Payments glossary

51 terms merchants run into when choosing a payment provider.

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3-D Secure (3DS)Security: 3-D Secure (3DS) is a protocol that lets the card issuer authenticate the cardholder during an online payment, either silently using risk data or with a challenge such as a banking-app approval, and it can shift fraud liability from the merchant to the issuer.

A

Account-to-Account (A2A) PaymentsMethods: Account-to-account (A2A) payments move money directly from the payer's bank account to the payee's account without a card network in between, usually as a credit transfer the customer authorises in their banking app.
Acquiring / AcquirerCore: Acquiring is the service of accepting card payments on a merchant's behalf. The acquirer contracts with the merchant, sends its transactions into the card networks for authorisation and clearing, and pays the merchant the proceeds after fees.
Acquiring BankCore: An acquiring bank is a bank licensed by the card schemes to acquire card transactions. It holds the scheme membership, settles funds to merchants and is ultimately responsible to the schemes for the merchants and agents it sponsors.
Alternative Payment Method (APM)Methods: An alternative payment method (APM) is any way to pay other than the major international card schemes, such as digital wallets, bank transfers and open banking, buy now pay later, local card schemes, cash vouchers and mobile money.
AML (Anti-Money Laundering)Compliance: Anti-money laundering (AML) covers the laws, controls and procedures that stop criminals passing illicit money through the financial system, including customer due diligence, transaction monitoring, sanctions screening and reporting suspicious activity to the authorities.
Authorisation and CaptureOperations: Authorisation is the issuer's real-time approval of a card payment, which reserves the funds on the customer's account; capture is the merchant's later instruction to collect the authorised amount so it can be cleared and settled.
Authorisation Rate (Approval Rate)Operations: The authorisation rate, or approval rate, is the share of payment attempts that the issuer approves. It is a key measure of payment performance, because every legitimate transaction that is declined is a potential lost sale.

B

BIN (Bank Identification Number)Standards: A BIN (bank identification number), also called an issuer identification number (IIN), is the first six or eight digits of a payment card number. It identifies the card's issuer and product, including its brand, country and type.
Buy Now, Pay Later (BNPL)Methods: Buy now, pay later (BNPL) is short-term credit offered at checkout that lets a customer split a purchase into instalments or pay later, often interest-free. The BNPL provider usually pays the merchant upfront, minus a fee, and collects repayments from the customer.

C

Card-Not-Present (CNP)Core: A card-not-present (CNP) transaction is a card payment made without the physical card being presented to a terminal, such as an online or in-app purchase, a phone or mail order, or a recurring charge to a stored card.
Card-on-File and Recurring PaymentsMethods: Card-on-file, or a stored credential, means a merchant or its provider keeps a customer's card details, usually as a token, with the customer's consent so they can be charged later for one-click checkout, subscriptions, instalments or usage-based billing.
Cascading (Payment Retries)Operations: Cascading is automatically retrying a failed payment through a different acquirer, PSP or payment method, usually within the same checkout, so a customer whose payment was declined or hit a technical error can still complete the purchase.
ChargebackRisk: A chargeback is the reversal of a card payment by the cardholder's issuer, usually after the cardholder disputes it. The amount is taken back from the merchant through the acquirer, often with a fee, unless the merchant successfully defends the dispute.

D

Direct DebitMethods: A direct debit is a bank payment collected by the merchant from the customer's account under a mandate the customer has given, commonly used for subscriptions, bills and memberships where payments recur.
Dynamic Currency Conversion (DCC)Fees: Dynamic currency conversion (DCC) lets a customer paying with a foreign card choose to be charged in their card's own currency instead of the merchant's local currency, with the conversion done by the merchant's provider at a rate that includes a markup.

E

E-Wallet (Digital Wallet)Methods: An e-wallet, or digital wallet, is an app or online account that stores payment credentials or a balance so customers can pay without entering card details. Examples include Apple Pay, Google Pay, PayPal and Alipay.
EMVStandards: EMV is the global technical standard for chip payment cards and terminals, named after Europay, Mastercard and Visa. It is now managed by EMVCo and also underpins contactless payments, mobile wallets, 3-D Secure and payment tokenisation.

H

High-Risk MerchantRisk: A high-risk merchant is a business that acquirers and PSPs consider more likely to cause chargebacks, fraud, regulatory or reputational problems because of its industry, business model, history or markets, and which therefore faces stricter onboarding, pricing and terms.

I

Instant PaymentsMethods: Instant payments are bank transfers that are processed and credited to the payee within seconds, at any time of day, every day of the year, through real-time systems such as SEPA Instant, Faster Payments, Pix, UPI or FedNow.
Interchange FeeFees: Interchange is a fee the merchant's acquirer pays to the cardholder's issuing bank on each card transaction. Card schemes set the rates, which vary by card type, region and payment channel, and it is often the largest component of card acceptance costs.
Interchange++ (IC++)Fees: Interchange++ (IC++, or interchange plus plus) is a card pricing model in which the merchant pays the actual interchange fee and scheme fees for each transaction, plus a separately stated acquirer or PSP margin.
ISO (Independent Sales Organisation)Core: An independent sales organisation (ISO) is a company that sells card acceptance services on behalf of an acquirer, recruiting and supporting merchants, while the acquirer holds the card scheme licence and the merchant agreement.
Issuer / Issuing BankCore: The issuer is the bank or licensed financial institution that provides a payment card to the cardholder. It holds the cardholder's account, approves or declines each transaction, and bills or debits the cardholder for it.

K

KYB (Know Your Business)Compliance: Know your business (KYB) is the due diligence a PSP, bank or platform carries out on a business customer: verifying that the company exists, who owns and controls it, who can act for it, and what it actually does.
KYC (Know Your Customer)Compliance: Know your customer (KYC) is the process by which regulated firms identify and verify who their customers are, understand the purpose of the relationship and keep that information up to date, as anti-money laundering law requires.

L

Local AcquiringCore: Local acquiring means processing a card payment through an acquirer in the same country or region as the card's issuer, so the card networks and the issuer treat the transaction as domestic rather than cross-border.

M

Merchant AccountCore: A merchant account is an agreement with an acquirer that lets a business accept card payments. Card sales are processed under it and then paid out, net of fees, to the business's ordinary bank account.
Merchant Category Code (MCC)Standards: A merchant category code (MCC) is a four-digit number that classifies a merchant by the type of goods or services it sells, such as 5411 for grocery stores and supermarkets or 7995 for betting and gambling. The acquirer assigns it.
Merchant Discount Rate (MDR)Fees: The merchant discount rate (MDR) is the total fee a merchant pays its acquirer or PSP for accepting a card payment, usually a percentage of the transaction value and sometimes a fixed amount per transaction as well.
Mobile MoneyMethods: Mobile money is a service, usually run by a mobile network operator or its partner, that lets people store, send and receive money with a basic mobile phone, using a network of local agents to convert cash into e-money and back.

N

Network TokenisationSecurity: Network tokenisation replaces a card number with a token issued through the card scheme itself, for example via Visa Token Service or Mastercard's MDES, restricted to a particular merchant or device and used with a unique cryptogram for each transaction.

O

Open BankingMethods: Open banking lets customers give regulated third parties secure, consent-based access to their bank accounts through APIs, either to share account data or to initiate payments directly from the account without using a card.

P

Payment Facilitator (PayFac)Core: A payment facilitator (PayFac) is a provider that signs up merchants as sponsored merchants under its own acquiring relationship, onboarding them quickly and passing on their settlement funds, while a sponsoring acquirer remains responsible to the card schemes.
Payment GatewayCore: A payment gateway is the technology that securely captures payment details at checkout, passes the transaction to an acquirer or processor for authorisation, and returns the result to the merchant's website, app or terminal.
Payment OrchestrationCore: Payment orchestration is a software layer that connects a merchant to several PSPs, acquirers and payment methods through a single integration, and decides how each transaction is routed, retried and reported.
Payment ProcessorCore: A payment processor is a company that handles the technical movement of transaction data between merchants, acquirers, card networks and issuers, carrying authorisation requests and responses and submitting transactions for clearing and settlement.
Payment Service Provider (PSP)Core: A payment service provider (PSP) is a company that lets businesses accept and manage electronic payments, typically bundling a payment gateway, acquiring or access to acquirers, alternative payment methods, fraud tools, settlement and reporting under one contract.
PayoutsOperations: Payouts are payments a business sends out rather than receives, such as seller and driver earnings, marketplace settlements, refunds, winnings, insurance claims or customer withdrawals, delivered to bank accounts, cards or wallets.
PCI DSSCompliance: The Payment Card Industry Data Security Standard (PCI DSS) is the security standard for any organisation that stores, processes or transmits payment card data. The PCI Security Standards Council maintains it, while the card brands and acquirers enforce compliance.
POS (Point of Sale)Core: Point of sale (POS) is where an in-person payment happens, and the system used to take it: the card terminal or device, plus the till or software that records the sale, stock and receipts.
PSD2 (Second Payment Services Directive)Compliance: PSD2 is the EU's revised Payment Services Directive, Directive (EU) 2015/2366. It sets the licensing and conduct rules for payment services in the EU and EEA, and introduced open banking access and strong customer authentication.

R

Rolling ReserveRisk: A rolling reserve is a percentage of each settlement that an acquirer or PSP holds back for a set period to cover possible chargebacks, refunds or fines, releasing each day's held amount when its holding period ends.

S

Scheme FeeFees: Scheme fees are charges set by card networks such as Visa and Mastercard for using their networks. Acquirers pay them and usually pass them on to merchants, either inside a blended rate or as a separate line on the statement.
SEPA (Single Euro Payments Area)Standards: SEPA, the Single Euro Payments Area, is a set of common schemes and rules that let people and businesses make euro credit transfers and direct debits across 41 European countries as easily as domestic ones, using an IBAN.
SettlementOperations: Settlement is the stage at which money for completed transactions is transferred to the merchant's bank account, net of fees, refunds and chargebacks. For card payments it follows authorisation, capture and clearing, usually one to a few business days after the sale.
Soft vs Hard DeclineOperations: A soft decline is a card refusal that may succeed later or after a change, such as insufficient funds or missing authentication; a hard decline means the issuer will not approve that card at all, for example because it is closed, stolen or invalid.
Strong Customer Authentication (SCA)Compliance: Strong customer authentication (SCA) is an EEA and UK requirement for customers to verify electronic payments with at least two independent factors from something they know, something they have and something they are, unless an exemption applies.

T

TokenisationSecurity: Tokenisation replaces sensitive card data, above all the card number (PAN), with a substitute value called a token that is useless outside its intended context, so systems can store and reuse payment details without holding the real number.

V

Virtual IBANMethods: A virtual IBAN (vIBAN) is an account number in standard IBAN format that routes incoming payments to an underlying master account instead of being a separate account, so a business can give each customer, invoice or entity its own IBAN.
Voucher and Prepaid Cash PaymentsMethods: Voucher payments let customers pay online with cash or a prepaid code: they either buy a prepaid voucher in a shop and enter its code at checkout, or receive a payment slip or reference to pay in cash at a store, bank or agent.