This glossary contains general terms used in the payments industry and should help you demystify the world of payments.
3D Secure. An additional security layer provided by certain credit card associations for online credit and debit card transactions. 3DS adds an authentication step for customers making online purchases.
The bank or financial institution that provides a merchant account and processes credit or debit card transactions on behalf of a merchant, which allows the merchant to accept card payments.
Automated Clearing House. A network for the processing of electronic financial transactions between banks in the United States
Access control server. The server that banks contract out to provide their end of the 3DS schema.
Agents are subcontracted by ISOs or MSPs to connect merchants with the card association they resell for.
Alternative Payment Methods
Also referred to as APMs, these are what people in the payment industry call a payment method which is not Credit/Debit card. There are many different types of payments available and their popularity depends on regions, and markets.
Acquirer Reference Number. A unique number that tags a credit or debit card transaction when it goes from the merchant’s bank through to the cardholder's bank. Also called a trace ID, this number is often used to determine where a transaction's funds lie at a certain time.
Credit card authorization is the process of verifying that a customer has sufficient funds to complete a transaction. The customer’s bank (the issuing bank) is responsible for authorizing the transaction.
In international markets, the static monetary amount deducted from each transaction. Also known as a per-transaction fee.
Address Verification System. A fraud protection feature that checks to see that the billing address given by the customer matches the one on file with the issuing bank for the credit or debit card.
A credit or debit card issued by a bank.
A group of credit or debit card transactions that have been submitted for settlement to the merchant’s bank account. Also known as a settlement batch.
Bank identification number. The first 4 or 6 digits of a debit or credit card number. Also known as an issuer identification number (IIN). Looking up the BINs associated with payment methods you’re processing can provide insights like where most of your customers are located or what types of cards they use.
After authorization, a follow up transaction that refers to the submission of a credit or debit card transaction for processing. Upon success, the transaction is sent to the acquirer for settlement
A specific credit card company, such as Visa, MasterCard, American Express, Discover, etc.
A card vault provides a means of storing and tokenizing your customers’ payment data. Choose an independent PCI-DSS Level 1, PCI 3DS, and GDPR-compliant solution for additional flexibility, reliability and the highest degree of independence from your payment service providers.
The customer to whom a credit or debit card has been issued; the individual authorized to use the card.
The Card Acceptor ID is a numeric string that identifies a store location or transaction point. This number is provided by the merchant’s acquiring bank.
Acronym for Verifi’s Cardholder Dispute Resolution Network. This platform enables subscribed merchants to refund disputes before they become chargebacks.
The result of a cardholder disputing a specific credit or debit card transaction with his or her issuing bank. The issuing bank initiates a chargeback with the acquiring bank, which then filters the chargeback down to the merchant account level. The amount of the disputed transaction is immediately withdrawn from the merchant's bank account, and the merchant has a set amount of time in which to defend the chargeback, depending on the rules of the card association. A chargeback fee is usually charged to the merchant in addition to the amount of the transaction.
The transaction information a merchant needs to defend against a chargeback, such as the amount, an invoice, a customer verification/signature, and/or shipping documents.
A payment card that enables cardholders to purchase goods and services on credit. The cardholder is then billed by the issuing bank for repayment of the credit extended.
Credit card processors
Merchant services providers -- like Braintree -- that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Also called third-party processors or payment processors.
A cross border payment is a monetary transaction that takes place between banks, financial institutions, businesses or individuals operating in different countries that may or may not share a border.
Currency conversion is the process by which a presentment currency is converted into the settlement currency. The presentment currency is determined by the acquirer; the settlement currency is the currency in which a merchant is funded.
Card verification value. A 3- or 4-digit numeric code on credit and debit cards; a fraud protection feature that helps verify physical possession of a credit or debit card.
A payment card issued by a bank that can be used to make purchases or withdraw cash. Unlike credit card transactions, money for a debit card transaction comes directly from the cardholder’s bank account.
A processor decline. This indicates that the cardholder’s issuing bank has refused the transaction request.
Also referred to as an e-wallet, a digital wallet lets users make payment using an electronic device such as a mobile phone, desktop PC or notebook. Examples of digital wallets include Google Pay, Apple Pay and PayPal.
The paying out of funds from an acquirer to a merchant’s bank account.
A claim made by a cardholder to his or her issuing bank to contest or question the validity of a charge to his or her credit or debit card. Customers dispute charges for a variety of reasons, such as unauthorized or excessive charges, dissatisfaction with the product, or billing errors. Disputes often result in retrievals or chargebacks.
The buying and selling of goods and services, including the transmitting of funds or payment data, online.
Electronic draft capture (EDC)
A system which enables merchants to capture and transmit transaction data for credit and debit card processing.
Electronic funds transfer (EFT)
The electronic transfer of money between two bank accounts, including ACH transfers and wire transfers.
Shorthand for Europe, the Middle East, and Africa.
EMVCo is privately owned by American Express, Discover, JCB, Mastercard, UnionPay and Visa, 5 major credit card schemes. EMVCo manages EMV specifications like PCI DSS and 3DS that safeguard credit card transactions.
Online payments can fail for various reasons ranging from incorrectly entered data to a lack of funds or suspicions of fraud. An error code is sent whenever a transaction fails and indicates the reason for the failure.
The point of sale where a cardholder enters their credit card and other personal information required to process a transaction.
A fee specified by card associations that is paid by the acquirer to the issuing bank for each credit or debit card transaction. The acquirer passes this fee to merchants, in addition to any other fees charged for processing credit or debit card transactions. The exact interchange fee for a particular transaction depends on a number of variables, such as card type, business type, card acceptance method, settlement or batch time frame, information submitted with the transaction, and more.
Acronym for “Independent Sales Organizations”. ISOs are contracted by VISA to connect merchants with their services.
The bank that maintains the customer’s credit or debit card account and settles funds to the merchant’s acquirer for payout to the merchant. The issuing bank then bills the cardholder for the sum of all transactions during a given time period.
Know Your Customer (KYC)
KYC is the process of verifying that a customer is who they say they are, and by extension, that a financial organization is able to legally conduct business with that customer. KYC roots are in legislation laying out requirements for financial entities to protect against money laundering and the financing of terrorism.
Acronym for “Merchant Discount Rate”. The rate that a merchant is charged per transaction.
Any business that accepts payments in exchange for goods or services.
A bank account provided by an acquirer that enables the holder to accept credit and debit card payments.
Acronym for “Merchant Identification Number”. The number that identifies a merchant account, MID is now used as a shorthand for a merchant account.
A MOTO (mail order, telephone order) payment is a card not present transaction. In order to complete and pay for an order, the relevant data is provided by the customer via phone or email. Merchants need access to a virtual terminal where they can enter the information provided to process the payment.
Acronym for “Member Service Providers”. MSPs are contracted by MasterCard to connect merchants with their services.
Open Banking is a payment method. It allows customers to pay by bank transfer, sending funds directly from their bank account to the merchant. It is fast and secure, and requires no card or personal data.
Payment fraud is the act of making a transaction with fraudulent details. The victim can be an individual or a business.
Payment Gateway is the software used to transfer payment information from the merchant to the acquirer.
Payment orchestration gives merchants complete control over their payment stack. By choosing an acquirer-agnostic provider, merchants are free to connect to the most appropriate payment methods to reach the markets they sell in. Increase conversion with transaction routing and payment pages based on geolocation, platform specific data, and payment history. Get a complete and accurate overview of with state-of-the-art reporting functions, and analyze your reconciliation and settlements any way you like.
Payment service provider
A payment service provider (PSP) helps merchants accept payments via methods such as credit cards, bank transfers and digital wallets. As well as handling payments, PSPs offer additional services such as risk management, fraud protection and reporting.
The divide between free, publicly accessible content and the area users must pay to access on a website.
Pay by link
Pay By Link or payment links is the process of using a URL or QR code that takes customers to a stand-alone web page where they can complete the transaction.
Adherence to the Payment Card Industry Data Security Standard (PCI DSS), a set of requirements mandated by card associations that apply to any business that transmits, processes, or stores credit cards, regardless of the business's size or location. If card associations find that a merchant is not PCI compliant, they can suspend the merchant’s ability to accept credit card payments and assess penalties to the merchant.
The Payment Services Directive Two (PSD2) is European Union legislation that ensures payment providers (card providers, banks, payment facilitators, and more) improve customer authentication processes. The regulations were implemented due to the increased popularity in online shopping and online payments.
A portion of the funds from a high-risk (as defined by the merchant account provider) merchant's credit card transactions, held in reserve by the acquirer to cover possible disputed charges, chargeback fees, and other expenses.
Payment reconciliation is the term given to the comparison of financial records to make sure that the accounting is accurate.
More and more goods and services are provided on an ongoing, periodic basis. Therefore, recurring payments have become one of the most frequent payment models.
A request initiated by an issuing bank when a cardholder or issuing bank wants information on a credit card transaction. The merchant has a set number of days in which to respond with transaction information, or the retrieval request becomes a chargeback, in which case there is usually a retrieval request fee issued against the merchant.
Strong Customer Authentication (SCA) is multi-factor authentication (MFA), sometimes also referred to as two-factor authentication (2FA). It involves using at least two out of three possible forms of identification to complete an online purchase.
Secure socket layer. A system for encrypting data sent over the Internet, including ecommerce transactions and passwords. With SSL, client and server computers exchange public keys, allowing them to encode and decode their communication.
A settlement in online payments is the transfer of assets to the merchant for the purchasing of goods and or services. It is the completing of the payment life cycle. Settlement time varies depending on the method of payment and the parties involved.
Tokenization is the process of protecting sensitive payment data by replacing it with a randomly generated number called a token.
Transaction routing is a feature of a multi-provider setup and gives merchants control of their payments. It allows for the customization of payment flows, flexible load distribution, lower transaction costs, and the use of fall-back routing and cascading in case of provider downtimes.
Acronym for “the VISA Claims Resolution Initiative”. The initiative was implemented April 15, 2018 as an attempt to update and improve cardholder disputes.
Acronym for “VISA Merchant Purchase Inquiry”. A component of the VCR, the VMPI is an automated platform VISA provides issuing banks with to send transaction data to merchants in cardholder disputes. It is intended as a preemptive means to resolve disputes before they become chargebacks.
The cancellation of the transfer of funds from the customer to the merchant. Merchants can issue a void if the transaction is either authorized or submitted for settlement.
Acronym for “VISA Resolve Online”. This is VISA’s proprietary online infrastructure for resolving cardholder disputes. VROL enables merchants and issuers to exchange transaction data to facilitate dispute resolution.
A white label payment gateway is the name given to a technical service provider that gives businesses the ability to manage and process payments under their own brand while using third-party SaaS (Software as a Service).