Welcome to our Payments Glossary!
Your go-to resource for simplifying complex payment terms. Explore our comprehensive guide to demystify the world of transactions and finance for your quick reference whenever you need immediate definitions.
An acquirer, often referred to as an acquiring bank, is a financial institution that processes credit or debit card transactions on behalf of a merchant. It is responsible for facilitating the transfer of funds from the customer’s account to the merchant’s account, ensuring a smooth and secure payment process. The acquirer plays a critical role in enabling businesses to accept various forms of electronic payments, thereby facilitating the seamless operation of the overall payment ecosystem.
An Acquirer Reference Number (ARN) is a unique code that is assigned to a transaction by the acquiring bank or the payment processor for the purpose of identification and tracking. It serves as a crucial reference point in the payment process, aiding in the reconciliation of transactions and providing a means for tracing the journey of a specific payment. The ARN is essential in resolving any issues or disputes that may arise during the processing of electronic payments, ensuring transparency and accountability in the payment system.
Regulations preventing disguising criminal money sources. Guidelines ensure customer identification, monitor transactions, report suspicious activities, and maintain financial system integrity.
A Bank Identification Number (BIN) refers to the first six digits of a payment card number, including credit, debit, or gift cards. It helps to identify the issuing institution of the card and is used in various financial transactions to determine the card type, the card brand, and the country of origin. BINs play a crucial role in fraud prevention, as they assist in verifying the legitimacy of transactions and enable merchants and financial institutions to assess potential risks associated with card-based payments.
Blended pricing, lumps all fees that are separated in the Interchange ++ pricing together; including interchange fees, card associations fees, processor charges, gateway fees, and PCI compliance fees. In this model, merchants will only get a collective fee without knowing exactly what those charges include.
A payment that has been authorized can be processed in two ways: it can be captured, sending the funds to the merchant’s account, or it can be canceled, typically due to a high risk of fraud or other reasons.
Canceling a payment is not feasible for transactions that have already been captured. In such instances, the merchant must initiate a refund to return the funds to the customer.
In the payments industry, CAP can refer to a Capacity or Transaction Volume Cap, representing a predetermined limit set on the volume or value of transactions that a merchant is authorized to process within a specified time frame. This limit is established for various reasons, including risk management, regulatory compliance, or operational considerations.
If a payment passes the necessary authorisation process, it can then be captured and, finally, completed. Capturing is the act of transferring the reserved funds for the transaction from the consumer’s account to the merchant’s.
Card schemes are payment networks linked to payment cards, such as debit or credit cards, of which a bank or any other eligible financial institution can become a member.
These companies operates a payment card network, such as Visa or Mastercard. These networks facilitate the transfer of funds between card issuers and acquirers.
Card networks impose charges for payment processing and also oversee the determination of interchange fees, influenced by various factors unique to each transaction.
Visa, MasterCard, and Union Pay are three of the biggest worldwide brands recognized as card schemes or card brands. TrustPay is a principal member of all three.
A transaction where the card cannot be physically presented to the merchant at the time of transaction. CNP Transactions can be completed for expample online, in-app, via telephone (MOTO transactions) or any time the physical card is not interacting with a card reader.
Every payment card, whether it’s a debit, credit, gift card, or another type, is assigned a distinct identification number. This number, found printed on the card, links every transaction made with the card to this unique identifier.
The initial segment of this number (typically the first 6-8 digits) is known as the Bank Identification Number (BIN) and is utilized to identify the issuing bank. The complete number is referred to as the Primary Account Number (PAN).
Card-on-file (CoF) is the storing of customer card and payment information by a merchant, i.e. keeping card information “on file”.
A card-on-file transaction is therefore a transaction which involves the cardholder authorizing a merchant to store their card information and bill them when appropriate.
Shoppers can opt-in or opt-out of this card detail storage, allowing them to choose the level of data that the merchant can keep concerning them. By choosing to store these details for future use, the shopper is creating a ‘Card on File’ – this is the default payment details assigned to this customer, enabling faster checkout through features such as one-click payments and recurring payments such as subscriptions, and more.
The card security code, also referred to as CSC, CVC, CVV, or by other names, is a numerical sequence printed on credit or debit cards alongside the card number. This code serves as an added layer of security for transactions where the cardholder cannot physically input a personal identification number (PIN), commonly known as card-not-present transactions. It was implemented to minimize the occurrence of credit card fraud.
A cardholder refers to an individual or an entity that owns a payment card, such as a credit card, debit card, or any other form of payment card issued by a financial institution. The cardholder is the authorized user of the card and is responsible for all transactions made using the card.
A verification technique utilized to confirm the ownership of a payment instrument, like a credit card, during a purchase.
Cards refer to physical or digital payment cards issued by financial institutions, such as credit cards, debit cards, and prepaid cards. These cards facilitate the transfer of funds between the cardholder’s account and the merchant’s account during the purchase of goods or services. They are typically associated with a specific card network, such as Visa, Mastercard or American Express and can be used for in-person, online, or mobile transactions.
A chargeback occurs when a payment is returned to a debit or credit card after a customer disputes a transaction. A customer may dispute a transaction due to a duplicate charge, merchandise that was never received, or fraudulent charges.
TrustPay offers strong Chargeback protection, minimizing fraudulent transactions and maximizing revenue for your business. Our customized risk management solutions, powered by advanced AI tools and experienced risk team ensure proactive fraud prevention.
A Chargeback Fee is a charge imposed by the acquiring bank or payment processor to the merchant when a customer disputes a transaction and the funds are returned to the customer’s account. This fee is intended to cover the costs incurred during the dispute resolution process, including administrative expenses and handling fees.
The process of completing a transaction and submitting payment for goods or services. A seamless and secure checkout experience is essential for customer satisfaction and can help increase conversion rates.
A Cross-border Payment refers to any financial transaction that occurs when a payment method issued in one country is utilized to make a purchase from a merchant located in another country.
In the realm of payments, “delay days” refer to the specific number of days by which the release or settlement of funds is intentionally deferred after a transaction. This delay is often instituted for risk management purposes, allowing payment processors or financial institutions to assess and mitigate potential issues such as chargebacks, disputes, or fraud before releasing funds to the recipient. Delay days contribute to the overall security and stability of the payment processing system, providing a window for thorough verification and risk assessment.
A Digital Wallet, also known as an e-wallet, is a secure virtual platform for managing and conducting various financial transactions, including online purchases and fund transfers. It securely stores payment information, enabling convenient and secure online transactions.
Some of the most popular ones are GooglePay, ApplePay, WeChatPay, or PayPal – all are available via TrustPay.
A claim made by a cardholder to the issuing bank questioning the validity of a credit or debit card charge. Disputes start an interaction with the merchant that could lead to retrievals or chargebacks.
Buying and selling goods and services online.
Embedded Payments refer to the integration of payment processing functionalities directly into a digital platform or application, allowing users to make transactions without leaving the platform.
In the context of payments, fraud typically includes unauthorized transactions, identity theft, or the use of stolen payment credentials to make purchases. Fraudulent activities can occur through various channels, such as online transactions, card-not-present purchases, or unauthorized access to financial accounts. Preventing and detecting fraud is crucial for maintaining the security and integrity of the payment ecosystem, often requiring the implementation of robust security measures and fraud detection systems by financial institutions and merchants.
A Gateway, in the context of payments, refers to a technology that acts as a mediator between an e-commerce website and the bank that processes the customer’s payment. It securely facilitates the transfer of transaction data, such as credit card information, between the merchant and the payment processor, ensuring the secure authorization and processing of payments.
A guarantee deposit, in the context of payments and financial transactions, is a sum of money held by a service provider or financial institution as a security measure. It acts as a form of collateral to cover potential risks and financial obligations that may arise during the course of business. The deposit is typically collected from merchants and is held in reserve to mitigate the impact of chargebacks, refunds, or other liabilities. The guarantee deposit helps ensure that the service provider has funds available to address any financial issues that may occur, providing a level of assurance and financial security in the payment processing ecosystem.
In-app payments, also known as mobile payments, refer to financial transactions conducted through a mobile application or within a mobile-optimized platform. These transactions enable users to make purchases directly from their mobile devices, without the need for traditional cash or physical credit cards. In-app payments are facilitated through secure payment gateways integrated within mobile apps, offering users a convenient and seamless payment experience. With the increasing popularity of mobile commerce and the widespread use of smartphones, in-app payments have become a fundamental component of modern digital transactions and e-commerce activities.
An instant refund is a payment process that enables the immediate reimbursement of funds to a customer following a transaction cancellation or refund request. This approach ensures that customers receive their refunded amount promptly and without the typical delay associated with traditional refund processes.
Instead of the typical bank transfer processing for refunds, TrustPay now facilitate instant refunds for payment methods settled as SEPA payments, subject to the recipient’s bank support. Merchant can initiate a refund with a single click and customer will receive their money back in a matter of seconds This feature aims to optimize the overall customer experience and build trust and loyalty between businesses and their clientele.
It is a pricing model that breaks down all the costs of credit card processing into three parts; interchange fee, a card scheme/card associations fee and processing fee.
It is a pricing model where the merchant is charged a three-part fee for card transactions:
- The interchange fee is charged by the issuing (consumers) bank to the acquiring (merchants) bank and varies depending on the type of transaction e,g. card present transaction and the type of card used e.g. corporate card, consumer card etc.
- The card associations fee is charged by the card providers (Visa, Mastercard) to the acquiring bank for using their systems.
- The processing fee is charged to the merchant by their payment service provider as a mark-up for their services e.g the use of their gateway.
The advantage of this type of billing is its transparency in the fees charged by the payment service provider.
An Interchange Fee is a transaction fee that is paid by a acquirer to the card-issuing bank during each payment card transaction. It is a fee that covers the costs associated with processing credit and debit card payments and is set by the card networks, such as Visa and Mastercard. The interchange fee is typically a percentage of the transaction value, plus a fixed fee. This fee structure helps compensate the card-issuing bank for the risk and costs associated with providing credit to the cardholder and managing the payment network, while also enabling the operation and maintenance of the payment system.
In the context of the payments industry, an issuer refers to a financial institution, such as a bank, that issues payment cards, such as credit cards or debit cards, to consumers. The issuer is responsible for providing the cardholder with the means to make electronic payments and access funds within the designated account.
Know Your Business (KYB) is an extension of the Know Your Customer (KYC) process. The main difference is that KYB focuses on the business’s owners, shareholders, and suppliers before considering customers or consumers.
Know Your Customer (KYC) refers to the process that financial institutions and businesses use to verify and gather essential information about their customers. The primary objective of the KYC process is to assess the identity, reliability, and potential risks associated with engaging in financial transactions with a particular customer. KYC procedures typically involve collecting personal information, such as identification documents, address proof, and other relevant data, to ensure compliance with regulatory requirements and to prevent fraudulent activities, money laundering, and other financial crimes.
These non-traditional payment options, such as bank transfers, digital wallets, and prepaid cards, cater to specific regional preferences alongside standard credit and debit card payments. In many regions, these methods are more widely used than traditional card payments, enhancing customer satisfaction and boosting conversion rates for businesses. By offering local payment methods, businesses can expand their reach, enhance customer satisfaction, and improve conversion rates in these markets.
TrustPay provides merchants with access to a comprehensive range of popular local payment methods. Refer to the Payment Methods section for a detailed list.
A Merchant refers to an individual, business, or entity that sells goods or services and accepts payments from customers in exchange for these offerings. In the context of payments, a merchant can operate in various forms, including physical retail stores, e-commerce websites, mobile applications, or any platform where transactions take place. Merchants typically establish merchant accounts with acquiring banks or payment service providers to enable the processing of payments from customers using various payment methods. The merchant is responsible for providing customers with a secure and convenient payment experience while ensuring the timely and accurate delivery of goods or services purchased.
A Merchant Category Code (MCC) is a four-digit number assigned to businesses by credit card companies and financial institutions to categorize the type of products or services they offer. The MCC is used to classify merchants based on the nature of their business and the types of transactions they typically conduct. It assists in streamlining transaction processing and allows financial institutions to apply specific rules and regulations based on the merchant’s industry. MCCs play a crucial role in various aspects of the payment ecosystem, including transaction monitoring, risk management, and the implementation of targeted rewards programs for specific merchant categories.
It is a unique code assigned to a merchant by an acquiring bank or payment service provider to distinguish and track transactions associated with that specific merchant. The MID helps facilitate the efficient and accurate processing of transactions, allowing for the seamless identification and reconciliation of funds related to each merchant. It serves as a critical component of the payment infrastructure, enabling financial institutions to manage and monitor transactions, settlements, and chargebacks for individual merchants. The MID is an essential reference point for identifying and managing the flow of funds within the payment system.
TrustPay Merchant Portal serves as the back office for merchants, offering a centralized platform for managing various aspects of their business operations. From overseeing setup configurations and projects to handling transactions and accessibility settings, the Merchant Portal provides merchants with comprehensive control and visibility over their payment processes. It acts as a user-friendly interface, empowering merchants to efficiently monitor and manage their activities, ensuring seamless and effective administration of their payment-related tasks.
One-click payment processes are a convenient feature that allows merchants to give their customers the option to pay for a product/service by clicking on a single button without having to input their complete card and address details each time. With one-click payments, the customer’s information is stored during the initial transaction. For subsequent payments, the customer only needs to provide their card security code (CVC/CVV) to finalize the order.
Using the Card on File process, users will be able to store their contact details on the merchant’s website, and then use these same details the next time they shop there.
Open Banking refers to the practice of sharing financial information securely and electronically, allowing third-party financial service providers to access and utilize consumer banking data. It enables the integration of various financial systems and services, promoting competition and innovation within the financial industry. Through open banking, consumers can grant consent for their banking data to be shared with authorized third-party providers, facilitating the development of new financial products and services tailored to their specific needs. Open Banking initiatives are governed by regulatory standards aimed at ensuring data security, transparency, and customer control over their financial information.
An information security standard for organizations that handle payment cards. This standard is governed by the Payment Card Industry Security Standards Council and exists to increase controls around cardholder data and to reduce credit card fraud. Compliance is validated on an annual basis, either by a qualified security assessor, or by self-assessment questionnaire, depending on the volume of transactions made by each organization.
TrustPay is fully PCI compliant.
A payment facilitator is an authorized entity responsible for enrolling merchants onto an acquirer’s platform and receiving settlement funds on behalf of the acquirer.
Once a payment is authorized, it can be either captured or canceled, and if already captured, it can also be refunded subsequently. These actions, including capture, cancel, and refund, are classified as modifications as they alter the payment’s status.
Modifications can be executed manually via the Merchant Portal interface or automatically using the TrustPay API. When an API call is initiated, the merchant receives confirmation in the response. Following TrustPay’s processing of the payment modification, the result is communicated asynchronously through webhooks.
A system that connects to a customer’s bank and a merchant’s bank in order to make a payment transaction on behalf of a merchant. Usually a payment processor obtains the payment information from a payment gateway.
A PSP is a technology company that provides merchants with the ability to accept electronic payments. PSPs typically work with multiple acquirers and offer a variety of services, such as providing a payment gateway, processing transactions, and offering merchant services, such as fraud prevention and data security. These are third-party companies that act on behalf of merchants to handle most payment-related matters.
In the context of merchant transactions, a payout refers to the transfer of funds from an acquiring entity to the designated merchant’s account. Payouts are a critical aspect of ensuring timely and secure financial transactions, enabling merchants to access their funds efficiently and effectively.
A PEP is an individual who is entrusted with a prominent public function or has a close association with someone in such a position. Due to their potential elevated risk for involvement in corruption or financial crimes, financial institutions and payment service providers subject transactions involving PEPs to enhanced scrutiny and due diligence.
Processing currency refers to the specific currency in which a payment transaction is initially processed or authorized by a payment service provider or acquiring bank. It is the currency used at the point of sale or during the transactional process, determining the value and terms of the payment at the time of purchase. Processing currency is a critical aspect of international transactions, allowing merchants to accept payments in various currencies and enabling customers to make purchases using their preferred currency. Effective management of processing currency is essential for facilitating seamless and efficient cross-border payment transactions.
By default, you can accept payments in EUR, CZK, HUF, PLN, DKK, NOK, GBP, RON, HRK, USD, CAD, UAH, RSD, AUD, JPY, more currencies can be added on request.
The offer of processing currencies may differ from the offer of settlement currencies.
A code used to provide additional information about a transaction and (typically) a rejection or change in status.
This code is a identifier used in the payment industry to categorize and provide explanations for specific transaction-related events or occurrences. Reason codes are utilized to communicate the underlying causes or explanations for various transaction outcomes, such as chargebacks, declines, or other payment-related issues. They serve as a reference point for both merchants and financial institutions, assisting in the analysis and resolution of transaction disputes, errors, or discrepancies.
The process through which incoming and outgoing funds and transactions are matched up.
Recurring payments refer to automated, pre-authorized transactions that occur at regular intervals, usually for ongoing services or subscriptions. These payments are initiated based on a pre-established schedule, enabling businesses to charge customers automatically for services or products on a recurring basis. Recurring payments are commonly used for subscription-based services, membership dues, utility bills, and other regular payments. They offer convenience for both merchants and customers, ensuring a seamless payment experience and uninterrupted service delivery.
Occasionally, a customer may decide to cancel a purchase or subscription, necessitating the return of funds, commonly referred to as a refund.
When the payment has not been captured, the process is straightforward: the merchant can simply cancel the payment, and the funds are promptly returned to the customer’s account. However, if the funds have already been captured, the refund process may require additional time for processing.
If a merchant disputes a refund request, a customer may make a chargeback request – you can learn more about this in our ‘Chargebacks’ definition in this glossary.
A rolling reserve is a percentage of a merchant’s gross sales withheld by an acquirer to cover the cost of chargebacks or refunds over a particular period. The sum is returned to the merchant at the end of the reserve period.
A fee that is paid to the card scheme by the acquirer for each payment transaction done with the card scheme. In addition to the interchange cost, the fee amount is defined by the corresponding card system – these fees differ slightly between systems.
SEPA Direct Debit (SDD) is a payment method that enables merchants to collect funds directly from a customer’s bank account within the Single Euro Payments Area (SEPA). It allows for the automated processing of recurring or one-time payments, providing a convenient and efficient way for businesses to manage transactions across multiple European countries. SEPA Direct Debit adheres to standardized rules and regulations established by the European Payments Council (EPC), ensuring consistent and secure payment processing throughout the SEPA region. It simplifies cross-border payment collections, enhances payment efficiency, and promotes seamless financial interactions between businesses and customers within the SEPA zone.
Payers can get their money back: in the SDD Core scheme, a refund is possible up to eight weeks after the transaction without supplying any justification; in the case of an unauthorised direct debit, a refund request can be made up to 13 months after the transaction.
SEPA Instant payments enable euro transactions to take place in just seconds, at all times of day and night. Unlike with most other payment systems, the speed of payment doesn’t depend on an individual payment provider’s own clearing and settlement capabilities.
Settlement currency refers to the specific currency in which merchants receive their financial settlements from payment processors or acquiring banks. It is the currency used to finalize and transfer the funds from the payment processing system to the merchant’s designated bank account, ensuring that merchants receive their earnings in the desired currency. The settlement currency is a crucial consideration for merchants operating in diverse international markets, allowing them to manage their finances efficiently and effectively across different currencies and geographical regions.
Settlement currencies offered by TrustPay are: EUR, USD, GBP, CAD, AUD, SEK, NOK, DKK, PLN, CZK, HUF, NZD, RON, CHF.
The settlement period, in the context of payments, refers to the timeframe during which financial transactions are processed, verified, and finalized, resulting in the transfer of funds from the payer to the payee. This period encompasses the various stages of the transaction lifecycle, including authorization, capture, and settlement.
SEPA is a payment integration initiative that aims to simplify euro-denominated bank transfers within the EU and EEA. This initiative allows for faster and more efficient cross-border payments between member countries, and helps to create a more unified European payments market.
Single-sale payments refer to individual transactions where a customer makes a one-time purchase or payment for goods or services. In contrast to recurring payments or subscriptions, single-sale payments occur as standalone transactions without an ongoing commitment or periodic billing.
Subscriptions refer to recurring agreements or arrangements between a customer and a business, wherein the customer regularly receives products or services in exchange for periodic payments. Subscriptions are commonly used for various services, such as streaming platforms, online publications, software licenses, and membership programs, among others.
Unusual or suspicious customer actions or conduct that could be linked to money laundering, other unlawful acts, or the support of terrorist operations. May also refer to a transaction that is inconsistent with a customer’s known legitimate business, personal activities, or the normal level of activity for that kind of business or account.
Tokenization is the process of replacing sensitive data, such as credit card numbers, with a unique identifier called a token. This helps to protect the customer’s data by reducing the number of places where it is stored and transmitted.
This technology allows ‘card on file’ processing without enormous risk to the cardholder and the entire payment card network. Tokenization is governed by the PCI standard and requires certification and audit of any provider of the service prior to its use.
In the payments sector, the term “transaction” refers to the exchange of a set quantity of currency from a shopper for the purchase of goods or services from a merchant, or for the fulfilment of any other responsibilities between the two parties. Transactions commonly involve the transfer of funds through methods like card payments (debit or credit cards) or local payment options such as bank transfers and mobile payments.
UBO refers to the individual or entity that ultimately owns or controls a legal entity, such as a company and benefits from its assets and profits. The UBO is the person who enjoys the ultimate economic benefits of the entity’s activities and has significant influence or control over its management and decision-making processes. Identifying the UBO is essential in financial and legal frameworks to ensure transparency, prevent fraudulent activities, and comply with regulatory requirements aimed at preventing money laundering, corruption, and other illicit financial practices.
Webhooks are user-defined HTTP callbacks or notifications triggered by specific events or changes in an application or system. In the context of the payments industry, webhooks facilitate real-time communication between payment service providers and merchants, allowing the exchange of crucial transaction-related information, such as payment status updates, chargeback notifications, or subscription renewals.
You can use webhooks to automate business processes, for example order management or downloading reports for accounting.
A near real-time transfer of funds between bank accounts. This feature is limited for bank to bank or intrabank transfers.
A zero-value authorisation is a form of authentication where a request is made in the amount of 0 (zero) to gather shopper details so that previous purchases and specific details can be found in the merchant database. A zero value authorisation enables a merchant to request a customer’s tokenised card number without presenting the transaction for authorisation.