Behind the rapid development of cross-border payments lies a complex and robust web of infrastructure. This backbone enables the seamless flow of funds around the world. From the instant a consumer clicks “Pay” to the moment funds settle into a merchant’s account, a series of platforms, identification numbers, processors, and clearing systems are silently at work.

In this issue, we introduce six key payment infrastructure terms essential in cross-border transactions. We’ll explain not just what they mean, but how they function in real-world scenarios.

Term 31: Payment Processor

Definition:
A payment processor is at the core of any payment system, responsible for transmitting transaction data from the merchant to the acquiring and issuing banks. It handles transaction authorization, risk checks, data encryption, clearing, and settlement.

Expanded Explanation:
In a typical cross-border transaction, a payment processor collects information from the front-end checkout page—like card data, currency, and device fingerprint—and passes it along to the appropriate payment networks. A reliable processor helps maximize authorization rates, decrease fraud risks, and ensure fast transaction finalization.

Common providers: Stripe, Adyen, Worldpay, PayPal, Checkout.com

Real-world Example:
A Chinese cross-border merchant uses Stripe to process payments from European consumers via credit card. Stripe manages authorization, currency conversion, and downstream settlement, allowing the merchant to focus on product sales and customer service.

Term 32: Settlement Period

Definition:
The settlement period refers to the time between when a payment is made and when the funds are actually deposited into the merchant’s account. This period is critical to the merchant’s cash flow planning.

Expanded Explanation:
Cross-border settlements are often more complex, involving intermediary banks, currency conversions, and clearing systems (e.g., SWIFT or international ACH). Settlement times can vary from real-time (T+0) to several business days or even weeks.

Key influencing factors:

• Country-specific banking regulations

• Payment method used (card, wallet, bank)

• Interbank and cross-currency processing chains

• Specific terms in merchant agreements

Real-world Example:
A UK consumer purchases from an Indian website using a credit card. The transaction is processed and may settle to the merchant’s account in T+3, affected by international clearing times and FX fees.

Term 33: Merchant Identification Number (MID)

Definition:
A MID is a unique numeric identifier assigned to a merchant by an acquiring bank or payment processor. It links the merchant to their acquiring account and defines transaction conditions (currency, region, service type).

Expanded Explanation:
Large or global merchants may have multiple MIDs to segment transactions by channel, country, or business unit. This structure improves data reporting and simplifies regulatory compliance, especially when operating across different jurisdictions.

Real-world Example:
A global hotel chain operates in various countries under different brands. Each has a unique MID to receive payments in the local currency and settle into the local entity. Finance teams use these MIDs to do income segmentation and tax reporting.

Term 34: Automated Clearing House (ACH)

Definition:
ACH is an electronic clearing network used to process low-value recurring transactions such as salaries, utilities, or monthly subscriptions. International variants like IAT (International ACH Transaction) are emerging for cross-border use.

Expanded Explanation:
In the U.S., the NACHA network facilitates ACH transfers. For international transfers, banks may offer ACH-based systems for cost-efficient cross-border B2B payments, although with slower speeds than real-time systems.

Key Features:

• Low processing cost

• Typically processed in one or more days

• Best for stable, recurring payments such as payroll or vendor payouts

Real-world Example:
A U.S. parent company sends monthly operating funds to its branch in Mexico through International ACH (IAT), saving on fees compared to traditional SWIFT wire transfers.

Term 35: Real-Time Payments (RTP)

Definition:
RTP systems enable instant or near-instant clearing and settlement, often within seconds, operating 24/7/365. It is viewed as the future of both domestic and international payments.

Expanded Explanation:
Many countries now operate their own RTP networks (e.g., Faster Payments in the UK, UPI in India, Pix in Brazil). While global RTP integration is advancing, challenges such as network compatibility, real-time compliance, and currency conversion remain.

Key Features:

• Instant confirmation and settlement

• Always available (including weekends and holidays)

• Ideal for mobile payments and small-value transfers

• Often integrated with APIs and open banking environments

Real-world Example:
A freelancer in Australia invoices a client in Singapore. The client pays using local RTP system PayNow and the transaction is settled in seconds thanks to Stripe Connect integration.

Term 36: QR Code Payment

Definition:
QR code payments let customers scan a 2D barcode via a smartphone or point-of-sale device to initiate payment. It has become immensely popular in Asia and is spreading worldwide.

Expanded Explanation:
In China, India, and Southeast Asia, QR payments dominate offline payment scenarios. Through QR code interoperability and partnerships (e.g., Alipay+), cross-border travelers can now scan and pay using their home-grown wallets in other countries.

Features:

• Ideal for low-value, offline and tourism-related transactions

• Requires minimal hardware (can be printed)

• Interoperability is key in cross-border usage

• Easily integrated with local e-wallets

Real-world Example:
A Chinese tourist in Thailand scans a PromptPay QR code displayed by a food stall using Alipay. The system performs currency conversion, authorization, and real-time settlement in Thai Baht.

✨ Industry Insight: The Evolution of Payment Infrastructure

With the rise of ISO 20022, real-time clearing networks, and blockchain-based ledgers, payment infrastructure is evolving toward:

• Faster, more transparent multi-currency clearing

• Real-time cross-border RTP systems with API integration

• Digital currencies (CBDC) embedded into payment networks

• Smart contract automation for B2B settlements

???? Summary:

From core processors to settlement cycles, from merchant identity standards to real-time technologies—each building block of cross-border payment infrastructure plays a vital role. Understanding these systems is critical for optimizing cash flow, reducing transaction costs, and improving global customer experience.

Next up in Issue 7: "Fees & Pricing Strategies"—we’ll uncover the cost structure of international payments: transaction fees, FX markup, and how to protect your profit margin in global e-commerce.