This document provides definitions for common payment terms used in the payments industry. It defines key terms including acquirer, authorization, average transaction size, BIN, capture, cardholder, chargeback, credit card associations, interchange fee, merchant account, mobile payment, payment processor, POS, and transaction fee. Understanding these terms makes working with payment providers and understanding costs easier.

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The Payments Glossary:
Top Payment Terms You Need to Know
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2. The jargon the payments industry uses can be extremely confusing. Knowing
common payment terms will make your life easier when it comes
to working with payment providers and understanding your costs.
We’ve put together a glossary of the top payment terms to help you
understand payments a bit better.

3. Acquirer
An acquirer (Chase, First Data, etc.) solicits, underwrites and owns the
merchant account. They provide technology and hardware which
enable the merchant to process the transaction.

4. API
Application Programming Interface allows applications to communicate
with each other. For example, a shopping cart platform will communicate
transactions to a Payment Processor via an API.

5. Authorization
An authorization works somewhat like a deposit in that it puts a hold on a
dollar amount. Merchants use this to ensure a customer has funds available
for rentals and larger transactions.
Authorized payments won’t actually pay out to the merchant until the
merchant captures the authorized transaction.

6. Average Transaction Size (ATS)
The average transaction size refers to the average dollar amount of your card
transactions. New businesses setting up their merchant account will always
be asked about their ATS. Providing a realistic ATS ensure your funds get to
your account with no delays.

7. BIN
A Bank Identification Number (BIN) is the first 6 six digits of a 16 digit credit
or debit card. The bank identification number identifies the institution
issuing the card.

8. Capture
A capture happens when a merchant collects a previously authorized
amount on a customer’s credit card and receives the funds. This is also called
a settlement.

9. Cardholder
Cardholders (consumers) are customers of a bank that request a credit card.
The cardholder will be approved by the issuer based on credit worthiness. In
practice, merchants do not need to work directly with all the members of the
credit card processing value chain, just ISOs/acquirers and cardholders.

10. Card Skimming
The theft of payment card information used in an otherwise legitimate
transaction. The thief can procure a victim’s card number using basic
methods such as photocopying receipts or more advanced methods such as
using a small electronic device (skimmer) to swipe and store hundreds of
victims’card numbers.

11. Credit Card Fraud
Credit card fraud is a wide-ranging term for theft and fraud committed using
or involving a payment card, such as a credit card or debit card, as a
fraudulent source of funds in a transaction.
The purpose may be to obtain goods without paying, or to obtain
unauthorized funds from an account.

12. Card Not Present (Keyed Transaction)
This is a transaction where the physical card is not present at the time of the
sale, such as an online purchase or telephone order. Credit card data is
manually entered instead of swiped. Checking rates is important as some
companies may charge more for Card Not Present transactions.

13. Chargeback
When a customer disputes a transaction directly with their bank (credit card
provider) and is refunded, after which the bank will take the issue up with
the merchant. Typical causes of a chargeback involve product delivery failure
or dissatisfaction.
Chargebacks that are not successfully refuted with sufficient evidence by a
merchant will incur an expensive chargeback fee. A merchant that
consistently exceeds acceptable chargeback limits may have their Merchant
Account terminated altogether.

14. Credit Card Associations
Associations (Visa, MasterCard, AMEX, etc.) are commonly referred to as the
credit card and debit card companies. The role of the associations is to
govern the policies pertaining to their bank cards, monitor processing
activity, and oversee the clearing and settlement of transactions. Currently,
VISA is the most popular association with approximately 65% transaction
volume.

15. Cryptocurrency
A digital currency in which encryption techniques are used to regulate the
generation of units of currency and verify the transfer of funds, operating
independently of a central bank, such as Bitcoin.

16. CVV
The Card Verification Value (CCV), is a unique 3 or 4 digit number found on
the back, and in some cases the front, of a credit or debit card. A CVV is an
extra layer of security to minimize unauthorized transactions. They are more
difficult to acquire via the same illicit methods used to acquire 16 digit card
numbers.

17. Decline
When a transaction attempt fails due to the card-issuing bank not accepting
the charge.

18. Discount Rate (or Processing Rate)
The percentage of each transaction that the acquirer charges the merchant
for making that transaction happen.

19. eCommerce
The sale of goods or services over the Internet. Electronic commerce is a
broad term reflecting a wide range of commercial activities, and may include
industries such as online retail or SaaS (software as a service).

20. Issuer
The issuer is the bank (Capital One, CIBC, RBC, etc.) that provides the
cardholder with their credit card. They bear the responsibility of approving
the cardholder, billing, and collecting the owed funds from the cardholder.

21. Interchange Fee
A term used in the payment card industry to describe a fee paid between
banks for the acceptance of card based transactions. the cardholder, billing,
and collecting the owed funds from the cardholder.

22. MCC
A Merchant Category Code (MCC) is a four digit number classification system
that is universally accepted by the Credit Card Associations and used to
identify the type of business. For example, 5661 is the MCC assigned to all
shoe stores.

23. Merchant
The merchant is a business owner who submits a request to an ISO/acquirer
for the ability to accept credit. Merchants are approved under the
qualifications set by the associations and the policy of the underwriters.

24. Merchant Account
A merchant account is a type of bank account that allows businesses to
accept payments by payment debit or credit cards. It is established under an
agreement between a business owner and an acquirer for the settlement of
payment card transactions.

25. Merchant Identification Number (MID)
A unique number issued by the acquiring bank to identify a merchant.

26. Mobile Payment
Instead of paying with cash, cheque, or credit cards, a consumer can use a
mobile phone electronically equipped with a bank account, debit/credit
card, or mobile wallet to pay for a wide range of services and digital or hard
goods.

27. NFC
Near Field Communication is technology that uses a chip to enable two
devices, when placed in close proximity (centimeters) of each other, to
exchange data.

28. Payment Processor
Processors are organizations that partner with acquirers to open merchant
accounts, handle support, manage payment processing, and build
technology on behalf of acquirers. Processors do this in exchange for a
percentage of the transaction volume.

29. PCI Compliance
The Payment Card Industry (PCI) is a 3rd party regulator of the Credit Card
Associations. It has defined a set of security and compliance standards to
protect merchant account holders and their customers during and after a
transaction.

30. POS
A Point-of-Sale (POS) is the place where a retail transaction is completed. It is
the point at which a customer makes a payment to the merchant in
exchange for goods or services. Also known as a Checkout.

31. Recurring Payment
Payment card transactions processed on a regular basis under a pre-
authorized agreement. Recurring payments are commonly used by
subscription or SaaS (software as a service) based businesses.

32. Refund
A credit issued by the merchant back to a customer when the customer
returns a product.

33. Transaction Fee
This is the amount charged to a merchant on every transaction. This covers
all transactions such as sales, authorizations and refunds. It’s usually bundled
with the Discount Rate.

34. That’s It!
With these terms you will be equipped to seamlessly work with payment
providers and make the right decisions regarding payments for your
business.

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