Payments glossary
25 terms merchants run into when choosing a payment provider.
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- 3D Secure (3DS)Security
- An authentication protocol used by card schemes (Verified by Visa, Mastercard SecureCode) to provide additional security for card-not-present transactions, shifting fraud liability to the issuer.
A
- Acquiring / AcquirerCore
- The bank or financial institution that processes card transactions on behalf of a merchant. The acquirer settles funds to the merchant after deducting fees.
- Acquiring BankCore
- The financial institution that holds the merchant's account and processes card transactions. Often distinct from the payment gateway or PSP layer.
- AMLCompliance
- Anti-Money Laundering. A set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.
B
- BNPLMethods
- Buy Now Pay Later. A short-term credit product that allows consumers to split purchases into instalments, often interest-free. Providers include Klarna, Afterpay, and Affirm.
C
- ChargebackRisk
- A forced reversal of a transaction initiated by the cardholder's bank, typically due to dispute or fraud. Results in the funds being returned to the cardholder and a chargeback fee levied on the merchant.
E
- EMVStandards
- Europay, Mastercard, and Visa. The global standard for chip-based payment cards. EMV chips generate a unique transaction code for each payment, making card-present fraud significantly harder.
H
- High-Risk MerchantRisk
- A merchant categorised as higher risk by acquirers due to industry type (gambling, adult, pharmaceuticals), high chargeback rates, or cross-border volume. Often faces higher fees and stricter terms.
I
- InterchangeFees
- The fee paid by the acquiring bank to the issuing bank for each card transaction. Set by the card schemes (Visa, Mastercard) and forms the largest component of the MDR.
- ISO (Independent Sales Organisation)Core
- A third party authorised by card schemes to sell merchant accounts and payment services on behalf of an acquiring bank. ISOs earn a share of the processing revenue.
- Issuer / Issuing BankCore
- The bank or financial institution that issues payment cards to consumers. The issuer approves or declines transactions and holds the cardholder relationship.
K
- KYCCompliance
- Know Your Customer. Regulatory process of verifying the identity of customers/merchants before providing financial services. Required by AML regulations globally.
M
- MDRFees
- Merchant Discount Rate. The fee a merchant pays to accept card payments, usually expressed as a percentage of the transaction value. Includes interchange, scheme fees, and the acquirer margin.
O
- Open BankingMethods
- A system where banks share customer financial data (with consent) via APIs, enabling third-party apps to initiate payments or access account information directly without card networks.
P
- Payment GatewayCore
- Technology that captures and transmits payment data from the merchant to the acquirer. Can be hosted, redirect-based, or API-integrated.
- PCI DSSCompliance
- Payment Card Industry Data Security Standard. A set of security requirements for any entity that stores, processes, or transmits cardholder data. Maintained by the PCI Security Standards Council.
- POSCore
- Point of Sale. The location and system where in-person transactions occur. A POS system includes the hardware (terminal) and software that processes payments at retail.
- PSD2Compliance
- Payment Services Directive 2. An EU regulation governing electronic payment services, introducing open banking obligations and Strong Customer Authentication (SCA) requirements.
- PSPCore
- Payment Service Provider. A company that facilitates electronic transactions between merchants and customers, handling card acquiring, settlement, and often fraud prevention.
R
- Rolling ReserveRisk
- A percentage of a merchant's processed volume held by the acquirer as a security buffer against chargebacks and fraud. Released on a rolling basis (e.g., 10% held for 180 days).
S
- SCACompliance
- Strong Customer Authentication. A regulatory requirement under PSD2 in Europe requiring at least two independent authentication factors (something you know, have, or are) for electronic payments.
- Scheme FeeFees
- Fees charged by card networks (Visa, Mastercard, Amex) for transactions processed on their rails. Separate from interchange and typically passed through by acquirers.
- SettlementOperations
- The process of transferring funds from the acquirer to the merchant's bank account after a transaction has been authorised and captured. Typically T+1 to T+3 business days.
T
- TokenisationSecurity
- Replacing sensitive card data (PAN) with a non-sensitive equivalent called a token. Tokens are useless if intercepted and reduce PCI DSS scope for merchants.
V
- Virtual IBANMethods
- A unique IBAN assigned to a specific merchant or end-customer to route incoming bank transfers. Enables automated reconciliation without manual matching.