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Payments Glossary: All The Payments Terms Used in the Industry, A-Z

The payments industry is full of technical terms that can be hard to understand.


If you’re new to payments or trying to understand the space, that can be frustrating.


So we’ve compiled a comprehensive guide to some of the most common terms used in reports, articles and more.

You’ll want to bookmark this guide as a reference - trust us! If you think we’ve missed a term, let us know here.

2C2P merchant account

A 2C2P merchant account is set up on the merchant portal after onboarding. It enables merchants to check their transactions in real-time, 24 hours a day, 7 days a week. It also enables merchants to manage transactions and download reports.

Alternative payment methods

The term alternative payment methods (APM) is a way of referring to methods that allow merchants to accept e-commerce and in-app payments without the use of cards. These methods include bank transfers, over the counter, kiosks, e-wallets, mobile payments and so on.

For merchants that want to sell goods and services to shoppers from all over the world, it is important to support local payment methods that are popular in each specific region.

With 2C2P, merchants have access to over 400,000 alternative payment touchpoints via 2C2P’s all-in-one payments platform.

Application Programming Interface (API)

API stands for Application Programming Interface. This is a general term for programming techniques that are available for software developers when they integrate with a particular service or application. These techniques vary on the software type and may include web API, remote API, software development kits (SDKs), libraries, frameworks, and much more.

In the payments industry, APIs are usually provided by any party participating in the money flow (e.g. payment gateways, processors, service providers) to facilitate the money transferring process.2C2P uses a 2C2P Redirect API which allows merchants to integrate their existing systems with the 2C2P Payment Gateway with minimum effort.

This allows them to enjoy the full benefits of enhanced security and a full suite of payment options. Accepting payments from credit cards, cash, ATMs, kiosks, over-the-counter, Internet banking, and all other bank channels is simple with 2C2P’s Redirect API.

Authorisation / Authorization

This is the process of the card issuer (like Visa or Mastercard) verifying payment details and reserving the funds to capture the payment at a later stage.

In e-commerce, in-app and point-of-sale payments, authorisation is implemented as an API call to the payment gateway. The gateway and payment processor then perform required validation and risk checks, and ask a corresponding card network to authorise this payment from an issuer to an acquirer.

When a payment is authorised but hasn't been captured yet, a merchant can also decide to cancel it for some reason (like a high risk of fraud).

Note that authorisation is valid only for a limited amount of time. In case an authorised payment hasn't been captured or cancelled, it expires after the predefined deadline is missed.

Bank Identification Number (BIN)

The first six to eight digits of the card number are known as the Bank Identification Number (BIN) or Issuer Identification Number (IIN).

They can be used to quickly determine the card network and the financial institute that issued the card.

Buy Now Pay Later (BNPL)

A fast-growing checkout option, Buy Now Pay Later or BNPL allows shoppers to make interest-free instalment payments over a set time period. The funding source is a loan backed by a BNPL provider at the point of transaction based on the risk assessment at that time.

The concept of BNPL is based on good repayment behaviour in exchange for affordable purchases, through flexible payment plans.

Clearing and settlement

A payment that was already authorised by the payment processor must be captured to be completed (this is the act of transferring the reserved funds from shopper to merchant).

2C2P enables manual capture (both in the Customer Area or with the use of API calls), or automatic capture (by default, 3 days after an authorisation has been made). It is also possible to make a partial capture, or cancel a payment. Captures, cancels, and refunds together are called modifications, since they modify the state of an authorised payment request.

Cardholder

A shopper possesses a credit or a debit card, issued by a bank.

Cardholder Verification Method (CVM)

Type of verification method used to confirm a payment instrument being used in a purchase, such as a credit card, is in the possession of its owner.

Card schemes

Payment networks that set rules and provide infrastructure to issue cards and process payments made with cards. For a payment to be made, both an issuer and an acquirer must be members of the same network as the card. Examples of some popular card networks are Visa, Mastercard, American Express, UnionPay, Discover and JCB.

Card schemes charge fees for processing payments, and also regulate the value of the interchange fee, which depends on many factors for each specific payment.

Card Not Present (CNP)

A payment transaction made with a card, where the shopper cannot physically present the card to the merchant at the time of the transaction. Examples of CNP transactions include online payments, in-app payments, and MOTO (mail order/telephone order) transactions.

CNP transactions are a common target for card fraud because it is difficult for the merchant to verify that it is the actual cardholder making the purchase. To reduce the risk of card fraud arising from CNP, use 3D Secure and AVS (address verification service) features.

Card number

Every payment card (be it a debit, credit, gift, or a similar card) has a unique number associated with it. This number is usually printed on the card and required to uniquely identify this card and to refer to it in every transaction.

Card on File (CoF)

When card details are stored to streamline the checkout process for returning customers. This can be used for one-click payments, pay-per-use services, or any recurring payment that does not follow a fixed schedule.

A recurring payment that occurs on a fixed schedule is referred to as a subscription.

If a merchant is PCI-Compliant at Level 1/Level 2, they can store card details by themselves. Otherwise, they must store card details using a payment service provider like 2C2P.

Cards

Plastic cards issued by shoppers' banks to enable cashless payments either on a point-of-sale, via an e-commerce website, or inside a mobile application. Cards may be debit, credit or prepaid, and are usually operated by card networks. Sometimes cards may be linked to e-wallets or other local payment methods, but most commonly they are used to withdraw cash or make cashless payments.

A typical card contains a card number, which uniquely identifies a card. It also contains a security code, used in combination with other information (a card expiry date and cardholder name) to verify card-not-present payments (for example, when paying for goods or services on an e-commerce website or inside a mobile application).

Card security code (CVC, CVV, CID)

The 3- or 4-digit numeric code that is printed on a card in addition to the card number. The security code is used in card-not-present transactions to verify the identity of a cardholder.

This code may have different names, for instance:

Visa: Card Verification Value (CVV, CVV2)

Mastercard: Card Validation Code (CVC, CVC2)

Chargeback

If a shopper for some reason wants the funds returned from a merchant, they can ask the merchant to make a refund. If the merchant refuses, a shopper may ask their issuer to make a chargeback (sending the funds back from the merchant to a shopper).

When a chargeback request is received, 2C2P will notify the merchant and the merchant has to submit details about the chargeback claim. Thereafter, 2C2P will convey the details to the bank acquirer, who will then update with the result of the chargeback claim. 2C2P will then notify the merchant of the results via our payment gateway portal.

Contactless or Near Field Communication (NFC)

Contactless payments allow your shoppers to make payments without inserting or swiping their card. In the context of POS, NFC is the technology used in contactless payments.

NFC stands for “Near Field Communication” and enables short-range communication between compatible devices

Apple Pay, Google Pay and Samsung Pay all use the standard NFC protocol and are therefore accepted. These payment methods are considered strongly authenticated and therefore support high-volume transactions.

Cross-border payment

When a payment method issued in one country is used to make a purchase from a merchant based in another country. This is also referred to as an "international payment".

Closed Loop Card

A closed loop card is an electronic payment card that can only be used to make purchases at a single company or retailer. It is typically branded with the company’s logo and can take the form of a debit card, credit card, gift card or prepaid card. See ‘open loop card’ for contrast.

Digital Goods

2C2P aggregates popular digital bills and services - like your taxes, phone bills, transport tickets - into a single platform to bring greater convenience to you and your customers.

List your digital goods, bills and services with 2C2P to benefit from a wide network of merchants and customers, while not having to worry about payments processing and invoices.

Dispute

When a shopper for some reason wants funds returned from a merchant, and a payment was already captured, the shopper can initiate a refund. If the merchant refuses, the shopper may ask their issuer to make a chargeback. If a merchant disagrees, they can dispute the chargeback.

If disputing a chargeback is allowed, the merchant must provide documents confirming the delivery of a product/service, and send these documents either to the acquiring bank or the payment service provider.

Dynamic Currency Conversion (DCC) or Cardholder Preferred Currency (CPC) or Multi Currency Conversion (MCC)

DCC is a currency conversion fee. It allows shoppers to convert the transaction amount to their card's default currency when making a payment abroad.

The shopper is presented with the choice to convert the transaction amount, when the transaction is in a currency other than the default configured on the card and the terminal has been configured to allow DCC.

Full details on the exchange rate are provided to the shopper on the terminal to allow an informed decision, and simultaneously to the cash register for merchant information.

The shopper either accepts or rejects the DCC offer and proceeds with the selected amount and currency. If the shopper chooses DCC, related information is shown on the receipt.

Shoppers can immediately understand the full amount charged for the transaction in a familiar currency.

E-commerce payments (or Online payments)

Payments made by shoppers via electronic commerce (like websites, webshops, social networks) for either goods or services provided by merchants. These payments are usually made using cards or local payment methods that have been optimised for e-commerce.

Other types of electronic payments are in-app payments and point-of-sale payments. Merchants usually require a payment service provider to process these payments. 2C2P allows its merchants to accept omnichannel payments (e-commerce, in-app, and in-store).

Europay, Mastercard, Visa (EMV)

A global standard for integrated circuit cards (ICC).

E-wallet

E-wallet is a type of online prepaid account where a user can store money for a future online transaction. With an e-wallet, one can easily make online payments for groceries, transport, online purchases and more.

Fraud

In payments, this means that there was an attempted transaction made by a criminal. The target of a fraud can either be a merchant or a shopper (depending on the approach of the fraudster).

When a fraud case is found, you will be guided to ‘void’ or ‘refund’ if the products or services have not yet been rendered. This can help the merchant to show that they have an action to control fraud.

2C2P has real-time fraud monitoring tools to help detect suspicious transactions attempted against the merchant. In the worst case scenario, if the sale has been completed before the fraud was detected, the merchant will be asked to send all the invoices or related documents to prove the sale.

If merchants are found to be involved in any fraudulent transactions, they will be terminated, reported and blacklisted.

Hosted Payment Pages (HPP)

These are web pages hosted by 2C2P that can be integrated with an e-commerce site to provide payment functionality. In this case, a shopper is redirected from a merchant's site to the hosted payment page provided by 2C2P. This helps merchants greatly reduce their scope of PCI compliance.

A hosted payment page can be customised with the use of skins to better match the whole UI and experience of the merchant's site, and/or to be optimised for mobile devices. Hence they are also white label solutions for merchants.

Instalment Payment Plan (IPP)

As an alternative to traditional credit, 2C2P allows merchants to let their customers split payments into smaller payments. This is great for offering flexible payment terms to the end customer. The funding source comes from a credit line or a credit limit of an already issued credit card.

Integrated Circuit Card (ICC)/Chip

In the context of payments, an EMV credit card with an embedded chip which is used to hold card information.

Interchange fee

A fee that is paid to the issuer by the acquirer for each payment transaction made via a card network. The interchange fee amount is determined by the corresponding card network, as well as the scheme fee.

A further fee is then deducted from the total by the acquirer before paying into the merchant's account.

Issuer (or Issuing bank)

A bank that issues a card for a shopper to make cashless payments via an e-commerce website, inside a mobile app, or in a physical store. To be able to issue a card, an issuer must be a member of one or several card networks, or subscribe to one of the card services.

Sometimes a shopper's bank is referred to as an issuer even if there is no card issued. This is to distinguish between a shopper's bank, which sends funds, and a merchant's bank, which acquires funds.

Know Your Customer (KYC)

Know Your Customer (KYC) is the process of identifying and verifying the identity of your customers. This is required by the payment industry regulations as a prerequisite to allow individuals or business entities being paid out.

For example, conducting background checks and due diligence before 2C2P onboards a merchant and cross-checking the merchant against global watch-lists.

Loyalty programme

A rewards programme offered by a company to customers who frequently make purchases.

Marketplace

An e-commerce website or a mobile app that enables third parties (referred to as sub-merchants) to provide their products or services to the users of a platform. Payments are processed through the platform and split between the marketplace and sub-merchant. Examples of online marketplaces are crowdfunding platforms, peer-to-peer marketplaces, ride sharing services, and so on.

Marketplaces need to implement sub-merchant onboarding, processing payments, performing KYC verification, and making payouts. With 2C2P, marketplaces can benefit from consolidated reporting, single authorisation for multiple sub-merchants, portal access for every sub-merchant, simple payment disbursements and FX conversion.

Merchant

The party selling goods or services to shoppers via an e-commerce website, a mobile app, on a point-of-sale, or across all three channels. To accept payments made with cards or local payment methods, a merchant must have an acquiring bank account and subscribe to the services available from the payment service provider.

Merchant of Record (MoR)

An entity that operates a platform and manages interactions with its sellers (sub-merchants) or suppliers. The MoR performs due diligence by overseeing and controlling all commercial activity on the platform. In this way, the MoR's payment service provider has a relationship with only the MoR itself.

Responsibilities of an MoR include:

  • Managing all transactions, refunds, cancellations, and disputes.
  • Providing the first line of customer support for shoppers.
  • Acting as the final arbiter of financial disputes.
  • Monitoring to ensure that no illegal, prohibited, or counterfeit products or services are sold.
  • No CVM (Cardholder Verification Method)
  • A transaction where there is no owner verification check for a credit card. No CVM payments have a low transaction threshold.

Mobile payments

Payments made by shoppers via mobile apps. These payments are usually made with cards or local payment methods, and utilise either native mobile APIs or web pages optimised for mobile (also called as mobile web).

Other types of electronic payments include e-commerce and in-store, which are based on similar infrastructure and usually require a payment service provider for merchants to automate and maintain these payments. 2C2P allows its merchants to accept omnichannel payments (e-commerce, in-app and in-store).

Multi-currency

In the payments industry, this means being able to settle your payments in various geographies across different currencies.

Offline transaction

Offline acceptance of payments in situations where no network connection is currently available. Debit cards will typically decline a transaction while most credit cards are configured to approve a relatively small amount offline.

Omnichannel payment solution

A set of services and technical solutions provided by a payment service provider, which allow a merchant to accept cashless payments across all channels (online, inside a mobile app or at a point-of-sale).

Most payment service providers (PSPs) enable merchants to accept payments via specific channels. 2C2P is one of the few PSPs that provide omnichannel solutions for its merchants. When merchants use 2C2P’s omnichannel payment gateway, they are able to view all purchases made across different channels in a single reporting dashboard.

Open Loop Card

An open loop card is an electronic payment card that is accepted by a wide variety of merchants. It usually bears the logo of a card brand or network like Visa or Mastercard. Open loop cards can take the form of debit or credit cards, gift cards and prepaid cards. See ‘closed loop card’ for contrast.

One-click payments

Simplifies the purchasing process for returning shoppers by allowing them to make a payment without entering their full card and address information. By enabling one-click payments, the shopper's details are stored during the first payment. For each successive payment the shopper only needs to enter their card security code (CVC/CVV) to complete the order.

One-click has the advantage of ensuring the full card authorisation takes place for each payment, including card security code checks and 3D Secure, if applicable. 2C2P offers this payment feature on our payment gateway - see ‘Save Card Details’.

Online PIN

Where the entered PIN is sent online to the card issuer for verification. The entered PIN is encrypted before it is sent.

Online PIN is used when the specific card scheme (payment method) and specific card support it.

Payment acquirer

A payment gateway can take on acquiring in addition to payment processing functions. If the payment gateway takes on an acquiring role, this means that it is given permission to act on behalf of financial service providers to directly acquire merchants and offer them a negotiated payment processing fee or merchant discount rate.

Payment gateway

A payment gateway is a platform that connects its merchants to financial service providers like card schemes (Mastercard, Visa, Discover), banks, wallets and more.

A payment gateway often comes with different features such as payment links, multi-currency conversion, fraud detection, reconciliation and settlement reports to cater to merchants’ business needs.

Payment processor

A payment processor is a service that helps a merchant process payments from their customers by routing them to the respective merchant banks, card or wallet schemes. Merchants can send in payment requests to the payment gateway via a payment terminal, e-commerce or mobile app interface to authenticate payment/card details via API call. The payment processor then routes the transaction accordingly to the respective merchant banks, card or wallet schemes for approval and delivers the approved or declined message back to the merchant.

2C2P is both a payment acquirer and a payment processor to different merchants and in different markets. We take on the acquiring role on behalf of some financial service providers in certain markets, and the processing role in others. We also offer a wide variety of payment methods and payment features, as well as tailored solutions for airlines and social commerce businesses.

For more information about our payment gateway or payment processing service, please contact us.

Payments platform

2C2P provides a wide range of powerful online payment solutions which allows online merchants to process credit/debit card and alternative payments. The payment platform supports implementations with websites or mobile applications. Our payment gateway is used by businesses that want to scale fast.

Payment Service Provider (PSP)

A company, which combines the functions of both a payment gateway and a payment processor, can connect to multiple acquiring and payment networks. Additionally, it can be an acquirer and provide risk assessments and other financial services.

For merchants, it is often cheaper and more convenient to use services of a PSP, rather than have different contracts with various payment gateways, processors and acquiring banks.

Payout

This term has multiple definitions in the payments industry and in general means a large amount of money paid at once to either an individual or a business entity. For example, an online marketplace transmits a payout to their sub-merchants for the products/services they provide to the marketplace customers. 2C2P helps with our payout solutions, where we enable enterprises to handle inbound and outbound transfers between customers and suppliers.

PCI compliance

If you use Payment Processing Services to accept payment card transactions, you must comply with the Payment Card Industry Data Security Standards (“PCI-DSS”). The PCI Standards include requirements to maintain materials or records that contain payment card or transaction data in a safe and secure manner with access limited to authorised personnel.

Merchants who find it difficult or expensive to fully comply with PCI DSS requirements may consider using encrypted methods or outsourcing card processing to a PCI-compliant payment service provider, such as 2C2P. This way their PCI DSS-compliance scope can be significantly reduced.

Point-of-sale (POS)

A point-of-sale system, or POS, is the place where your customer makes a payment for products or services at your store. Simply put, every time a customer makes a purchase at your store, they’re completing a point-of-sale transaction.

Point-of-sale payments

Payments made by shoppers via point-of-sale systems to buy products or services from merchants on a physical location (for example, a store or a ticketing booth). These payments are usually made with cards (swipe, ICC, or contactless).

Other types of electronic payments include e-commerce and in-app, which are based on similar infrastructure and usually require a payment service provider for merchants to automate and maintain these payments. 2C2P allows its merchants to accept payments across all possible channels (e-commerce, in an app and in a store).

Point-of-sale terminal (or payment terminal, pin entry device (PED), process data quickly (PDQ))

A device that communicates with a shopper's card at the point-of-sale. Usually, a card is swiped or inserted into a POS terminal. The shopper is then prompted to enter a PIN or provide their signature (depending on the country, card type and the transaction amount). It is sometimes referred to as a Pin Entry Device (PED), though this only refers to the part of a terminal where the PIN is entered.

Point-to-Point Encryption (P2PE)

Secures card data that is being communicated from point A to point B.

QR Wallet

A QR wallet contains a payment QR code to make payments to merchants.

Recurring payments

Recurring payments means the consumer has given permission for a retailer or merchant to deduct payments for goods or services each month from the consumer’s bank account or to automatically charge the amount due each month to his credit card. The merchant must get the consumer’s permission the first time upfront. The merchant then deducts the amount on the due date so late fees are never a problem. The automatic payments continue until the consumer retracts his permission.

2C2P complies with Payment Card Industry (PCI) standard practices for payment security. Built-in fraud protection is another important feature to cope with today’s increasing cybersecurity attacks.

Reconciliation

Managing multiple acquirers by payment options available, across multiple counties becomes difficult to track and operate at scale.

2C2P enables simplified tracking and reconciliation on one platform for credit cards & local payments each with streamlined report formats across all countries.

Refund

When a shopper cancels the purchase of a product or service, after they have paid. When the merchant makes the refund, the funds are sent back from the acquirer to the issuer. If an authorised payment hasn't been captured yet, a merchant can cancel the payment; in other cases a refund is possible.

If a merchant refuses to make a refund, a shopper can ask their issuer to make a chargeback. In some cases, a merchant is allowed to dispute a chargeback.

Refunds are also referred to as a modification, since they modify the state of an authorised payment request.

Remittance

Remittance refers to the transfer of money from one party to another across borders, often by a foreign worker to an individual in their home country.

Risk management

2C2P follows appropriate card acceptance and data security procedures for all transactions under the applicable law and rules to reduce the financial risk or financial loss of 2C2P, merchant and/or customer and/or end-user from fraud transactions.

Sensitive Authentication Data

Security-related information that is used to authenticate cardholders and/or authorise payment card transactions. This can include card validation codes/values, full track data from the magnetic stripe or chip, PINs, PIN blocks, and more.

See also: Card security code (CVC, CVV, CID).

Stored value card

A payment card with a monetary value that is stored on the card itself, instead of in a bank account. Examples are gift cards and prepaid cards. Some stored value cards can be reused by transferring money to it, others are disposable cards that can't be reloaded.

Stored value wallets

Stored value wallets are also sometimes known as e-wallets, wherein they store money electronically and can be used to spend their stored value at the point-of-sale.

Subscriptions

Recurring payments that occur on a fixed schedule. Popular examples of subscription payments are music and TV streaming services.

Tokenisation / Tokenization

Tokenisation is the process of replacing sensitive data with non-sensitive data (known as a token), which can be later used to get access to the initial (tokenised) data. In the payments industry, it is used to safeguard a card number and other payment data by replacing it with a unique string of numbers. This string can be used later to implement recurring payments.

Together with Client-Side Encryption, tokenisation enables merchants to securely pass their shoppers' data to a payment service provider, like 2C2P.

Transaction (or Tx)

In the payments industry, the term "transaction" is used to indicate exchanging of a specified amount of funds from a shopper to a merchant for the purchase of the latter’s products or services or for fulfilling any other obligations between the two parties.

Funds are usually transferred by means of card payments or local payment methods (bank transfers, e-wallets, mobile payments, etc.).

Tx is a commonly used abbreviation to denote a financial transaction.


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