← Knowledge Trees · Nestor G Pestelos Jr
Online Payments Knowledge Tree
Prerequisite graph: card authorization, settlement, CNP fraud, 3DS liability shift, Rails multi-provider adapters, and parallel rails.
Target Capability
Narrate an online card payment from typed PAN through issuer auth to merchant funding; identify who holds CNP chargeback risk; distinguish closed-loop charge cards from open bank networks; place that stack against ACH/FedNow and PH InstaPay; locate a Rails multi-provider adapter (ActiveMerchant-class) on that stack.
Phase 1 — What a Payment System Is 3 / 3 Mastered
Payment System Inventory
Test: List the four Fed-named elements (currency, checks, ACH, Fedwire) and specify which one a web card checkout is not.
Inspect Evidence & Links
Bank For Banks Role
Test: Explain how Reserve Banks collect checks and why that is interbank settlement rather than a consumer card network.
Inspect Evidence & Links
Private Overlay Thesis
Test: State why Visa/Mastercard are missing from the Fed's payment-system list and what that implies for who writes the rulebook.
Inspect Evidence & Links
Phase 2 — Charge Networks vs. Public Batch Knowledge Frontier
Charge Versus Bank Network
Test: Distinguish a closed-loop charge product (single firm, pay in full, no interbank) from an open bank-card network (many issuers, scheme routes and writes rules).
Why A Switch Exists
Test: Explain why a single-bank card needed no interbank switch and what broke when merchants began taking multiple banks' cards.
Public Batch Versus Private POS
Test: Contrast planned batched ACH with real-time consumer POS; name one payment that belongs on each; explain why the Fed operates ACH rather than the card switch.
Phase 3 — Four-Party Checkout Mechanics Locked
Four Parties Named
Test: Assign cardholder, merchant, acquirer, issuer, and network for one $40 online sale without mixing roles.
Three-Party Contrast
Test: Explain how classic American Express differs from Visa/Mastercard regarding who issues and who acquires.
Auth Is Not Settlement
Test: Walk authorization (seconds hold) versus capture versus settlement (1-3 business days) for a delayed-fulfillment order.
Fee Split
Test: Specify who receives interchange versus scheme fees versus PSP markup on a given card transaction.
Gateway Processor Acquirer
Test: Distinguish the three adapters and explain why a unified PSP API still fails if credentials or MID routing are misconfigured.
Phase 4 — Card-Not-Present (CNP) & Fraud Locked
CNP Definition
Test: Classify web checkout, MOTO, card-on-file, and chip-insert into CNP or CP with justification.
Merchant Liability
Test: Explain why a stolen-PAN chargeback lands on the merchant rather than the cardholder.
Conversion Funnel & Acceptance
Test: Identify checkout fraud filtering and network acceptance as distinct gates; show how over-filtering hurts acceptance.
Phase 5 — Security & EMV 3DS Locked
PCI DSS Scope Reduction
Test: Name who PCI DSS applies to and explain an architecture that keeps PAN off merchant servers to minimize SAQ burden.
EMV 3DS Liability Shift
Test: Walk 3-D Secure data exchange (frictionless vs challenge) and explain how passing 3DS shifts fraudulent chargeback liability to the issuer.
Phase 6 — Internet Adapters & Rails Framework Locked
ActiveMerchant & Multi-Provider Adapters
Test: Explain authorize-then-capture behind a unified Ruby interface and identify failure modes that shared adapters must not silently swallow.
Phase 7 — Parallel Rails (ACH, FedNow, InstaPay) Locked
InstaPay & Account-to-Account Rails
Test: State PHP 50k cap, 24x7 domestic operation, and prefunded PhilPaSS settlement; contrast card versus A2A on liability and speed.