Payment Industry Glossary
More than 200 key payment terms explained in plain language. Searchable, categorized, and linked to deeper guides.
47 terms
3
3D Secure (3DS)
An authentication standard that adds a security step to online card transactions. Modern adaptive or risk-based versions challenge only higher-risk payments to limit friction and protect conversion rates.
A
Acquirer
The bank or financial institution that contracts with merchants to accept payments. It routes transactions to networks, handles settlement, and deposits funds into the merchant account after deducting fees.
Adaptive Authentication
Dynamic security that adjusts the level of customer challenge based on real-time risk signals. Low-risk transactions proceed without interruption while higher-risk ones face additional verification.
Assessment Fee
A network fee charged by Visa, Mastercard, or other schemes to cover the cost of operating the payment infrastructure and security programs. It applies as a small percentage of transaction volume.
B
BIN (Bank Identification Number)
The first six to eight digits of a card number that identify the issuing bank, card type, and country. Orchestration platforms use BIN data for precise routing decisions.
C
Chargeback
A reversal of funds initiated by the cardholder or issuer, often due to disputes, fraud claims, or errors. Merchants can submit evidence to represent the transaction and potentially win the dispute.
Clearing
The exchange of transaction details between acquirers and issuers after authorization but before money moves. It reconciles records so both sides agree on amounts owed.
Cross-Border Fee
Extra charges that apply when the card issuer and merchant acquirer operate in different countries. These often include foreign exchange markups and international service fees.
CVV (Card Verification Value)
A three- or four-digit security code printed on payment cards, used to verify that the person making an online or phone transaction physically possesses the card.
D
Decline
A rejected authorization. Soft declines from temporary issues like insufficient funds can frequently be recovered with smart retries, while hard declines usually require the customer to take action.
Device Fingerprinting
A fraud prevention technique that creates a unique profile based on browser settings, hardware signals, and interaction patterns to identify devices without requiring customer input.
Digital Wallet
A software application or service that stores payment credentials and enables contactless or online payments. Examples include Apple Pay, Google Pay, and Samsung Pay.
Dunning
The process of communicating with customers whose payments have failed, typically through automated email sequences that escalate in urgency to recover subscription revenue.
E
EMV
The global standard for chip-based card payments, named after Europay, Mastercard, and Visa. EMV chips generate unique transaction codes that make counterfeiting significantly harder than magnetic stripe cards.
F
Fallback Routing
Automatic redirection of a failed transaction to an alternative provider to improve recovery chances. A core capability of orchestration platforms.
Fraud Score
A risk rating produced by fraud prevention tools based on signals such as device data, behavioral patterns, location, and transaction history. Higher scores indicate greater fraud probability.
Friendly Fraud
A chargeback filed by a legitimate cardholder who received the goods or services but disputes the charge, often claiming they did not recognize the transaction or did not authorize it.
G
Gateway
The technology that securely transmits transaction data between the merchant's website or point-of-sale system and the payment processor or acquirer.
I
Interchange Fee
The largest single component of most card fees, paid by the acquirer to the issuing bank. Rates vary by card type, merchant category, transaction method, and data quality.
ISO (Independent Sales Organization)
A third-party company authorized to sell payment processing services on behalf of an acquiring bank. ISOs typically handle merchant onboarding and ongoing support.
ISO 20022
The international standard for electronic data interchange between financial institutions. It provides a common language for payment messages, replacing older formats with richer, structured data.
Issuer
The bank or financial institution that issues cards or payment accounts to consumers and decides in real time whether to approve or decline transactions.
K
KYC (Know Your Customer)
Regulatory requirements that oblige financial institutions and payment companies to verify the identity and assess the risk profile of their customers before establishing a business relationship.
L
Local Acquiring
Processing transactions through an acquirer based in the same country or region as the customer, which typically boosts approval rates and lowers cross-border fees.
M
Merchant Account
A specialized account that enables a business to accept and receive customer payments. It is underwritten for risk and subject to monitoring for chargeback ratios and other compliance factors.
Merchant Category Code (MCC)
A four-digit code assigned to merchants by acquirers to classify the type of business. MCC affects interchange rates, fraud rules, and eligibility for certain payment programs.
N
Network Token
A secure token issued by card networks such as Visa or Mastercard. These tokens often improve authorization rates, reduce fraud risk, and update automatically when underlying card details change.
O
Open Banking
A regulatory and technology framework that enables secure sharing of financial data between banks and authorized third parties through APIs, enabling account-to-account payments and other services.
Orchestration
The technology layer that connects a merchant to multiple PSPs, acquirers, and payment methods through one integration. It enables intelligent routing, centralized fraud controls, and performance optimization.
P
PAN (Primary Account Number)
The full card number printed or embossed on a payment card. Tokenization replaces PANs with non-sensitive substitutes to reduce security risk.
Payment Facilitator (PayFac)
A company that aggregates merchants under its own master merchant account, simplifying onboarding but creating shared risk exposure. Square and Stripe operate partly as PayFacs.
Payment Service Provider (PSP)
A company that simplifies payment acceptance for merchants by bundling technology, bank connections, fraud tools, and support into a single solution.
PCI DSS
The Payment Card Industry Data Security Standard, a set of security requirements for organizations that handle card data. Compliance reduces the risk of data breaches and is mandatory for card acceptance.
Pix
Brazil's instant payment system launched by the central bank, enabling real-time bank transfers 24/7. It has become the dominant payment method in Brazil for both online and in-person transactions.
Processor
The technical infrastructure responsible for moving transaction data between merchants, acquirers, networks, and issuers during authorization, clearing, and settlement.
PSD3
The evolving European regulatory framework in 2026 that further harmonizes payment services, strengthens consumer protections, and supports open banking data sharing.
R
Representment
The process by which a merchant responds to a chargeback with evidence to dispute the reversal and recover the funds. Success depends on documentation quality and adherence to network rules.
Rolling Reserve
A portion of merchant funds held back by the acquirer or PSP as security against potential chargebacks or losses, common in higher-risk verticals. Typically 5 to 10 percent held for 90 to 180 days.
S
SCA (Strong Customer Authentication)
European requirement for multi-factor verification on many online transactions to reduce fraud. Requires at least two of: something the customer knows, has, or is.
Scheme Fee
Fees charged by card networks such as Visa and Mastercard for using their infrastructure. These cover network operations, security programs, and brand marketing.
Settlement
The final stage in which funds move from the issuing bank, through the network, to the acquirer, and ultimately into the merchant's account. Timing varies from same-day to several business days.
Smart Routing
Rules-based or AI-driven logic within orchestration platforms that directs each transaction to the PSP or acquirer most likely to deliver the best combination of approval rate, cost, and speed.
T
Tokenization
The process of replacing sensitive card data with a non-sensitive substitute token. It reduces PCI compliance scope and limits exposure in case of a data breach.
U
UPI (Unified Payments Interface)
India's real-time payment system that enables instant bank-to-bank transfers via mobile devices. It processes billions of transactions monthly and dominates India's digital payment landscape.
V
VAMP (Visa Acquirer Monitoring Program)
Visa's program that monitors merchants for excessive chargeback and fraud ratios. Breaching thresholds triggers escalating consequences including fees, mandatory remediation, and potential termination.
Velocity Check
A fraud prevention rule that tracks the frequency and speed of transactions from the same card, device, IP address, or email to detect testing or automated attacks.