There are so many acronyms, abbreviations and specific terms that get thrown about in the payments industry. As opaque as some may seem, they all contain important information that can be incredibly useful for business. So, we’ve gathered them all here to help you navigate the payments ecosystem.
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3D Secure
A cardholder authentication protocol that aims to reduce fraud and enhance security in eCommerce. Created by Visa, it is supported by most major card schemes. The ‘D’ in ‘3D’ refers to the ‘three domains’: the merchant/acquirer domain, the issuer domain and the interoperability domain. We outline everything you need to know about 3D Secure here.
A
Acceptance
The process by which a merchant allows a payment card to be used by a customer as a means of payment. Acceptance rate is the percentage of attempted transactions that are accepted by a merchant.
Acquirer
The financial institutions that connect merchants with card schemes by routing the card transaction through the relevant scheme. Also known as an acquiring bank.
Acquirer Reference Number (ARN)
A unique number used to tag card transactions as they move through the acquirer, card network, issuer and processors that allows acquirers and merchants to track a specific transaction.
Address Verification Service (AVS)
A tool that verifies the cardholder’s billing address in order to help combat fraud in card not present card payment environment (available mainly in the US and UK).
Alternative Payment Method (APM)
Alternative payment methods can be categorised as any form of payment which isn’t cash, or a credit card issued by a major bank. Mobile payments, digital wallets, bank transfers, Buy Now Pay Later and prepaid cards are all examples of frequently used APMs. Also known as a local payment method.
Application Programming Interface (API)
Enables different systems to interact with each other programmatically. Two examples of types of API are web services and library-based APIs.
Arbitration
The procedure a member can initiate to resolve a chargeback-related dispute between two members.
Authorisation
The process by which a transaction is approved by the issuer based on the cardholder account status and available credit. It’s the initial transaction initiated in a payment transaction, basically a request to charge a cardholder.
Authorisation code
A code that an issuer provides to indicate approval of a transaction. The code is returned in the authorisation response message and is usually recorded on the transaction receipt as proof of authorisation.
Authorisation fee
Technically called an authorisation request fee, this is what is charged each time a transaction is sent to the issuer to be authorised. The fee applies whether or not the request is approved. Note that this is not the same as a transaction fee.
Automated Teller Machine (ATM)
An electronic banking terminal that can be physically located at a bank branch, retail business, or other locations. Most commonly used to facilitate cash withdrawals with debit and credit cards.
B
Batch
A term that collectively refers to all payment card transactions processed during a given period of time.
Bank Identification Number (BIN)
An identification number assigned by the card schemes to each of its affiliated financial institutions, banks and processors. It is shown on the payment card as the leading four to six digits of the card number. Also referred as an ‘issuer identification number (IIN)’.
Bank transfer
A method of electronic funds transfer from one person or entity to another.
Buy Now Pay Later (BNPL)
An APM that allows consumers to spread the cost of a purchase by paying in instalments, often without interest. For more information on how this payment method works and why it’s rising in popularity, read our blog post about it.
C
Cardholder
The person or entity whose name is embossed on a payment card and who is the holder or an authorised user of a debit or credit card.
Card issuer
The bank, credit union or other financial institution through which a cardholder obtains a card.
Card present transaction
More than just the physical presence of the credit card, a transaction is considered “card present” only if electronic data is captured at the time of the sale. Data can be captured by swiping a magnetic strip card, dipping an EMV chip card, or tapping an NFC/contactless digital wallet with a stored card, like a smartphone with Apple Pay enabled.
Card not present (CNP) transaction
A payment card transaction made where the cardholder does not or cannot physically present the card for a merchant's visual examination at the time that an order is given, and payment effected. It's mostly used for online payments, but also mail-order or telephone-order transactions. Read our guide to CNP transactions here.
Card Verification Value code (CVC, CVV)
An authentication code added to a payment card for use during the authorisation process. The purpose of the CVC is to verify that the cardholder making the transaction during a card not present transaction possesses the credit or debit card being used for the purchase. “CVC” stands for “Card Verification Code” and “CVV” stands for “Card Verification Value”.
Chargeback
The act of taking back funds that have been paid to a merchant for a disputed or improper card transaction. This procedure is initiated by the issuer after the acquirer has begun the clearing process. Learn more about chargebacks in our blog article.
Chargeback period
The number of calendar days during which the issuer has the right to charge the transaction back to the acquirer. This may not exceed 120 days. However, there are various occasions where the chargeback timeframe is calculated on a different basis, therefore time limits may vary. Read more about chargebacks in our blog article.
Clearing
A post-transaction banking term used to describe the process of ensuring the reconciliation and settlement of the transactions are done in agreement with the underlying rules and frameworks governing the transaction.
Client-side encryption
The cryptographic technique of encrypting data on the sender's side before it is transmitted to a server, such as a cloud storage service. Also known as encryption at source.
Contactless card payments
A type of payment that can be made without the card, or chosen device, coming into contact with the card reader. NFC (Near Fied Communication) is the technology used in contactless payments. Apple Pay, Google Pay™ and Samsung Pay all use the standard NFC protocol and are therefore accepted. We also wrote an in-depth article about it.
Cross-border payment
The process that occurs when a payment method used has been issued in one country to pay someone (a peer or a merchant) that is based in another. Also known as an ‘international payment’, this is a more complicated type of payment that requires the right, regulated payments infrastructure. Read our guide to cross-border payments here.
Cryptocurrency
A digital or virtual currency that is secured by cryptography, making it nearly impossible to counterfeit. Popular cryptocurrencies include Bitcoin and Ethereum. We wrote an article about its history, why it’s so popular and the future of cryptocurrencies.
D
Digital wallet
A software application usually used in conjunction with a mobile payment system to facilitate electronic payments for online transactions and, increasingly, purchases at physical shops. Apply Pay and Samsung Pay are both popular examples. Also known as an eWallet.
E
eCommerce
The process of electronically buying or selling products over the Internet. The rate of digital acceleration in payments has been unprecedented from 2020 onwards. Learn about changes in eCommerce consumer behaviours in The new world of windows shopping in report.
The European Economic Area (EEA)
An international agreement which enables the extension of the European Union's single market to member states of the European Free Trade Association. Founded in 1994, it includes EU countries and also Iceland, Liechtenstein and Norway.
Electronic Funds Transfer (EFT)
The electronic paperless transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of bank staff. EFT transactions are known by a number of names. In the United States, they may be referred to as electronic checks or e-checks.
Europay, Mastercard, Visa (EMV)
EMV is a payment method based upon a technical standard for smart payment cards and for payment terminals and automated teller machines that can accept them. The name stands for the three companies that originally created the EMV standard.
EMV Co
The company that manages the EMV standard. It’s a consortium with control split equally among Visa, MasterCard, JCB, American Express, China UnionPay and Discover.
Encryption
The technique of scrambling sensitive data automatically in the terminal, site or computer before data is transmitted for security and anti-fraud purposes.
F
The Financial Conduct Authority (FCA)
A financial regulatory body that is based in the United Kingdom, but operates independently of the UK government. Its role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers.
Friendly fraud
An activity where a customer is trying to gain money back from performed legitimate card payments by claiming fraud and disputing the transactions with fraud reasons.
G
Geo-location
The identification and tracking of a user or computer device’s geographical location. Geolocation technology is the foundation for location-positioning services and location-aware apps.
I
In-app payments
Electronic payments made by consumers via/in mobile apps and, since they enable users to pay without having to leave an app, they a popular payment type. Payments are made either with cards or alternative payment methods (like digital wallets) and utilise native mobile APIs or web pages optimised for mobile. Also known as mobile payments.
Independent Sales Organisation (ISO)
A sales organisation acting as a third party that functions by signing up merchants to accept card payments through a partnership with a payment service provider.
Interchange ++
A transparent fee structure that shows a breakdown of individual fees. There can be a fluctuation in interchange fees, particularly for merchants operating internationally accepting a range of card types. Merchants are charged on a per-transaction basis, meaning that scheme and processing fees remain fixed, but the interchange fee is added on accordingly and is liable to change. Learn more about Interchangee ++ in our blog article.
Interchange fee
A fee paid between banks for the acceptance of card-based transactions. Usually for sales or services transactions, it is a fee that a merchant's bank (the acquiring bank) pays a customer's bank (the issuing bank). For cash transactions, the interchange fee is paid from the issuer to the acquirer, often called reverse interchange.
Issuer/ Issuing bank
The bank, credit union or other financial institution that issues credit and debit cards to consumers. Once a card transaction has started and routed to the issuer through the card scheme, the issuing bank will have to determine whether they have enough funds or credit to cover the amount requested. If the transaction is authorised, they are responsible for billing the cardholder for his purchases.
K
Know Your Customer (KYC)
The process of identifying and verifying the identity of your customers. This is required by the payment industry regulations as a prerequisite to allowing individuals or business entities to be paid out.
M
Mail Order/ Telephone Order (MOTO) payments
A type of card not present transaction that allows merchants to take orders via telephone, email and even physical letter. Customers provide their card details and merchants enter them into a virtual terminal, which works like a card machine but without the need for a physical card. For more information on how MOTO payments work and what their benefits are, read our blog post.
Marketplace
An eCommerce website or mobile app that functions as a platform for third partie sellers to sell their products or services to its users. Payments take place on the platform itself rather than at individual sub-merchants’ shops and split between the marketplace and sub-merchant. Amazon, Airbnb and Etsy are all popular examples. We also wrote an article about the rise of online marketplaces here.
Merchant
A merchant represents a company that sells goods or services online or in physical locations. Merchants may operate in various industries, such as retail, hospitality, travel, eCommerce, gaming, gambling, forex and many more.
Merchant agreement
A contract between a merchant and a payment service provider and/ or acquirer that enables the merchant to accept cards through them. It contains the merchant's and acquirer's respective rights, duties and warranties with respect to acceptance of the card transactions and matters related to transaction activity.
Merchant Identification Number (MID)
A number that a payment service provider and/ or acquirer assigns to a merchant under their merchant agreement. This unique number identifies a merchant to the payment gateway or acquirer. Associated with it is the Terminal Identification Number (TID), which is used to identify a terminal in the payment gateway provider’s system. Read our blog post on MIDs here.
Merchant Plugin (MPI)
A software module designed to facilitate 3D Secure verifications to help prevent credit and debit card fraud. The MPI identifies the cardholder and queries the card scheme servers to determine if it is enrolled in a 3D Secure programme and returns purchase and merchant information. Merchants are responsible for installing an SSL/TLS MPI at their servers.
Mobile commerce (mCommerce)
The purchase of goods and services conducted over the Internet with mobile devices. Essentially, mCommerce allows users to access their online shopping platforms of choice without having to use their desktop or laptop. For a full exploration of mCommerce, read our blog here.
Mobile payments
The use of a mobile device to pay for goods or services.
N
Negative database
Payment processors usually maintain a database of blacklisted cardholder data, result of confirmed fraudulent activities, suspicious behaviour, fraud related disputes. Used to prevent and reduce the risk of fraud and gathered over time, emerchantpay has a very extensive negative database as a result of how long we’ve been operating.
Near Field Communication (NFC)
Refers to close-range contactless wireless technologies enabling connectivity between devices, such as for processing mobile payments, when the devices are either touching or within close proximity to one another.
O
Omnichannel payment solution
A combination of services and technical solutions provided by a PSP to enable a merchant to connect all channels – online, in-app, point of sale – to allow customers to shop online and return or get a refund in-store.
One-click payments
A payment solution that allows customers to make a payment without entering their full card and address information, simplifying the purchasing process for return customers. With the customer’s consent, all details are stored after an initial purchase so they only have to enter their CVC/CVV to complete the order.
P
Pay by link
A payment functionality that allows merchants to send a simple, secure payment link to customers, usually via email or text, in order to receive payments. Payment links are generated by a merchant’s PSP in their back-office and then sent off to customers. When customers click on the link, they’re redirected to a secure payment page where the payment amount is predefined. For more information, read out blog post on pay by link here.
Payment gateway
A payment gateway is the technology that authenticates and securely transmits payment data between all the parties involved in the transaction flow. It operates as an encrypted and secure channel which passes the consumer’s payment details from the transaction device to the acquiring bank for authorisation and approval. Once approval has been granted from both the issuer and the acquirer, the payment gateway sends back verification to the merchant. Read our comprehensive explanation of payment gateways and how they work here.
Payment processor
Acts as the mediator between the merchant and the financial institutions involved in card acceptance.
Payment Service Directive (PSD)
The legal foundation for the creation of an EU-wide single market for payments. The PSD aims at establishing a modern and comprehensive set of rules applicable to all payment services in the European Union. The latest update, PSD2, came in 2018 with the aim of creating a more transparent online payments ecosystem for consumers in the EU. Read our in-depth explanation and insights on PSD2 here.
Payment Service Provider (PSP)
A company that provides comprehensive payment services to merchants. For merchants, partnering with a PSP is a more convenient and cost-efficient way of processing payments than having to deal with different contracts across various organisations and institutions. We, emerchantpay, are a PSP providing an all in one suite of payment solutions to merchants across the globe.
Pay out
Though this is a relatively broad term, pay outs are generally understood to be a large sum of money paid out in one go to an individual or business entity.
Payment Card Industry (PCI)
Consists of all the organisations which store, process and transmit cardholder data, most notably for debit cards and credit cards
Payment Card Industry Data Security Standard (PCI DSS)
An information security standard for organisations that handle branded credit cards from the major card schemes. The PCI Standard is mandated by the card brands and administered by the Payment Card Industry Security Standards Council. The standard was created to increase controls around cardholder data to reduce credit card fraud.
Payment Card Industry Security Standards Council (PCI SSC)
The governing body that’s responsible for administering the PCI Standard.
Point of sale (POS)
The merchant location from which a customer makes a purchase. This term may also refer to the devices or software used to process transactions.
Point of sale (POS) system
Encompasses both the hardware and software infrastructure involved in taking a customer’s payment. Today’s retail POS systems are often sold or leased with proprietary hardware systems. Read our article on POS systems and devices here.
Point-to-Point Encryption (P2PE)
An encryption standard established by the PCI SSC. It stipulates that cardholder information is encrypted immediately at the POS. ‘Point-to-point’ means that data is encrypted on its journey between the terminal and the acquirer and ‘encryption’ is the process of converting that data into something unintelligible to potential data breaches. Read our blog post on P2PE here.
Prepaid card
The process of authorising and reserving funds for a transaction – ensuring the card is valid and the cardholder has sufficient open-to-buy funds to cover the purchase amount and reserving the funds for completion (post-authorisation).
Primary Account Number (PAN)
The card identifier found on payment cards. For most debit cards, this tends to be the 16-digit number that’s printed on the card. The first six digits of it are called the Bank Identification Number (BIN).
R
Recurring payments
A payment model whereby a customer authorises a merchant to automatically pull funds from their account at regular intervals on an ongoing basis. Most commonly used with subscription services, recurring payments require the secure storage of payment details to create a token after the first transaction that merchants can use for all future transactions.
Remittance
Simply, an amount of money that is sent in outstanding payment for goods or services.
Risk management
In payments, a set of knowledge, skills, services, techniques and systems that payment processors use to filter transactions by their associated risk. Performing risk management is extremely complex as it usually involves the analysis of multiple big data banks.
S
Server-to-server integration
An integration that allows two servers/systems to correspond to each other. Businesses using direct integration must follow PCI DSS level 1 compliance requirements. Also known as direct integration.
Strong Customer Authentication (SCA)
An essential part of the PSD2 legislation introduced in 2018. It requires online payments in the EU – where at least one leg of the transaction is located in the EU – to process transactions using two layers of identification, known as two-factor authentication. An example would be the need for both a password and a fingerprint to authenticate a mobile payment. We cover SCA in-depth in this article.
Settlement
The process where a merchant’s processed card transactions are settled as payments to the merchant’s bank account. The exact timeframe of a settlement varies depending on the merchant’s agreement with their PSP.
Shopping cart
A user interface for customers to easily add products to a virtual shopping cart in an online store, much like a physical brick-and-mortar cart. It provides a virtual space for your customers to hold the products they’ll purchase.
Social commerce
The process of embedding your entire shopping experience into a social media platform, effectively turning a social profile like an Instagram account into a shop. Not only can customers browse through a merchant’s shop and view their goods and services, but they can also add to cart and pay for their purchase without leaving the social media app or website. You can read the blog we wrote about it here.
Software Development Kit (SDK)
A collection of software development tools in one installable package – a ‘kit’. An example in the world of payments is an in-app payments SDK, which supports payments on mobile devices by embedding a card entry form in a mobile application.
Surcharge
An extra fee charged by a merchant when receiving a payment by cheque, credit card, charge card or debit card (but not cash) which at least covers the cost to the merchant of accepting that means of payment, such as the merchant service fee imposed by a credit card company. Retailers generally incur higher costs when consumers choose to pay by credit card due to higher merchant service fees compared to traditional payment methods such as cash.
T
Terminal
A device which interfaces with payment cards to make read and transmit data for an electronic funds payment and purchase from a merchant. A terminal typically refers to a hardware device in the face to face environment or a “virtual” terminal or gateway utilised by eCommerce merchants to accept payment for goods or services sold online.
Tokenisation
Simply, the process by which sensitive data – e.g., passwords, card details, health information – are replaced by a non-sensitive equivalent, also known as a token. A token has no value on its own. It’s only useful because it represents something bigger, like a customer’s PAN. Read our article on tokenisation here.
U
Underwriting
The process of evaluating all potential risks that are associated with a merchant account, ensuring that the merchant meets all requirements, in terms of finances and business model, to keep their business running smoothly and handle issues like chargebacks and refunds. In payment processing, the underwriting process begins with the initial application process.
User Interface (UI)
The mode of interaction between a user and a computer system. A good UI provides a ‘user-friendly’ experience, meaning the way that a user interacts with the software or hardware is natural and intuitive.
V
Value Added Tax (VAT)
Also known as Goods and Services Tax (GST), a type of consumption tax assessed on the value added to goods and services. It applies to the majority of goods and services that are bought and sold for use or consumption in the UK, the EU, the US and several other countries globally.
Virtual terminal
A web-based payment application provided by PSP’s. It works almost exactly like a virtual card machine but, instead of swiping a customer’s card, data is manually entered into the system. It’s the technology that enables MOTO payments and we covered it in this article.
VisaNet
A global online system that processes money transfers. It provides domestic and international processing of credit, debit, prepaid, and commercial payment products, among other capabilities.
Void
The reversal of a current transaction that has been authorised but not settled. Settled transactions require processing of a credit in order to be reversed.
We are always happy to help people understand payments
emerchantpay is a PSP that works with businesses of all sizes. We can help you accept payments online, in-store or remotely. With shoppers eager to move seamlessly and securely across channels, it’s integral to enable them to pay across touchpoints, however they want. Our global payments solution is available through a simple integration, offering a wealth of features, including global acquiring, alternative payment methods, card issuing, an in-house e-wallet solution, fraud and risk management and performance optimisation.
When you partner with emerchantpay, we can advise on the best solutions for your business and talk you through anything that’s unclear to you in terms of payments. If you’d like to know more about payments, how we can help your business grow or anything else, please don’t hesitate to contact us.
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