embedded in everyday life, but understanding how they actually work can often feel complex. To help demystify this topic, The Soltesz Institute recently hosted a webinar with Mahmoud Ismail, Adyen’s Chief of Staff and Head of Acquiring and Payments for the Middle East.
The session served as a crash course for anyone looking to get to grips with the fundamentals of payments: what’s involved in processing a card payment, why fees exist, the role of different players in the ecosystem, and the growing landscape of alternative payment methods.
Here’s a simple recap of what Mahmoud covered.
Mapping the payment ecosystem
At the heart of every transaction is an ecosystem of players working together to ensure payments happen securely and reliably.
Card networks such as Visa, Mastercard, and American Express facilitate communication between issuers (the banks that issue cards to consumers) and acquirers (payment providers like Adyen that connect businesses to this network).
Issuers are responsible for verifying transactions, checking a cardholder’s identity and funds before approving or declining payments.
Acquirers like Adyen enable merchants to accept card payments and act as the key point of contact for businesses, ensuring transactions comply with local regulations and card scheme rules.
Gateways securely capture and transmit payment details online or at the point of sale.
In simple terms: when a customer initiates a purchase, their payment journey flows through these players from the point of sale, to the gateway, through the card network, to the issuer for authorization, and back to the acquirer and merchant to confirm if the transaction is successful.
Exploring payment methods beyond cards
While card payments remain dominant, Mahmoud highlighted that today’s payment landscape is more diverse than ever, offering flexibility for both consumers and businesses.
Here’s a quick overview of key methods:
Credit cards: Widely used thanks to their convenience and loyalty rewards, though they carry higher fees for merchants and potential risks like chargebacks.
Debit cards: Directly linked to a consumer’s bank account and often involve lower merchant fees; common for day-to-day purchases.
Digital wallets: Solutions like Apple Pay, Google Pay, and Samsung Pay are gaining traction globally, offering fast, secure transactions enhanced by tokenization technology.
Bank transfers: Suited for larger or B2B transactions with typically lower costs but slower settlement times.
Buy Now, Pay Later (BNPL): Increasingly popular for spreading payments over time, appealing to consumers seeking flexibility.
Cash: Still in use, but steadily declining as digital payment adoption grows rapidly in markets like the UAE.
What’s popular in the UAE?
In the UAE, usage patterns vary by industry. For example, debit cards are more common in hospitality, while credit cards are frequently used in dining and entertainment, driven by the appeal of loyalty programs.
Looking ahead, Mahmoud pointed out emerging trends such as crypto and blockchain payments. Although adoption remains slow, the UAE’s proactive regulatory environment led by entities like VARA (Virtual Assets Regulatory Authority) is paving the way for innovation in this space.
Closing thoughts
Whether it’s a tap at the checkout or a click online, every payment involves a complex network working seamlessly in the background. As Mahmoud emphasized, understanding this landscape helps businesses optimize their payment setup and prepare for the future.