A test post for the series
#payment

A test post for the series

Payment Rails Explained: The Invisible Infrastructure Powering Money Movement

When you tap your card in Accra, send MoMo to a friend, or process a payout to a merchant, something bigger is happening behind the scenes.

That “something” is called payment rails.

If you're building fintech infrastructure — especially in markets like Ghana — understanding payment rails isn’t optional. It’s foundational.

Let’s break it down clearly.

What Are Payment Rails?

Payment rails are the underlying systems and networks that move money from one party to another.

Think of them like:

  • 🚆 Rail tracks for trains
  • 🛣️ Highways for cars
  • 🌐 Internet cables for data

They are the infrastructure that financial transactions travel on.

Without rails, there is no movement of money.

The Major Types of Payment Rails

1️⃣ Card Networks (Visa / Mastercard)

Examples:

  • Visa
  • Mastercard

These are global card schemes that allow debit and credit cards to work across banks and countries.

How It Works:

  • Customer taps card
  • Merchant’s bank (acquirer) sends request
  • Card network routes it
  • Issuing bank approves/declines
  • Settlement happens later

Characteristics:

  • Fast authorization (seconds)
  • Settlement takes 1–3 days
  • Subject to chargebacks
  • Requires interchange + scheme fees

2️⃣ Bank Transfer Rails (ACH / RTP / Local Switches)

Examples:

  • Bank of Ghana systems like GhIPSS
  • Ghana Interbank Payment and Settlement Systems (GhIPSS)

These rails move money directly between bank accounts.

Types:

  • Batch systems (ACH)
  • Real-time systems (RTP / instant transfers)

Characteristics:

  • Lower fees than cards
  • Harder to reverse
  • Often more regulated
  • Used for payroll, B2B, large settlements

3️⃣ Mobile Money Rails

Examples in Ghana:

  • MTN Ghana (MoMo)
  • Vodafone Ghana (now Telecel Ghana)
  • AirtelTigo Ghana

These are telecom-led stored-value wallet systems.

Characteristics:

  • Extremely dominant in Ghana
  • Real-time transfers
  • Lower barrier to entry than banks
  • Typically no traditional chargebacks

For many startups in Ghana, MoMo rails are more important than card rails.

4️⃣ Internal Ledger Rails (Your Own Infrastructure)

Not all rails are external.

If you're building an escrow system or wallet app, you likely have:

  • Internal accounts
  • Double-entry ledger
  • Virtual balances

Inside your system:

  • Dr Customer Wallet
  • Cr Merchant Payable

This is not Visa.
This is not MoMo.
This is your own rail.

External rails move money in/out.
Your internal ledger tracks ownership.

A Real-World Flow (Example)

Let’s say you run an escrow platform in Ghana:

  • Customer pays via MTN MoMo
  • PSP processes transaction
  • Money lands in your merchant account
  • You credit user’s internal wallet
  • You later release funds to merchant

What rails were involved?

  • Mobile money rail (MTN)
  • PSP integration layer
  • Your internal ledger rail
  • Bank payout rail (if merchant withdraws to bank)

Multiple rails. One transaction.

Payment Rails vs Payment Providers

Important distinction:

Payment RailPayment Provider (PSP)The highwayThe logistics companyInfrastructureIntegration layerMoves moneyGives you API access

For example:

  • Visa = rail
  • Hubtel = PSP integrating into multiple rails

Key Engineering Considerations

If you're building fintech infrastructure, ask:

1️⃣ Is This Rail Reversible?

  • Cards → Yes (chargebacks)
  • MoMo → Usually No
  • Bank transfers → Depends on scheme

2️⃣ Is Settlement Instant?

Authorization ≠ Settlement.

Card approval is instant.
Actual money settlement can take days.

3️⃣ Who Holds the Float?

When money sits in your merchant account:

  • Is it your revenue?
  • Or a payable to merchants?

Accounting matters here.

Why This Matters for Startups in Ghana

If you're early-stage and:

  • No PSP license
  • No funding
  • No direct scheme membership

You likely:

  • Integrate with MoMo
  • Integrate with a PSP
  • Use bank rails for payout

That’s normal.

You don’t need to “build rails.”
You need to connect to rails intelligently.

Final Thought

Payment rails are not sexy.

They are invisible.

But they define:

  • Your risk exposure
  • Your settlement speed
  • Your accounting model
  • Your regulatory burden

If you're building fintech in Ghana, understanding rails deeply gives you leverage.

Because at the end of the day:

Fintech is not about apps.

It’s about controlled money movement across rails.