Glossary

ACH ACH stands for Automated Clearing House. ACH transfers are bank transfers, used to transfer funds from one bank to another via the ACH network (NACHA). ACH is a US-based system that supports both money transfers with the US as well as international transfers.

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Acquirer An acquiring bank or acquirer is a bank or financial institution that handles payments by credit or debit card on behalf of a merchant, allowing the merchant to accept card payments.

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Alternative Payment Methods Alternative Payment Methods, often abbreviated to APMs, are what people in the payment industry call payment methods that are not credit/debit cards. There are many types of alternative payment methods available, with their popularity varying by region and market.

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Authorization Credit card authorization is the process of verifying that a customer has sufficient funds to complete a transaction. The customer's bank (the issuing bank) is responsible for authorizing the transaction.

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Backup Payment System A fallback or backup payment system ensures that merchants can continue to process transactions even if their primary payments processor is unavailable. In this case, transactions can be routed via the fallback/backup system.

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BIN A BIN, or bank Identification number, identifies the financial institute that issued a credit card (the issuer). The first set of digits of a credit card's PAN (primary account number) consist of the BIN.

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BNPL Buy Now, Pay Later (BNPL) is a payment method that allows consumers to pay for goods and services in several installments, rather than paying the full cost up-front.

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Capture In payments terminology, capture means the process of transferring funds from the customer's account to the merchant's account, i.e. the point at which the merchant receives payment. This takes place after the transaction has been authorized. In IXOPAY, the capture process is handled by its own dedicated transaction type.

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Card on File Card on file transactions are transactions where the card details used for the transaction are retrieved from storage, rather than entered manually by the cardholder at checkout, i.e. where the details are kept "on file".

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Card Vaulting A card vault stores and tokenizes merchants' customer payment data. An independent provider that is PCI-DSS Level 1 and PCI 3DS certified delivers flexibility, reliability and the highest degree of independence from your payment service providers.

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Chargeback A chargeback occurs when a consumer is refunded for a transaction after filing a dispute. If the consumer's claim is upheld, e.g. in the case of credit card fraud, the charge is reversed.

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Cross-Border Payments A cross border payment is a monetary transaction that takes place between banks, financial institutions, businesses or individuals operating in different countries.

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CVV The CVV (card verification value) is a 3 or 4-digit number on the back of credit and debit cards that is used in combination with the PAN (primary account number) to add an additional layer of security to transactions. Entering both the PAN and CVV as part of an online transaction is intended to verify that the customer has access to the physical card.

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Digital Wallet Also referred to as an e-wallet, a digital wallet lets users make payment using an electronic device such as a mobile phone, desktop PC or notebook. Examples of digital wallets include Google Pay, Apple Pay and PayPal.

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Direct Debit A direct debit allows funds to be automatically collected from a customer's bank account. The amount can be variable, making direct debit particularly suited to regular payments that can differ in value, such as for utility bills or mobile phone plans.

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Dispute Customers can dispute charges to their credit card or digital wallet (e.g. PayPal) for various reasons, such as unauthorized transactions or non-performance. If the dispute is upheld, the funds are returned to the customer automatically by the payment provider and deducted from the merchant's account.

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EMV EMVCo is privately owned by American Express, Discover, JCB, Mastercard, UnionPay and Visa, 5 major credit card schemes. EMVCo manages EMV specifications like PCI DSS and 3DS that safeguard credit card transactions.

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Failed Transactions Online payments can fail for various reasons ranging from incorrectly entered data to a lack of funds or suspicions of fraud. An error code is sent whenever a transaction fails and indicates the reason for the failure.

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Independent Sales Organization An independent sales organization (ISO) is a third party that provides merchant services on behalf of acquiring banks.

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Interchange Fee Interchange fee is a term used in the payment card industry to describe the fee paid to the cardholder's issuing bank from the merchant's acquiring bank when a transaction is made.

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Issuer An issuing bank or issuer is a bank or financial institution that issues credit or debit cards on behalf of credit card schemes such as Visa, Mastercard and American Express. Payments using the card are debited to the holder's bank account at the issuing bank.

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Know Your Customer (KYC) KYC is the process of verifying that a customer is who they say they are, and by extension, that a financial organization is able to legally conduct business with that customer. KYC roots are in legislation laying out requirements for financial entities to protect against money laundering and the financing of terrorism.

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Load Balancing Load balancing allows merchants to spread financial transactions across multiple payment providers. This can be done for various reasons, including A/B testing, ensuring that contractual volume targets are met and to minimize the risk that comes with having a single payments provider holding all of a merchant's revenue.

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Merchant Advice Code Merchant advice codes are returned by credit card issuers and payment service providers (PSPs) to communicate the reason for declining a transaction.

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MOTO A MOTO (mail order, telephone order) payment is a card not present transaction. In order to complete and pay for an order, the relevant data is provided by the customer via phone or email. Merchants need access to a virtual terminal where they can enter the information provided to process the payment.

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Open Banking Open banking is based upon the sharing of data between banks and technical providers. It is a direct consequence of the European Union's Payment Service Directive 2 (PSD2).

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P2P Payments P2P or peer-to-peer payments are payment methods that directly transfer funds from one person to another using a digital wallet - without needing to share bank details or handle card payments. All that is needed to transfer funds between users is the recipient's contact details, typically an email address or phone number.

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PAN The primary account number (PAN) is a unique identifier for credit cards, debit cards and other payment cards. It is often colloquially simply referred to as the "card number".

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Pay By Link Pay By Link or payment links is the process of using a URL or QR code that takes customers to a stand-alone web page where they can complete the transaction.

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Payment API An API, or application programming interface, allows applications to connect and communicate with one another and request that another application perform a certain task. The API defines how developers of one application submit requests to another application to perform tasks (e.g. request information on a transaction) and the format of responses (e.g. the transaction data).

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Payment Fraud Payment fraud is the act of making a transaction with fraudulent details. The victim can be an individual or a business.

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Payment Lifecycle A payment lifecycle covers the entire act of processing a transaction. Payment lifecycles differ depending on the payment method. Currently, the most common payment methods are credit or debit card.

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Payment Orchestration Payment orchestration gives merchants complete control over their payment stack. By choosing an acquirer-agnostic provider, merchants are free to connect to the most appropriate payment methods to reach the markets they sell in. Increase conversion with transaction routing and payment pages based on geolocation, platform specific data, and payment history. Get a complete and accurate overview of with state-of-the-art reporting functions, and analyze your reconciliation and settlements any way you like.

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Payment Service Provider A payment service provider (PSP) helps merchants accept payments via methods such as credit cards, bank transfers and digital wallets. As well as handling payments, PSPs offer additional services such as risk management, fraud protection and reporting.

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Payout Payouts refer to the process of paying out funds to either end users or partners. Payouts play an important role in various industries, such as online gambling, online marketplaces and food delivery services, as well as for affiliate marketing programs. These businesses require the ability to pay out winnings to customers or earnings to partners and freelancers. Payouts may be one-time or recurring, depending on the type of transaction and contractual relationship between the parties.

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PCI DSS PCI DSS stands for "Payment Card Industry Data Security Standard", and lays out the requirements that need to be met to transmit, store, handle or accept credit/debit card data.

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Provider Lock-in Vendor lock-in occurs when a customer becomes highly dependent on a particular vendor, and is unable to switch to a different vendor or competitor due to the costs of doing so. In the context of payments, vendor lock-in can occur when a merchant becomes highly dependent on a particular payments service provider or acquirer. While switching to an alternative provider may be appealing, the cost of integration and migration to a new provider can be prohibitive.

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PSD2 The Payment Services Directive Two (PSD2) is European Union legislation intended to create a more integrated European payments market with a level playing field for payment service providers It has a strong emphasis on secure payments and protecting consumers, e.g. with SCA (Strong Customer Authentication).

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Reconciliation Payment reconciliation is the term given to the comparison of financial records to make sure that the accounting is accurate.

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Recurring Payments More and more goods and services are provided on an ongoing, periodic basis. Recurring payments have become one of the most frequently-used payment models.

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Rolling Reserve A rolling reserve is used as a risk mitigation strategy: a percentage or flat amount of each transaction is kept in reserve by the payments processor for a specific period of time.

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SCA Strong Customer Authentication (SCA) is multi-factor authentication (MFA), sometimes also referred to as two-factor authentication (2FA). It involves using at least two out of three possible forms of identification to complete an online purchase.

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Secure Remote Commerce SRC provides consumers with a digital wallet where they can store all their credit card details. It attempts to address some of the disadvantages of Card on File (COF) payments by ensuring that credit card details are always up-to-date and provides consumers with a single unified platform to manage their payments.

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SEPA SEPA stands for "Single Euro Payments Area" and is a payments integration initiative aimed at simplifying bank transfers using euros. There are currently 36 member countries, including all members of the EU and EFTA, the United Kingdom, Andorra, Monaco, San Marino and Vatican City.

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Settlement A settlement in online payments is the transfer of assets to the merchant for the purchasing of goods and or services. It is the completing of the payment life cycle. Settlement time varies depending on the method of payment and the parties involved.

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Tokenization Tokenization is a security mechanism, where sensitive payment data is replaced by a randomly generated number called a token. Merchants can store this token locally without worrying about exposing the underlying payment details.

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Transaction Routing Transaction routing is a feature of a multi-provider setup and allows merchants to determine which provider should process particular transactions. It allows for the custom payment flows, load balancing, higher authorization rates and lower transaction costs by using the best provider for a transaction, and fall-back routing and cascading if the merchant's preferred payments provider is unavailable.

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Two-Factor Authentication Two-factor authentication (2FA) or multi-factor authentication (MFA) are security mechanisms. Two (2FA) or multiple (MFA) methods of proving the user's identity are required to access an account or platform.

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White Label A white label payment gateway is the name given to a technical service provider that gives businesses the ability to manage and process payments under their own brand while using third-party SaaS (Software as a Service).

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