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The following table defines the bolded terms from our Introduction to Payments article. This includes terms relating to key players in the industry, supporting partners, and the technology used to facilitate payments.
| Term | Definition |
|---|---|
| 3-Domain Secure (3D Secure or 3DS) | Security protocol used to prevent fraud in online card transactions by using certain criteria to determine whether the cardholder’s identity needs to be authenticated first. The three domains are the 1) issuer, 2) acquirer, and 3) interoperability domain (i.e., “go-between” platform that handles 3DS). 3D Secure authentication is done in three ways per the European Payment Services Directive 2 (PSD2): Possession – Something only the customer has, e.g., their mobile device registered with their bank to which they receive a one-time code in a text message. Inherence – Something only the customer is, e.g., their fingerprint or other form of biometric data. Knowledge – Something only the customer knows, e.g., a unique passphrase or answer to a personal question. |
| Acquirer | Financial institution (usually a bank but not always) that processes credit or debit card payments for a merchant. The acquirer allows merchants to accept credit card payments from the card-issuing banks within a card association. |
| Application Program Interface (API) | A structured way for networked computers to communicate through server requests and responses. APIs help developers interface with other software systems to exchange data, for example, to move funds between a customer (payer) and a merchant. |
| Authentication | An action in which a merchant verifies the identity of a customer. For online transactions, this can be done using 3D Secure. For in-store transactions, a card chip or entering a personal identification number (PIN) can be used. |
| Authorization | An action in which an issuer approves a cardholder’s transaction. This is based on the account standing, account balance, and the validity of the card. |
| Bank Identification Number (BIN) | Initial eight numbers that appear on a credit or debit card (see PAN), identifying the institution issuing the card, country of issuance, and type of card. The BIN is a key part of the process of matching transactions to the issuer of the payment card. |
| Capture | An action in which an electronic sales transaction with a credit or debit card is submitted to the issuer for financial settlement. Authorized credit card sales must be captured and settled for a merchant to receive credit for their sales and a cardholder account to be debited or credited. |
| Card Brand | A payment network linked to a credit or debit card, of which a bank or any other eligible financial institution can become a member (e.g., Visa, Mastercard, etc.). The member then gets to issue or acquire cards operating on the network of that card brand. Also known as card schemes. |
| Cardholder | A person given a credit or debit card by an issuer on behalf of a card brand to use for purchases. |
| Card Verification Value (CVV) | A three- or four-digit security code that appears on a payment card, usually on the opposite side of the card’s number. It provides extra protection against unauthorized use. Also known as a card verification code (CVC) or card verification number (CVN). |
| Chargeback | The cardholder or issuer disputes a transaction, and funds are returned to the issuer/cardholder. The merchant can accept or challenge the dispute by supplying documentation proving the transaction was valid. |
| Clearing | The process of exchanging financial transaction details between an acquirer and an issuer to facilitate posting of a cardholder's account and reconciliation of a customer’s settlement position. |
| Developer | A person who can be hired to build an integration, such as an app or a website, that supports accepting and processing payments. Developers usually specialize in one or more coding, scripting, or markup languages, which they use to interface an integration with the software and hardware systems of the key players in the payment process. |
| Expiry | A payment card’s expiration date, meaning the last day that it can be used. It’s represented as a two-digit month (MM) and two-digit year (YY) on the card. |
| Fees | Costs associated with processing card payments for merchants. In pricing terminology, Interchange Plus (Interchange++), includes the following three fees: Interchange fee – Percentage fee charged to the acquirer by the cardholder's issuer for using the interchange system. Card Brand fee – Fee charged to the acquirer by the card brand for using its network. Processing fee – Fee (monthly, % of total transaction amount, or per-transaction) added by the acquirer or payment provider (processor) for providing card-processing services. Alternatively, a merchant can choose to use blended, standard, or simple pricing In which an all-in-one rate is quoted as the merchant discount rate. Blended pricing can offer simplicity but often leads to overall higher fees when compared to Interchange Plus. |
| Issuer | A financial institution (usually a bank but not always) that offers payment cards branded by a card association directly to customers. The name is derived from the practice of issuing payment to the acquirer on behalf of its customer (the purchaser in the transaction). |
| Merchant Identification Number (MID) | A unique number assigned to a merchant account to identify it throughout the course of payment processing activities. |
| Payment Gateway | The software and servers that transmit transaction information to acquirers and responses from issuers, such as whether a transaction is approved or declined. Commonly referred to simply as a gateway. |
| Payment Processor | A company that works with banks and other financial institutions to help a merchant process card payments for a fee. Also known as a card processor or payment provider. |
| Primary Account Number (PAN) | A 14- to 19-digit number that appears on a payment card. It’s used to uniquely identify the primary account of the person who owns it and also contains information about which issuer (first eight digits) and which card brand (first digit) the card is associated with. |
| Reversal | The act of voiding an authorization, capture, refund, or credit before capturing a transaction. If the transaction was already placed in the next settlement file (or batch), this will remove it. Transactions can be reversed in full or partially reversed. |
| Software Development Kit (SDK) | A set of coding tools given to developers to help them quickly build an app or feature, for example, a front-end checkout page or a back-end resource like a database. SDKs are available in various coding languages such as Java, PHP, and .NET. |
| Settlement | The process of sending a merchant’s batch file of transactions to the card brand network for processing and payment, and ultimately for cardholder billing. Describes the actual transfer of funds for sales and credits from the issuer to the acquirer. Acquirers pay the merchant (less any fees) with funds from the card brand. The issuer then bills the cardholder for the transaction amount. |