Sometimes payment processing terms can be confusing. But all merchants should have a clear understanding of its meaning.
In this article, we will introduce you to a list of the top payment processing terms and their definitions. After reading the article, you will definitely know the most important and frequently occurring phrases in the field of e-commerce.
ADDRESS VERIFICATION SYSTEM (AVS)
A system that allows you to verify the cardholder’s billing address. By verifying the billing address, the transaction will be linked to a physical address, and the likelihood of fraud is drastically reduced.
ADDRESS VERIFICATION SERVICE (AVS)
A service provided by IT for the purpose of verifying the cardholder’s address. It is done to prevent fraud when shopping by mail, telephone, or the Internet.
ACQUIRING
The activity of a credit institution, which includes the implementation of settlements with trade or service enterprises for transactions made using bank cards.
ACQUIRER
A member of a credit card company such as Visa or MasterCard that receives transaction data from IT and/or the payment system and transmits this information to the issuing bank through closed financial channels.
ACQUIRING BANK
A bank that carries out the entire range of operations for interaction with card service points, which consists of terminals in the trade and service network and ATMs.
APPLICATION PROGRAMMING INTERFACE (API)
A set of ways and rules by which various programs communicate with each other and exchange data. It’s an interface through which an application program accesses the operating system and other services.
BANK IDENTIFICATION NUMBER (BIN)
A unique number assigned to the bank by the payment system for performing operations on the issue and acquisition of plastic cards. The bank identification number is placed on a plastic card, usually, these are the first four digits of the card number.
BATCH PROCESSING
A type of data processing and transmission in which related transactions are grouped together and submitted for processing.
BUSINESS IDENTIFIER CODE (BIC)
A unique code of the bank, which consists of 8 or 11 characters and is also used when making payments.
CAPTURE
A decision that a transaction will be presented for payment. Such a transaction initiates the movement of funds from the issuer to the recipient and then to the merchant’s account.
CARD ISSUER
A credit institution that issues cards. The issuer guarantees the fulfillment of financial obligations related to the use of the plastic card issued by him as a means of payment. The issuer maintains the accounts of cardholders, carries out authorization, and is also liable for obligations to other member banks of the payment system.
CARD VERIFICATION CODE (CVC)
A three-digit security code that is located on the back of the bank card next to the signature field.
CHARGEBACK
Amount that is deducted from the seller’s account at the request of the owner of the plastic card. If the correctness of the cardholder is recognized, the payment amount plus the chargeback fee will be deducted from the merchant’s account. A chargeback is initiated by the issuer after the acquirer has completed the transaction.
CHARGEBACK REASON CODE
A two-digit number that encodes the reason for the refund.
CHARGEBACK PERIOD
The number of calendar days (counted from the transaction processing date) during which the issuer has the right to return the transaction to the acquirer. The number of days varies from 45 to 180 days, depending on the type of transaction.
CLEARING
The process of exchanging details of a financial transaction between an acquirer and an issuer to facilitate billing to a cardholder.
ELECTRONIC COMMERCE (E-COMMERCE)
Buying and selling goods and services over the Internet. Customers can shop from their computers and through other touchpoints, including smartphones, smartwatches, and digital assistants.
ELECTRONIC WALLET
An electronic payment method that stores your payment information (cards, cash, bank accounts) and with which you can make payments in stores and on the Internet.
ENCRYPTION
A way of translating data from plaintext or an unencrypted version to ciphertext or an encrypted version.
FACTORING
Financial service for companies operating on a deferred payment basis. With its help, the seller receives money for the goods immediately after shipment, can eliminate cash gaps and replenish working capital.
FRAUD PREVENTION SYSTEM
Fraud monitoring service for suspicious bank financial transactions.
FRAUDULENT TRANSACTION
Illegal use of credit card details without the knowledge of the real cardholder.
HIGH-RISK BUSINESS
A commercial activity that initially carries the risk of encountering various difficulties: this concerns customer dissatisfaction with the quality of services or goods (sale of medicines, cryptocurrency trading, online gaming, brokerage), claims from government agencies, and the risk of bankruptcy.
INTERNATIONAL BANK ACCOUNT NUMBER (IBAN)
A unique identification number of 34 characters is used in international settlements. The IBAN number contains all the information needed to transfer funds: account number, bank name, bank branch, and country code.
ISSUER (ISSUING BANK)
A financial or other organization that supplies payment cards, such as credit or debit cards. The issuer sets a credit limit for the card or account for its owner. The issuer is obliged to transfer money from the card account to the acquiring bank serving the seller. If the buyer has a credit card, the issuing bank issues an invoice to him after a purchase.
MAIL ORDER/TELEPHONE ORDER (MOTO)
A payment transaction with a bank card, at the time of which the cardholder is not personally present at the point of sale of goods or services.
MASTERCARD SECURE CODE
A security system for paying for online purchases using one-time codes. The secret code, which is sent to the cardholder via SMS, is valid for one purchase only.
MERCHANT
A company where you can pay by bank cards. By concluding an agreement with the acquiring bank, the business undertakes to accept payment system cards, regardless of who issued them.
MERCHANT ACCOUNT
A special transit bank account opened by a seller that allows him to accept payments by credit cards. By opening a merchant account, the bank agrees to pay the seller for correctly made purchases in exchange for withdrawing money from the buyers’ accounts at the issuing bank.
MERCHANT AGREEMENT
A written agreement between a commercial enterprise and an acquiring bank, which fixes the rights, obligations, and guarantees of the parties in the process of accepting card payments.
MERCHANT CATEGORY CODE (MCC)
A code assigned by the acquiring bank to the merchant. This four-digit code, sometimes referred to as the SIC code, reflects the merchant’s main line of business.
MERCHANT IDENTIFICATION NUMBER (MID)
A unique set of characters that identifies the merchant and is issued by the acquiring bank. It is tied to a specific business and indicates to whom and where to send funds.
PAYMENT CARD INDUSTRY DATA SECURITY STANDARD (PCI DSS)
An international security standard designed specifically to protect payment card data. It allows you to protect the organization from security incidents and provide the necessary level of security throughout the payment system.
PAYMENT GATEWAY
A server on the Internet with programs installed on it connects a merchant’s server with a payment processor.
POINT OF SALE TERMINAL (POS TERMINAL)
An electronic device that allows reading information from a magnetic stripe or a card chip and communicating with the bank for authorization in order to carry out a bank card transaction.
PREPAID CARDS
A banking product, which is a card with funds credited to it, similar to gift cards of retail chains, as well as cards of mobile operators and Internet providers.
RECURRING BILLING or RECURRING TRANSACTION
A method of regular payment of bills without the direct participation of the payer and without the obligatory input of the card number and company details each time.
ROLLING RESERVE
A special reserve fund, to which there is a monthly deduction from 5 to 30% of monthly or quarterly profit. The money from this fund can be used to compensate dissatisfied customers who filed a formal complaint under the Rolling Reserve procedure.
SECURE SOCKETS LAYER (SSL PROTOCOL)
A protocol developed by Netscape Communications Corporation to secure data transmitted over the Internet. It supports both server-level and client-level authentication. The SSL protocol ensures the security and integrity of the transmission channel through encryption and message authentication codes.
SKIMMING
Illegal copying of data from one card to another for fraud purposes.
SMART ROUTING
A payment processing technology for online businesses and institutions that accept payments by working with multiple payment service providers.
TOKENIZATION
Exchange of confidential bank card data for a special token that allows you to pay for purchases using this card.
3D SECURE PROTOCOL
A protocol used as an additional layer of security for online credit and debit cards, for two-factor user authentication and payment confirmation using a security code.
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