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Payments Systems in the U.S.: A Guide for the Payments Professional
“Payments Systems in the U.S.” is a comprehensive description of the payments systems (cards, checks, ACH, wires, and cash) that move money between and among consumers and enterprises in the U.S. In clear and lively writing, the authors explain how the payments systems work, how they evolved, who uses them, who provides them, who profits from them, and how they are changing. Anyone in the payments industry – or needing to use payments products – can benefit from understanding this. The third edition updates information about each system, adds a chapter on payments innovation, and includes a glossary of industry terminology.
487 pages, Kindle Edition
First published September 15, 2010
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Displaying 1 - 30 of 38 reviews
June 8, 2019
The book calls itself a "Guide for the Payments Professional." It doesn't meet that bar and so I reduced by star. Had it called itself "A Guide for the Non-Payments Professional" or "A basic Introduction for the Payments Professional" I think it would be a four star version of that.
What does it get right?
(A) Useful overview of each major payments system (ACH, checks, credit, wire, cash, and wire transfer
(B) Usage statistics across various payment categories (though these same insights are recycled in about half the chapters in the book
(C) Frameworks to understand providers in each payments system (e.g., acquiring bank, processor
(D) Frameworks to understand payments systems, their types (open, closed, mixed) and functions (rules, processes, brand), and basic features (ownership, push/pull, risk management, network economics (e.g., at par, interchange), and regulation). Though I do believe, with a little work, this could all be one framework.
(E) History! The book does not try to present a complete history of payments. But it does pay attention to the history and that matters because it gives the reader some sense of how changes occur, what expectations were realized (e.g., powerful ecosystem participants find ways to make more money over time, regardless of efficiencies), were not realized (e.g., complete virtualization of the banking system), and how regulation / market economics have worked differently across time and location (e.g., rise of signature debit cards and subsequent imposition of the Hatch Act)
(F) General observations. The authors occasionally make a general observation that is both simple and occasionally counter-intuitive and immediately sums up decades of development. It's impressive. Two examples: Consumers choose products that offer convenience and financial rewards, but never those oriented toward security, despite claiming they will do so in opinion pools. Merchants choose products that will grow their top line, but seldom those that reduce costs, despite constant complaints about costs, and willingness to negotiate cost within a product. If both are as true as the authors claim they are, they are the sort of useful generalizations that elevate detailed introductions.
What does it get wrong? In short, there isn't enough attention paid to economics, terms, regulation, or legal drivers of development to provide a basic understanding of the industry:
(A) Analyses of the economics of specific companies (public and private) that participate at various points in the payments ecosystem. This is important, because the reader can literally read about an entire payments system without being even moderately obvious how much revenue a processor versus an acquiring bank makes and what the margins are on that activity. In this case, the authors have substituted being able to tell a story about how something works for an actual understanding of the industry.
(B) Consistent definition of terms and thoughtful introduction to those terms. For instance, the term processor is used no fewer than a dozen times before it is defined in chapter 9. If this is going to be done, the authors need to at least include a glossary.
(C) An appendix on regulation and laws. For an industry whose contours have been determined by network rules and government regulation, the book's treatment of these is almost nonexistent in the case of the former and surface level in the case of the latter. It isn't enough to simply repeat how important these things are if the authors actually seek to write a guide to the payments industry.
If I were to reread this book, I would read it out of order. I would start with the Introduction and then read Chapters 8 and 9, which provide an overview of the users and providers of payments services. This will then orient you much better to understand the information in chapters 2 through 7, which provide a walk through of each basic payments system. I found it easier to understand the systems, when I already understood the characters and their motivations.
What does it get right?
(A) Useful overview of each major payments system (ACH, checks, credit, wire, cash, and wire transfer
(B) Usage statistics across various payment categories (though these same insights are recycled in about half the chapters in the book
(C) Frameworks to understand providers in each payments system (e.g., acquiring bank, processor
(D) Frameworks to understand payments systems, their types (open, closed, mixed) and functions (rules, processes, brand), and basic features (ownership, push/pull, risk management, network economics (e.g., at par, interchange), and regulation). Though I do believe, with a little work, this could all be one framework.
(E) History! The book does not try to present a complete history of payments. But it does pay attention to the history and that matters because it gives the reader some sense of how changes occur, what expectations were realized (e.g., powerful ecosystem participants find ways to make more money over time, regardless of efficiencies), were not realized (e.g., complete virtualization of the banking system), and how regulation / market economics have worked differently across time and location (e.g., rise of signature debit cards and subsequent imposition of the Hatch Act)
(F) General observations. The authors occasionally make a general observation that is both simple and occasionally counter-intuitive and immediately sums up decades of development. It's impressive. Two examples: Consumers choose products that offer convenience and financial rewards, but never those oriented toward security, despite claiming they will do so in opinion pools. Merchants choose products that will grow their top line, but seldom those that reduce costs, despite constant complaints about costs, and willingness to negotiate cost within a product. If both are as true as the authors claim they are, they are the sort of useful generalizations that elevate detailed introductions.
What does it get wrong? In short, there isn't enough attention paid to economics, terms, regulation, or legal drivers of development to provide a basic understanding of the industry:
(A) Analyses of the economics of specific companies (public and private) that participate at various points in the payments ecosystem. This is important, because the reader can literally read about an entire payments system without being even moderately obvious how much revenue a processor versus an acquiring bank makes and what the margins are on that activity. In this case, the authors have substituted being able to tell a story about how something works for an actual understanding of the industry.
(B) Consistent definition of terms and thoughtful introduction to those terms. For instance, the term processor is used no fewer than a dozen times before it is defined in chapter 9. If this is going to be done, the authors need to at least include a glossary.
(C) An appendix on regulation and laws. For an industry whose contours have been determined by network rules and government regulation, the book's treatment of these is almost nonexistent in the case of the former and surface level in the case of the latter. It isn't enough to simply repeat how important these things are if the authors actually seek to write a guide to the payments industry.
If I were to reread this book, I would read it out of order. I would start with the Introduction and then read Chapters 8 and 9, which provide an overview of the users and providers of payments services. This will then orient you much better to understand the information in chapters 2 through 7, which provide a walk through of each basic payments system. I found it easier to understand the systems, when I already understood the characters and their motivations.
March 22, 2020
Payments is a mess. I work for a bank, I have a good friend who works for a cyptocurrency startup, and payments is a nonsensical nightmare. This book is a decent introduction to the world of ACH, credit and debit cards, but doesn't really get at the true underlying weirdness.
See, cash is easy. It's a physical object which is deemed to have worth because you can pay your taxes with it, and we believe that money has value. Of course, cash is just a physical representation of the abstraction of debt (see Graeber, Debt: The First 5000 years). To deal with a transaction, two banks have to make matching records in their ledgers, crediting one party and debiting the other. Simple enough. What makes this hard is doing this process with no errors, at the absolute minimum of cost, while avoiding increasingly sophisticated attacks by fraudsters.
There's some useful information in here, about the fundamental differences between push and pull transactions, open and closed networks, and what the Federal Reserve actually does in terms of mediating between banks. Doing payments well is hard.
Yet this book doesn't get at some hard issues. Why are credit card interchange fees still the same as they were in the 1950s, especially for smaller merchants. Why have mobile payments been so slow to take off in the US. The authors point to the payments industry as tech leaders, yet in practice it's incredibly conservative. I have to deal with 80 character fixed width formats because the spec was laid down in 1986 and has to be backwards compatible with punch cards. The daily batch processing on big iron mainframes is decades behind actually impressive tech infrastructure, thing like high-reliability auto-scaling kubernetes clusters, Kafka message queues, and distributed databases. And it has little to say about the actual work that I'm doing as a payments systems engineer.
See, cash is easy. It's a physical object which is deemed to have worth because you can pay your taxes with it, and we believe that money has value. Of course, cash is just a physical representation of the abstraction of debt (see Graeber, Debt: The First 5000 years). To deal with a transaction, two banks have to make matching records in their ledgers, crediting one party and debiting the other. Simple enough. What makes this hard is doing this process with no errors, at the absolute minimum of cost, while avoiding increasingly sophisticated attacks by fraudsters.
There's some useful information in here, about the fundamental differences between push and pull transactions, open and closed networks, and what the Federal Reserve actually does in terms of mediating between banks. Doing payments well is hard.
Yet this book doesn't get at some hard issues. Why are credit card interchange fees still the same as they were in the 1950s, especially for smaller merchants. Why have mobile payments been so slow to take off in the US. The authors point to the payments industry as tech leaders, yet in practice it's incredibly conservative. I have to deal with 80 character fixed width formats because the spec was laid down in 1986 and has to be backwards compatible with punch cards. The daily batch processing on big iron mainframes is decades behind actually impressive tech infrastructure, thing like high-reliability auto-scaling kubernetes clusters, Kafka message queues, and distributed databases. And it has little to say about the actual work that I'm doing as a payments systems engineer.
December 19, 2017
This book is a pretty straightforward analysis of different American payment systems, but if, like me, you've found yourself mystified by the actual plumbing of checks, ACH payments, credit card interchange, and so on, this book will explain how it all works.
The authors show that "push" transactions, whereby consumers tell their own bank to pay off someone else, exhibit few problems, but "pull" transactions, where merchants or billers have to ask their bank to pull money out of their customer's bank, open up a lot of room for fraud or default. Credit card companies such as Mastercard and VISA (both independent of banks since their IPOs in 2006 and 2008 respectively) set a fixed "interchange" fee of about 1.75% charged to the "acquiring bank" or merchant's bank, which all goes directly to the "issuing bank" or customer's bank, to pay for credit fees, fraud potential, non-sufficient fund danger, and customer service, while about .30% goes to the card company itself. Yet merchants often have to pay other fixed transaction fees, for sending authorizing message to the issuing bank, back-end processing costs to deal with batch fund settlement issues at the end of the day, a "merchant discount fee" for interchange charges and other service to the acquiring bank, not to mention terminal costs, marketing etc. that raise the price of each swipe even more. You can see why they get so angry sometimes, even if their continual acceptance of more and more expensive card systems show they do value the services they provide. After all, the authors show that banks first encouraged merchants to adopt "Point of Sale" direct transmission terminals in the early 1980s to use PIN Debit cards and credit cards, which the merchants knew avoided the hassle from gathering bags of checks to send to the bank every night, which the bank often charged for per paper, and which also exposed merchants to the danger of fraud and bounced checks. Today, most such credit or debit or prepaid cards are "open-loop systems," whereby the card brand can be attached to any banks and any merchants. Some "closed loop" systems, however, such as Discover and American Express, do all the credit risk and banking in-house (basically "on us" transactions). In either case, merchants and banks both keep signing up.
That's basically a taste of what this book is about, which may not be to everybody's palate. But if you want know more about the burgeoning payment field, this is probably the best place to go.
The authors show that "push" transactions, whereby consumers tell their own bank to pay off someone else, exhibit few problems, but "pull" transactions, where merchants or billers have to ask their bank to pull money out of their customer's bank, open up a lot of room for fraud or default. Credit card companies such as Mastercard and VISA (both independent of banks since their IPOs in 2006 and 2008 respectively) set a fixed "interchange" fee of about 1.75% charged to the "acquiring bank" or merchant's bank, which all goes directly to the "issuing bank" or customer's bank, to pay for credit fees, fraud potential, non-sufficient fund danger, and customer service, while about .30% goes to the card company itself. Yet merchants often have to pay other fixed transaction fees, for sending authorizing message to the issuing bank, back-end processing costs to deal with batch fund settlement issues at the end of the day, a "merchant discount fee" for interchange charges and other service to the acquiring bank, not to mention terminal costs, marketing etc. that raise the price of each swipe even more. You can see why they get so angry sometimes, even if their continual acceptance of more and more expensive card systems show they do value the services they provide. After all, the authors show that banks first encouraged merchants to adopt "Point of Sale" direct transmission terminals in the early 1980s to use PIN Debit cards and credit cards, which the merchants knew avoided the hassle from gathering bags of checks to send to the bank every night, which the bank often charged for per paper, and which also exposed merchants to the danger of fraud and bounced checks. Today, most such credit or debit or prepaid cards are "open-loop systems," whereby the card brand can be attached to any banks and any merchants. Some "closed loop" systems, however, such as Discover and American Express, do all the credit risk and banking in-house (basically "on us" transactions). In either case, merchants and banks both keep signing up.
That's basically a taste of what this book is about, which may not be to everybody's palate. But if you want know more about the burgeoning payment field, this is probably the best place to go.
July 20, 2020
A complete overview of the American payments systems, although it could be a little less dry. Would have loved more case studies, oral history, and industry insight.
January 12, 2021
This book is not a particularly fun read, but I ended up finding it more interesting than I expected. It had the info I needed and was relatively concise too!
January 5, 2015
This book explains in very simple terms all the payment systems in the US, the value chain, pros and cons of each system and the main players in each segment. Light reading and easy to follow. Valuable content if you work with financial services. The does not mention bitcoin so I'm sure a third edition will come out at some point.
August 19, 2020
When you want to learn more about an entire industry, it's near-impossible to find an overview of all the different players involved, from the big name companies to the various smaller service providers and the functions they serve. If you wanted to understand the movie industry for instance, you'd want a book that covered actors, writers, their unions, production companies, distributions companies, theaters, streaming services, movie critics, audiences, and all of their incentives and economics. Unfortunately, that book doesn't exist. You could look Gartner or Deloitte's "State of the Industry" reports but these are mostly about "point in time" trends and don't really dive into the structure of the industry. You're often relegated to stitching together news articles, blog posts and many, many books to get to the bigger picture.
Thankfully, for the payments industry in the United States, this book exists, and it's this one.
Thankfully, for the payments industry in the United States, this book exists, and it's this one.
February 14, 2024
Well ... for a person who was just curious about the US Payment system, this is a very good introduction to how it works. It covers very well all the different parts of the ecosystem and how they interact, why and the motivations around it. As a foreigner, it does a great job of setting the scenery. On the other hand, the book has two major downsides. The first is that it's longer than needed. You can feel the repetition when the subject is being stretched further than it required it to be. This drained me of much of the energy I'd expected to digest this type of topic, which I enjoy. Second, is that the book is a bit outdated by now. This topic is in constant evolution and even though the US system is very far behind other places in the world, it catches up, not covering a lot that happened over the past 5-10 years. A new version is needed.
December 2, 2024
"Payments Systems in the U.S.: A Guide for the Payments Professional" is a must-read for anyone looking to gain a deeper understanding of the structure and operation of payment systems in the U.S. The author explains complex concepts clearly and in detail, making the book useful for both beginners and experienced professionals.
The sections on modern technologies and digital payments are especially relevant. For those looking for reliable solutions in the field of crypto payments, linkpay.io is worth a look. This is a modern platform that embodies the principles of speed, security, and transparency that are discussed in the book.
The book not only informs, but also inspires you to use new tools for working with payments, making it a valuable resource for professionals in this field.
The sections on modern technologies and digital payments are especially relevant. For those looking for reliable solutions in the field of crypto payments, linkpay.io is worth a look. This is a modern platform that embodies the principles of speed, security, and transparency that are discussed in the book.
The book not only informs, but also inspires you to use new tools for working with payments, making it a valuable resource for professionals in this field.
February 25, 2023
There was a lot of useful information in here (and little to no filler), but at times felt slightly disorganized -- certain points tended to be repeated (not quite verbatim, but perhaps close) in multiple subsections, and many terms were used heavily before they were introduced with a deeper explanation. This latter problem is probably somewhat inevitable as references tend to be circular with some of the terminology, but what could have been helpful here (and felt glaringly missing) was a glossary. (There was an exceedingly long acronym list in the back of the book, which was not of much use; the addition of a glossary for quick reference during and after reading would be very valuable to many readers, I'd imagine.)
December 19, 2017
My key points
• There are 6 core payment systems: cash, checking system, credit card and charge system, debit card system, automated cleating house, wire transfer system
• Open and closed loop payment systems. Intermediaries join a single payment system
• Push/Pull payments
• 3 key payment system functions: processing, rules, and brand
• There are 6 core payment systems: cash, checking system, credit card and charge system, debit card system, automated cleating house, wire transfer system
• Open and closed loop payment systems. Intermediaries join a single payment system
• Push/Pull payments
• 3 key payment system functions: processing, rules, and brand
August 21, 2020
A solid overview to understand the different rails, systems, features and a thinner chapter on innovation. They are not coming up with any cutting edge content but Glenbrook is one of the few firms that brings order and some structure to this industry which feels very disjointed most of the time. Also one that brings some excitement and realizes the value of payments way beyond money movement.
June 26, 2023
The title is pretty apt- this book serves as a guide to different payment systems in US. Cards, cash, ACH, wire transfer, checks are covered succinctly.
Folks who aren’t fascinated by this domain may find the read bit dry. The formatting in the digital version is not the best, particularly with tables and diagrams.
However, the content covered makes it 5 stars.
Folks who aren’t fascinated by this domain may find the read bit dry. The formatting in the digital version is not the best, particularly with tables and diagrams.
However, the content covered makes it 5 stars.
September 23, 2019
Clear and concise, if a bit dense crash course on U.S. payment systems and accompanying value chains and business models. Offers historical background and clear diagrams on checking, ACH, cards, cash, and wire transfer.
January 3, 2020
This was helpful to update some of the terminology I was using around the office. The chapter on innovations in the payment space was insightful. Nice glossary in the back for reference aided while I learned new concepts.
March 5, 2021
Really thorough view on the banking and payments systems in the US circa 2013. Fascinating to see a difference and acceleration of parts, as well as the stagnation of others.
May 10, 2021
Pretty good overview of US payments systems. You certainly don’t need to be a payments professional to understand the content.
July 3, 2021
Useful reference, but I pity the fool (like me) who attempts to read this cover-to-cover.
December 29, 2021
A must-read for anyone working in payments!
December 31, 2021
blame the banks
February 25, 2022
Excellent overview text with just enough history and context for each "system". Please write an updated edition!
April 30, 2022
This is a textbook, not pleasure reading. It's readable but not exactly entertaining.
Read
May 11, 2022Stopped on page 14
September 12, 2022
very comprehensive and short, interesting read
May 25, 2023
A quick read. Interesting (though brief) sub-chapters on networks economics.
2014 edition is somewhat outdated, especially given the pace in Payments industry.
2014 edition is somewhat outdated, especially given the pace in Payments industry.
September 6, 2024
Good reading for a high level overview on the economics and history of payments in the US. Does not cover technical details though.
September 9, 2024
It's good and provides a lot of helpful information, but it can be a bit too high level for my tastes.
December 27, 2024
Second time through, aided by coffee and holiday determination. Goal to understand better for work.
Read
January 8, 2025Very academic. Would recommend reading anatomy of a swipe or listening to acquired podcast (Visa episode) first. Made it easier to grasp depth of this book
June 7, 2025
Extremely well written for what could be such a dry topic. Got a lot out of this book!
Only thing I wish was included was some sort of discussion on file types and layouts by method (for example, no discussion of Nacha file formatting or Wire MT files or acks).
Only thing I wish was included was some sort of discussion on file types and layouts by method (for example, no discussion of Nacha file formatting or Wire MT files or acks).
Displaying 1 - 30 of 38 reviews