Glossary of payment terms

An electronic funds transfer system in the United States that facilitates the secure and efficient transfer of money between bank accounts. It is commonly used for various financial transactions, such as direct deposits, bill payments, and business-to-business payments, replacing traditional paper checks with electronic transactions. While the United States utilises the Automated Clearing House (ACH), other countries have their own equivalents, such as Canada’s Electronic Funds Transfer (EFT), the United Kingdom’s Bankers Automated Clearing System (Bacs), or Ukraine’s System of Electronic Payments (SEP)

An Acquirer, also known as an acquiring bank or acquiring financial institution, is a financial entity that partners with merchants to process credit and debit card transactions. Acquirers are responsible for receiving transaction data from merchants, obtaining authorisation from card issuers, and settling funds from the customer’s bank to the merchant’s account

In open banking, an AISP is an entity specialising in granting users access to their financial information stored across various banks. This access is typically restricted to read-only mode and excludes transaction capabilities. A prime illustration of an AISP is Experian, which offers a financial application enabling users to securely retrieve and view their banking data while also providing tailored advice on improving FICO scores, obtaining loans, and more

Anti-Money Laundering procedure, which are rules and procedures put in place to prevent illegal money activities, such as money laundering and terrorist financing

APIs serve as the conduit facilitating communication between two applications or software programs. APIs define the methods and data formats that applications can use to request and exchange information, enabling them to work together seamlessly

Alternative Payment Methods are diverse payment solutions that go beyond traditional credit cards and bank transfers. They offer customers various ways to pay for goods and services online. These methods include options like mobile wallets, digital currencies, prepaid cards, and specific online payment systems tailored to different regions

In credit card transactions, ARN is like a special code given to a transaction. It helps keep track of the transaction as it moves from the store’s bank (acquirer) to the customer’s bank (issuer)

The process of verifying a customer’s payment method and confirming the availability of funds for a transaction

A temporary hold placed on a customer’s funds when a transaction is authorised but not yet captured, ensuring that funds are available when the payment is settled

Represent the proportion of transactions that successfully navigate the authorisation process and culminate in an approved transaction. Maintaining a robust authorisation rate contributes to revenue growth and enhances customer satisfaction

Frequently referred to as “auth retries” or a “retry strategy,” authorisation retries can be executed automatically by your payment partner or strategically planned to bolster your chances of securing authorisation. Various methods for authorisation retries encompass updating your Merchant Category Code, leveraging automation services, or enhancing the accuracy of customer data

Automatic funds transfers, also known as direct debits, empower customers to make payments automatically from their checking or savings accounts

Address Verification System, which is a security feature used in credit card transactions to verify that the billing address provided by the cardholder matches the address on file with the card issuer

B2B signifies business conducted exclusively between companies, distinct from transactions involving individual customers and businesses. B2B payments entail purchases executed from one business to another

Bank payment processing streamlines online purchases by facilitating nearly instant transaction processing, benefiting both businesses and customers

Bank transfers empower customers to make payments directly from their bank accounts. Upon initiation by an account holder, a financial institution will then orchestrate the transfer of funds to either a business or another bank account via automated clearing house networks

The practice of grouping multiple transactions together for settlement and processing, typically done in one batch at the end of the business day

A Business Identifier Code (BIC) is essential for cross-border payments, facilitating accurate routing and identification of financial institutions

A “Bank Identification Number” is the initial set of digits (usually the six to eight digits) in a credit or debit card number. It tells you which bank issued the card and helps in processing payments correctly. BINs are prominently present on credit cards, charge cards, prepaid cards, debit cards, and gift cards

Biometric authentication represents a method of identity verification harnessing biometric data such as fingerprints, iris patterns, voice recognition, or facial features to authenticate an individual’s identity. Within payment contexts, biometrics are increasingly employed to verify identities for transactions

Blockchain stands as a public, decentralized ledger that underpins cryptocurrencies and other cutting-edge web technologies like Web3. This system of record isn’t owned by a single entity; rather, multiple entities within a network collaborate to validate transaction legitimacy (referred to as a ‘block’) or asset ownership. The utility of blockchain technology lies in its ability to resolve record-keeping challenges and establish a transparent, public audit trail for diverse transaction types

Buy now, pay later, a variant of installment payments, empowers customers to divide the cost of a purchase into a series of scheduled payments over a specified duration. The seller receives the full payment upfront

The act of collecting funds from an authorised transaction, completing the payment process, and initiating the transfer of funds from the customer’s account to the merchant’s account

Card networks, also known as card schemes, are organizations or companies that establish the rules and standards for payment card transactions. They facilitate the flow of information and funds between banks, merchants, and cardholders when credit or debit cards are used for payments. Common examples of card networks include Visa, Mastercard, American Express, and Discovery

A security code printed on credit and debit cards used to verify card-not-present transactions, typically during online purchases

A cardholder is person who has and can use a credit or debit card issued by a bank or card provider

Customers receive a scannable voucher containing a transaction reference number for making online purchases. Subsequently, they can take the voucher to an ATM, bank, convenience store, or supermarket to complete the payment using cash

A digital currency backed by a government’s central bank is referred to as a CBDC. CBDCs are currently available in nine countries, including Nigeria and The Bahamas, with other nations like the US, Canada, and the UK actively researching and developing their own CBDCs

A Core Banking System is a centralised software application that is used by banks to manage and streamline their core banking processes and transactions. It serves as the backbone of a bank’s operations, facilitating a wide range of essential functions related to customer accounts, transactions, and financial services

A chargeback is a process where the amount of an authorised payment is debited from a merchant’s account at the request of the customer’s issuing bank, often due to disputes or concerns

Chargeback prevention strategies and tools are implemented by businesses to reduce the likelihood of customers initiating chargebacks, which can result in financial losses and penalties

The process of finalising and securely transferring funds or assets between financial institutions to complete financial transactions

In card-not-present transactions, customers do not physically present their payment card or device to a seller for payment. Instead, they may input a card number into an online payment field, relay the card number over the phone, or store card information with a business for future use

A contactless payment limit represents the maximum amount a customer can pay using a contactless card. If the payment amount exceeds this limit, customers are prompted to provide a signature or PIN verification. These limits are established to safeguard customers against fraud

Contactless payment technology leverages near-field communication (NFC) for transaction authorisation. It encompasses various payment methods, including digital wallets, contactless credit and debit cards, QR codes, and peer-to-peer (P2P) payments

Card-present transactions involve customers physically presenting their payment card or device to a seller. For instance, customers may insert their cards into payment terminals or use ‘tap’ functionality with a card or mobile device to complete a CP transaction

Credit cards enable customers to access a line of credit to pay for goods and services. Credit cards can be used for both CP and CNP transactions. For instance, customers can enter credit card payment details into an online form, add a credit card to a digital wallet, or use ‘tap’ functionality with a contactless credit card for payments

“Cross-border payments” refer to financial transactions or money transfers that involve sending money from one country to another. These payments can include international wire transfers, online purchases from foreign merchants, remittances sent by individuals to their home countries, or any other form of transferring funds across national borders. Cross-border payments often involve different currencies and may be subject to currency exchange rates, fees, and regulatory requirements imposed by both the sender’s and recipient’s countries

Cryptocurrency is a digital currency devoid of backing from fiat currencies or centralised governments or authorities. Instead, a decentralised system employing cryptographic techniques verifies transactions on a public ledger known as the blockchain. Notable cryptocurrencies include Bitcoin and Ethereum

3D Secure is a security protocol used in online card transactions to enhance security by verifying the cardholder’s identity. It involves authentication methods like one-time passwords or biometrics and adds an extra layer of protection, reducing the risk of fraudulent card-not-present (CNP) transactions and chargebacks. Different card networks have branded versions of 3DS, such as “Verified by Visa” and “Mastercard SecureCode”

DCC lets international customers pay in their home currency instead of the local one, but it can be costlier due to less favourable exchange rates and extra fees

A direct debit occurs when an individual authorises another party, such as a landlord or utility company, to withdraw funds from their bank account on specified dates or at regular intervals

Debit cards provide customers with a means to make payments for goods and services directly from their bank accounts without the necessity of borrowing money on credit. Similar to credit cards, debit cards can be employed for both card-present (CP) and card-not-present (CNP) transactions. For instance, customers can add their debit cards to a digital wallet, relay payment information over the phone, or securely store their debit card details with a company. Debit cards are also suitable for contactless transactions, enabling customers to simply ‘tap’ their debit cards to initiate payments

Digital currency, encompassing cryptocurrencies and central bank digital currencies (CBDCs), represents a form of electronic money. Digital currency can either be centralised, administered by a government (such as the Chinese digital yuan), or decentralised, as seen in the case of cryptocurrencies

A digital invoice is a billing document delivered to customers electronically. These invoices can be received through various channels, including email, Pay by Link, SMS, WhatsApp, and more

Digital wallets serve as virtual repositories for a customer’s diverse payment methods, alongside other digital assets like airline tickets and loyalty cards. Customers can conveniently access their digital wallets through web browsers or mobile applications. Prominent examples of digital wallets include PayPal, Google Pay, Alipay, WeChat Pay, and Apple Pay

A disagreement or conflict between a customer and a merchant or a customer and a financial institution (such as a bank or credit card company) regarding a transaction. Disputes often arise when a customer believes there has been an error, unauthorised activity, or a problem with a purchase. The customer can dispute the transaction by notifying their bank or credit card company, which then investigates and may resolve the issue, potentially resulting in a refund or chargeback. Disputes are a way for consumers to protect their rights and resolve transaction-related problems

E-billing, or electronic billing, is an automated, paperless invoicing and billing process that minimises manual effort and time

An electronic invoice, or e-invoice, is a digital version of a traditional paper invoice, facilitating efficient and automated billing processes

eCommerce, short for electronic or digital commerce, encompasses the online buying and selling of goods and services over the internet. Customers have the flexibility to make purchases using a variety of payment methods, including digital wallets, credit cards, and debit cards

Electronic Funds Transfer, often referred to as direct deposit, constitutes an electronic payment method that involves the direct transfer of funds into the recipient’s bank account. This method eliminates the need for physical checks, mobile deposits, or visits to a bank branch. EFT transactions are renowned for their safety, security, efficiency, and cost-effectiveness when compared to traditional paper checks and collections

A global standard for secure card-present transactions that uses chip technology to enhance security during in-person payments

A shift in liability from the card issuer to the merchant for certain types of fraudulent transactions if the merchant does not support EMV chip card payments

The Faster Payments Service (FPS) is a banking initiative in the United Kingdom designed to significantly accelerate payment processing times. It enables the swift transfer of funds between customer accounts held at different banks, reducing the typical processing duration from three working days to just a matter of seconds

FATF is an international organisation that fights against money laundering and terrorist financing by setting global standards and promoting their implementation

Fiat currency is a form of money issued by a government and not backed by any physical commodity, such as gold. Prominent examples of fiat currencies include the United States dollar, the Canadian dollar, the Chinese digital yuan, the euro, and the British pound

Fraud in online payments refers to any deceptive or unauthorised activity aimed at exploiting online payment systems or transactions for financial gain. It can take various forms, such as identity theft, stolen credit card information, account takeover, phishing scams, or any fraudulent activity that results in unauthorised access to funds or goods. Online payment fraud poses a significant risk to both businesses and consumers, leading to financial losses and potential damage to reputation. To combat fraud, various security measures, such as encryption, fraud detection algorithms, and authentication methods like 3D Secure, are employed by payment processors and businesses

High-risk payment processing involves handling financial transactions for businesses or industries that pose a higher risk of fraud, chargebacks, or regulatory issues

Internet bank account number is a standardised format for identifying bank accounts internationally. IBANs are used to facilitate international money transfers and ensure that payments are routed correctly to the recipient’s bank and account. IBANs consist of a country code, check digits, and the account number, and they vary in length depending on the country. This system helps prevent errors and ensures the smooth processing of cross-border payments

A charge that a merchant’s bank (the acquiring bank) pays to a customer’s bank (the issuing bank) when a customer uses a credit or debit card to make a purchase. This fee is part of the overall cost of processing card payments. Interchange fees are set by payment card networks (e.g., Visa, Mastercard). These fees can vary based on factors such as the type of card used, the transaction amount, and the merchant’s industry

Invoicing software is a digital tool that simplifies the creation, management, and sending of invoices, streamlining the billing process for businesses

IoT stands for the Internet of Things, which denotes a network comprising interconnected devices linked through the internet, allowing them to communicate with one another

IoV, short for the Internet of Vehicles, represents a wireless network established to facilitate the exchange of information among vehicles, infrastructure, and pedestrians. IoV is an integral component of the broader Internet of Things (IoT) ecosystem

Financial institution that provides a credit or debit card to a cardholder, allowing them to make purchases or withdraw cash. The issuer is responsible for setting credit limits, managing accounts, and handling billing and payments for cardholders

KYC, short for Know Your Customer, is a process employed by financial institutions and businesses to verify the identity of their clients or customers. It involves collecting and verifying information about individuals or entities to prevent fraud, money laundering, and other illicit activities, ensuring compliance with regulatory requirements

Predefined boundaries or restrictions on various financial transactions, accounts, or activities. These limits are established by financial institutions, regulators, or individuals

Local payment methods are payment options specific to a region or country, tailored to the preferences and banking systems of that area, making it easier for local customers to pay for goods and service

An MCC, or Merchant Category Code, is a concise four-digit number used to categorise the nature of products or services offered by a business. Originally designed for taxation purposes, MCCs now play a pivotal role in payment processing and can occasionally influence authorisation rates

A merchant is a business entity or individual that sells goods or services to customers in exchange for payment. Merchants can operate in various industries and may have physical storefronts, online stores, or both. They facilitate transactions by accepting various forms of payment, such as cash, credit cards, debit cards, mobile payments, and more. Merchants play a crucial role in the economy as they provide consumers with access to the products and services they need or want

A specialised bank account that allows businesses to accept payments. Funds from customer transactions are temporarily held in this account before being transferred to the merchant’s bank account

A verification method that relies on at least two distinct elements from the following three categories:

1) possession, such as a mobile device;

2) biometrics, such as a fingerprint;

3) knowledge, such as a passphrase

A unique alphanumeric code or identifier assigned to a merchant by a payment processor or acquiring bank. It is used to distinguish and track individual businesses within the payment processing system, allowing for the efficient processing of transactions and the management of funds

The capability of a payment gateway to accept and settle transactions in multiple currencies, ideal for international businesses

NFC technology facilitates communication between two compatible devices. For instance, an NFC-enabled smartphone can securely transmit financial information, encrypted through tokenisation, to an NFC-equipped card reader at the point of sale, allowing for seamless contactless payments

NFTs are digital tokens built on blockchain technology, each representing a distinctive asset, be it digital artwork, content, or media. While the majority of NFTs are associated with the Ethereum blockchain, other blockchain platforms have also introduced their own variations of these unique tokens

One-click payments enable customers to make purchases with a single click, as their payment information is securely stored and automatically used for future transactions

Open banking is a regulatory framework that grants authorised third parties direct access to consumers’ bank accounts and financial information, contingent upon the consumer’s consent. With this access, third parties can provide enhanced financial insights and facilitate account-to-account payments

Peer-to-peer (P2P) payments enable individuals to transfer money directly to one another using digital payment platforms or mobile apps, bypassing traditional banks

A special number that’s embossed or encoded on the card. It helps identify the bank that issued the card and the specific cardholder’s account. The PAN is made up of different parts, including an industry code, a bank code, a unique account number, and a check digit for accuracy

An entity that simplifies the merchant onboarding process by aggregating multiple merchants under a single master merchant account

A payment authorisation code is a unique code generated by the issuing bank or payment processor to confirm that a transaction has been approved for payment

An online service or software that facilitates and manages electronic transactions between customers and businesses. It plays a vital role in processing payments made over the internet, enabling customers to securely enter their payment information (such as credit card details) during online purchases. Payment gateways encrypt this sensitive information, transmit it to the respective financial institutions for authorisation, and then return a response to the merchant to complete the transaction

The process of connecting a merchant’s website or application to a payment gateway’s API to enable online payments

Payment gateway maintenance encompasses regular updates, monitoring, and troubleshooting to ensure the smooth and secure operation of payment processing systems

Payment gateway plugins are software components or extensions that can be added to various e-commerce platforms to enable seamless payment processing

A Payment Identifier is a unique code or reference number assigned to a specific payment transaction to distinguish it from other transactions. Payment identifiers are used to track and identify payments, making it easier to match payments with their corresponding orders, invoices, or recipients. These identifiers can take various forms, including alphanumeric codes, transaction numbers, or QR codes, depending on the payment system or service provider. They play a crucial role in ensuring that payments are accurately processed and reconciled within the payment ecosystem

A payment link is a URL or hyperlink that, when clicked, directs users to a secure payment page, simplifying the process of accepting online payments

An automated message or notification sent to the merchant to inform them of successful or failed payment transactions

Payment Orchestration refers to the strategic management and optimisation of a variety of payment methods, processors, and financial services to provide a seamless and efficient payment experience for businesses and customers. It involves routing transactions to the most suitable payment methods, processing providers, and acquiring banks to enhance payment acceptance and performance

Payment page customisation allows businesses to tailor the appearance and branding of their payment pages to create a consistent and professional user experience

Payment processing fees are charges imposed by payment service providers for processing transactions and are typically based on a percentage of the transaction amount or a flat fee per transaction

An entity responsible for facilitating the technical aspects of payment transactions, including communication between the merchant, the payment gateway, and the customer’s bank

A payment reversal is a transaction initiated by the payer, bank, or payment processor to reverse or cancel a previously authorised payment

A Payout refers to the process of transferring funds or money from one party to another, typically from a business or organisation to an individual or entity. Payouts can occur for various reasons, such as salary payments to employees, dividends to shareholders, merchant settlements, affiliate commissions, insurance claims, or any situation where money is disbursed to beneficiaries or payees. Payouts can be made through different payment methods, including bank transfers, checks, digital wallets, or other electronic payment systems, depending on the nature of the transaction and the preferences of the parties involved

Payment Card Industry certification is a validation process that confirms a business’s compliance with Payment Card Industry Data Security Standard (PCI DSS) requirements for handling payment card data securely

Payment Card Industry certification is a validation process that confirms a business’s compliance with Payment Card Industry Data Security Standard (PCI DSS) requirements for handling payment card data securely

Payment Card Industry Data Security Standard (PCI DSS ) is a set of security standards created by major credit card companies to protect payment card data. It outlines guidelines and best practices for organisations that handle this data to prevent breaches and theft. Compliance is essential to maintain security and trust with customers

Payment Card Industry Point-to-Point Encryption is a security standard designed to protect payment card data from the point of capture (e.g., card reader) through to processing

A PIN is a numeric code utilised in electronic financial transactions. In payments, PINs grant users the authority to authorise transactions, enhancing the security of the electronic transaction process

In the realm of open banking, PISPs are companies empowered to access customer bank accounts to retrieve read-only data and execute payments on the customer’s behalf. PISPs enable direct payments from a customer’s bank account, eliminating the necessity for a debit or credit card

PSD2 stands as a European Union regulation governing electronic payments, enacted in 2018. This EU directive encompasses Strong Customer Authentication (SCA) and introduces new regulated payment providers. Its purpose is to establish guidelines for how service providers can access banking accounts and financial data with user consent, fostering increased competition and innovation in the banking and finance sectors

A Payment Service Provider is a financial institution or third-party company that offers payment processing services to businesses and merchants. PSPs facilitate electronic transactions by connecting merchants to various payment methods, card networks, and financial institutions. They play a crucial role in enabling businesses to accept payments from customers

The PSR serves as the economic regulator for payment systems within the United Kingdom. It strives to make payments accessible, reliable, secure, and valuable for merchants. The PSR’s mission is to ensure a competitive and innovative payment system industry that benefits all stakeholders, from consumers and merchants to payment providers

QR codes are matrix barcodes that are scannable and contactless. They serve as a means to guide consumers to websites, online checkouts, mobile apps, menus, and various other digital channels

Real-time payment processing enables instant settlement and confirmation of transactions, reducing payment processing times and enhancing customer experiences

Reconciliation refers to the process of comparing and matching records to ensure that they are consistent, accurate, and in agreement. It involves comparing various sets of financial data, such as bank statements, payment records, invoices, and accounting entries, to identify any discrepancies or differences. The goal of reconciliation is to ensure that all financial transactions and records are accurately recorded and that any discrepancies are investigated and resolved

An automated payment setup where a customer’s payment method is charged at regular intervals for subscription services or ongoing purchases

A refund is a financial transaction in which a payer receives a reimbursement or repayment of funds previously paid to a recipient. Refunds typically occur in various contexts, including retail, e-commerce, services, and financial transactions

Remittance transfers pertain to bank transfers conducted across international borders

RTP is a payment system that executes transactions instantly, depositing funds into a user’s account within seconds. This eliminates the need for users to endure days of waiting to see money in their business accounts or to ponder when a payment will be finalised — it all occurs instantly

Strong Customer Authentication (SCA) is a European authentication protocol mandated by the Payment Services Directive 2 (PSD2) to enhance security and combat fraud in payment transactions. Businesses seeking to accept payments and comply with SCA requirements must incorporate additional authentication measures into their checkout processes or partner with a payment service provider to achieve this

SEPA stands for the Single Euro Payments Area, an initiative aimed at simplifying euro-denominated bank transfers. Through SEPA, customers can make cashless euro payments, including credit transfers and direct debits, to destinations within the European Union and select non-EU countries, offering a rapid, secure, and efficient alternative to national payment methods

The process of reconciling and finalising transactions, ensuring that funds are transferred from the customer’s bank to the merchant’s bank

Social commerce empowers businesses to directly sell their products and services through social networking platforms such as Instagram, Facebook, Pinterest, Twitter, and other related channels

A cryptographic protocol that ensures secure data transmission between the customer’s browser and the payment gateway during online transactions

Stablecoins are cryptocurrencies that are backed by physical commodities (like gold), assets (such as stocks), or fiat currency (like the US dollar) to provide stability and reduce price volatility

Subscriptions refer to a business model where customers sign up to receive goods or services regularly over a specified period, typically in exchange for recurring payments. This model is common in various industries, including streaming services, software-as-a-service (SaaS), magazines, meal kit deliveries, and more. Customers subscribe to access products or content continuously, often on a monthly or yearly basis, rather than making one-time purchases

Third-party payment processing is when a merchant outsources its payment processing functions to a third-party service provider, simplifying the payment acceptance process

A Terminal Identification Number (TID) is a unique numerical identifier associated with a specific payment terminal, whether virtual or physical. TIDs play a crucial role in enabling merchants to swiftly locate and reference transactions, particularly in cases involving refunds or disputes

A secure database where payment tokens (replacing sensitive card data) are stored for recurring payments, reducing the risk of data breaches

The process of replacing sensitive payment data, such as credit card numbers, with a unique identifier (token) to enhance security during storage and transmission

A financial transaction between a client and a company made using a bank card, electronic money or cryptocurrency

In the realm of open banking, Technical Service Providers collaborate with regulated entities to provide the essential financial data that fuels open banking services. It’s important to note that under PSD2, there exists a critical distinction between TSPs and Payment Initiation Service Providers (PISPs). Generally, TSPs specialise in delivering technical services exclusively, refraining from handling funds, and thus, they do not fall under the category of PISPs or Account Initiation Service Providers (AISPs)

Virtual card payments involve the use of temporary, digital card numbers for online purchases, enhancing security and reducing the risk of fraud

A web-based application that allows merchants to manually enter payment card information for processing card-not-present transactions, often used for phone or mail orders

White-label refers to a product or service produced by one company (the provider or manufacturer) that is rebranded and resold by another company (the reseller or marketer) as if it were their own. In this arrangement, the reseller can put their own branding, logo, and identity on the product or service, making it appear as if they created or developed it themselves. White-label products and services are typically generic and not customised to a specific brand, allowing resellers to offer a range of offerings to their customers without the need for extensive development or production efforts. This approach is commonly used in various industries, including software, finance, and consumer goods

A White-Label payment gateway is a payment processing solution offered by a payment gateway provider that allows businesses to use the payment gateway’s infrastructure and technology under their own branding and label. Essentially, it enables businesses to rebrand the payment gateway as if it were their own, providing a seamless and customised payment experience for their customers

Zero trust payment security is a security model that assumes no trust, even within a secure network, and continuously verifies user identities and device security before granting access to payment systems