Explore the PayCompass payment industry glossary – your reliable resource for understanding the language of modern commerce. Packed with clear payments definitions and straightforward payments terminology, this glossary is built to support business owners, finance teams, and high-risk merchants alike. Whether you’re just getting started or looking to deepen your expertise, our comprehensive payments glossary will help you confidently navigate the complexities of payment processing, industry standards, and key compliance terms.
3D Secure
3D Secure is an extra layer of security in the authentication process for debit and credit card payments used online. When a customer makes a payment online, the gateway transfers them to a page which asks them to enter a password or a code that is sent to their email or phone. Once this is successfully entered, the transaction is authorized. The overall aim is to reduce fraud and associated chargebacks.
ACH Payment Processing
A commonly-used payment transfer system within the US which allows funds to be transferred from one bank account to another. ACH payments use the Automated Clearing House network and are suited for domestic payments only. Although not instant, ACH payments usually clear within 1-3 business days and are commonly used for payroll or recurring payments.
Authorization
A critical part of the transaction process, authorization is the step in the payment process that verifies that the customer’s payment method is valid (not expired) and has sufficient funds available. If a payment is not authorized, it cannot go ahead, forming an essential part of the security process and ensuring businesses don’t lose money when a customer doesn’t have the necessary funds for the purchase.
Batch Processing
A common payment processing method where several transactions are collected and processed together over a set period of time. In this case, transactions aren’t processed individually and may wait a short period before they’re actioned. Batch processing is efficient for large numbers of transactions as it can save time and effort, however it may result in delays.
Card Verification Value (CVV)
A standard security feature for credit and debit cards in online payments, characterized by three digits on the back of the card. Often shortened to CVV, this helps to prevent different types of fraud in situations where the card may have been lost or stolen. To comply with PCI DSS, the CVV code is not stored by merchants after the payment is authorized.
Chargeback
If a customer believes they have been charged the wrong amount or that there is a suspicion of fraud, they can lodge a chargeback. This is a reversal of that transaction, which often results in high fees for the business itself. Chargebacks are particularly common for high-risk businesses, where fraud is more likely, and partly due to friendly-fraud. This is when a customer isn’t completely aware of returns policies, so they lodge a chargeback dispute rather than contacting the business. Chargebacks can result in high fees, lost goods, and take a considerable amount of time to deal with. Businesses that have a high chargeback ratio are often deemed ‘high-risk’ by many payment processors. PayCompass’ merchant accounts all have built-in chargeback prevention to help reduce these instances.
Chargeback Prevention
Tools that help minimize chargebacks, therefore protecting business revenue and avoiding unnecessary fees. PayCompass’ merchant accounts all have built-in chargeback prevention, thanks to our secure payment gateway and strong fraud protection. Businesses can also reduce chargebacks with holistic measures, such as ensuring customers are aware of returns policies, having clear customer support channels, and focusing on dispute management at source.
Chargeback Representment
When a customer files a chargeback dispute, businesses respond with chargeback representment to fight the claim. For instance, if a customer claims they never received a product or they were charged incorrectly, they may file a chargeback. If the company doesn’t agree, a chargeback representment takes the dispute further and presents evidence. Losing chargebacks can cost businesses large amounts of money over time, so chargeback representment is a valuable tool to prevent excessive losses.
Cost and Cash Flow Efficiency
A range of strategies used by businesses to optimize their financial operations. Both are concerned with different areas, with cost efficiency focusing on how well a company controls and reduces its production or operating costs, and cash flow about how well a company manages its cash inflows and outflows to ensure financial stability and business growth.
Cross-Border Payment
Cross-border payments have become more common as e-commerce has picked up pace. In this case, the merchant and the customer are situated in two different countries, and the payment may be in different currencies. Businesses can choose to offer DCC (Dynamic Currency Conversion) to allow the customer to choose whether to pay in their home currency, or they can offer payment in the base currency, therefore incurring a currency conversion fee.
Currency Conversion Fee
When a customer purchases goods or services and pays in a different currency, e.g., a cross border payment, a fee is applied to facilitate the conversion. Currency conversion fees can either be a flat rate or a percentage. Our multi-currency accounts help you avoid these high fees and streamline the process when two currencies are involved.
Digital Wallet (eWallet)
A digital wallet stores payment information, e.g., debit and credit card information, to be used electronically via an app. This format cuts down on the need to carry cards, providing a more convenient way for customers to pay. Common digital wallets include Apple Pay and Google Pay, which are becoming more widely accepted in many regions.
Dispute Management
When a customer files a chargeback, dispute management helps to handle the process. Effective dispute management allows both sides to put forward their case, ensuring fairness across the board. It also ensures that the decision is made based on evidence and in a timely manner that fits necessary timelines. However, robust chargeback and fraud prevention is a better option, as disputes can be time-consuming and costly. PayCompass’ merchant accounts all offer robust dispute management services, helping to avoid extended disputes that can be damaging to a business’ reputation.
Dynamic Currency Conversion (DCC)
Dynamic Currency Conversion is often shortened to DCC and is a service that allows customers from other countries to choose the currency in which they pay. For instance, a US-based online business using DCC and selling goods or services to a customer in Germany can give their customer the option of paying in dollars or their home currency (Euros). This service makes it easier for customers to understand how much they’re paying, increasing overall satisfaction.
EDI Payments
An EDI payment is a way for businesses to send money via the Electronic Data Exchange. In this situation, information is shared quickly via computer systems, rather than sending checks or invoices. This process is much faster, allows businesses to be paid quickly, and cuts down on the potential for human error. Within an EDI payment, certain information must be present, including the invoice number, total amount, and payment details.
Electronic Funds Transfer (EFT)
Electronic funds transfers, often called EFT for short, simply means transferring money from one bank account to another. This is done electronically and typically takes 1-3 business days to complete, although can be faster in some situations. Often confused, an EFT payment is not the same as an ACH payment but does work in a similar way.
Embedded Payments
Embedded payments allow payments to be processed without the customer having to leave the page and be redirected back. This is a streamlined payment option that can be integrated directly into a business’ platform or payment software. This can reduce friction in the customer experience, potentially leading to greater satisfaction.
Gateway Emulator
A simulator tool that allows businesses to test out different payment gateways and their effects. This is useful if a business is unsure of which way to go and wants to see the real-time effects of opting for a specific gateway over another. However, a gateway emulator can also allow a business to physically switch their gateway without changing their current setup, saving time and effort.
Global Market Access
The world is large but feels small thanks to global trade. Global market access allows businesses to reach customers all over the world through online access and payment systems. Within this, offering globally accepted payment methods and clear financial structures facilitates transactions. All our merchant accounts are multi-currency, allowing businesses to trade across borders with ease.
High-Risk Merchant Account
A type of merchant account that is specifically tailored to high-risk businesses. Many standard payment processors classify businesses as high-risk if they have high instances of chargebacks, increased regulatory scrutiny, or a higher chance of fraud. This can often leave businesses struggling to access payment processing services. Our high-risk merchant accounts are tailored to the specific needs of these businesses, offering tools such as real-time transaction monitoring and chargeback prevention.
Hosted Payment Page
Often shortened to HPP, this is a secure, third-party web page provided by a payment gateway to handle the payment process. Rather than processing the payment directly on a website, customers are automatically directed to the HPP where they can enter their payment information, before being redirected back to the website once the transaction has gone through.
KYC (Know Your Customer)
KYC, or Know Your Customers, is a security measure to help ensure the identity of customers, specifically to prevent fraud and money laundering. KYC is required by many financial regulators as a baseline measure and often requires customers to provide government-issued ID, such as a passport, and proof of address. For digital platforms, biometrics may also be required, such as a photograph.
Merchant Account
A tailored business account required by traders that allows them to accept debit and credit card transactions in a streamlined way. Our merchant accounts feature other tools, including fraud protection, chargeback prevention, and multi-currency capabilities to name just three, while also being available to high-risk businesses.
MOTO
MOTO stands for Mail Order/Telephone Processing and is a service that allows these types of businesses to process payments without requiring the credit or debit card to be physically present. In these cases, payments are made by mail or over the telephone rather than online, creating a range of challenges that a PayCompass MOTO account helps to solve.
Near-Field Communication
Near-field communication, often shortened to NFC technology, is a game-changer in payment processing. This type of technology enables two devices to “talk” to each other, as long as they’re within close proximity. This is a wireless technology that allows customers to make payments with devices such as smartwatches, simply by holding them a few centimeters away from a payment terminal. NFC is commonly used in tap to pay/contactless payments.
Payee
Every transaction has a payee and a payer. In this case, a payee is the person who receives payment for goods and services, be it in cash, via card payment, or a transfer. If a customer buys products online, the payee is the company they’ve purchased from, and the customer is the payer. The payment processing operation sits between the payer and payee.
Payment Acceptance
When a payment is accepted, it has successfully completed the payment processing stage and is ready to be sent to the receiver’s bank account. For instance, once a customer makes a payment and it is accepted, the money will shortly appear in the merchant’s account. This process is the same for both card present or card not present payments.
Payment Aggregator
Payment aggregators allow businesses to accept card payments and bank transfers without the need to set up individual accounts with payment processors. Rather than signing up for accounts with banks and other financial services, a business can simply sign up with a payment aggregator that already has such connections in place. Then, when a customer makes a payment, the transaction routes through the aggregator before arriving in the merchant’s account. Ultimately, a payment aggregator makes it faster and easier for e-commerce businesses in particular to receive payments.
Payment Gateway
A payment gateway is a sophisticated piece of financial technology that allows payment data to be transmitted from a business’ website after a payment to the payment processor itself. There are several types of payment gateways, but security should always be a priority, to ensure a smooth process and customer confidence.
Payment Orchestration
Payment orchestration is a key tool to smooth out and optimize the payment transaction flow. This includes several payment services and providers working together through one single platform simultaneously.
PCI DSS Compliance
Payment Card Data Security Standard is a set of robust financial regulations that businesses must comply with to ensure transaction security. These regulations govern how we accept, process, store, and transmit financial information securely. All businesses that accept transactions must comply with these regulations, and non-compliance can lead to severe penalties.
Point of Sale Systems
Point of Sale systems, sometimes known as POS, allow businesses to process payments at the point where the sale is made. For instance, in a retail store when the customer arrives at the desk and wants to pay for goods or services. Both hardware and software are typically required, although some systems can be used via a smartphone with a linked app or software package.
POS Solutions
Packages that integrate POS hardware, software, and associated services into one service. These can streamline the payment process and integrate easily with other systems a business uses. PayCompass offers payment processing services that integrate smoothly with your POS system for a streamline experience.
Real-Time Payments (RTP)
Real-Time Payments, often called RTP, allow instant, or near-instant receipt of funds sent from one bank to another. These are beneficial for obvious reasons – the person expecting the funds gets them without delay, even if it’s a weekday. This type of payment can be used to pay bills, send money to family or friends, and to receive payment from a company. RTPs are also secure, which gives extra peace of mind, while remaining a preferred payment method for many, due to their unmatched speed.
Reconciliation Report
Reconciliation reports are important documents that ensure a company’s financial records match with outside sources, such as their bank or payment processor. If there are any mismatches in numbers, these are then investigated and rectified. The entire process is called reconciliation and it’s a vital process to ensure accuracy of taxes and other reporting mechanisms. Reconciliation reports may also be used in audits, so it’s vital that these are up to date and any anomalies are addressed urgently.
Recurring Billing
Subscription-based models use recurring billing. In this case, a customer authorizes a business to charge them at set times for goods and services. This is an ongoing arrangement over the long-term or for a set amount of time until the payment is complete. Subscription-based models, such as Netflix, use recurring billing, and customers can cancel their subscription at any time, although a notice period may be required.
Rolling Reserve
High-risk businesses are often subject to rolling reserves, where a set amount of their revenue is held by the payment processor. This is designed to cover any potential chargebacks or the effects of fraud. The amount held back varies from processor to processor and is also affected by the type of business and their risk profile. Rolling reserves can have a detrimental effect on a business’ cash flow, making it necessary to look for specialized high-risk merchant accounts, like those offered by PayCompass.
Secure Payment Processing
When a customer makes a purchase by card or other digital means, secure payment processing ensures security and safety. This includes several methods, including encryption, tokenization, and authentication. All of these work to anonymize card data so that it cannot be read or intercepted during the transaction process. Secure payment processing is vital to ensure businesses stay in compliance with key regulations, including PCI DSS.
Settlement
Settlement is the last step in the payment processing chain, when the business receives the funds from a sale into their bank account. At this point, the transaction has been authorized and processed, and is ready to complete. For credit or debit card transactions, settlement typically takes between 1-3 working days.
Smart Routing
Smart routing can help a business increase successful transactions by choosing the most suitable payment path for each specific payment’s characteristics. Routing software quickly analyzes the payment to decide which path to take, based on several factors, such as past approval trends, location, currency, and the type of card. This process gives a much higher chance of a successful payment in real-time, rather than sending all transactions through one single payment gateway.
Tokenization
A security feature that replaces sensitive payment data, such as credit card names and numbers, with a unique identifier. These identifiers cannot be read by other means and are useless once the transfer has completed. Tokenization is increasingly used as a security technology measure, helping businesses to comply with financial regulations, such as PCI DSS, and to boost customer confidence. It’s also a key piece of fraud protection.
Underwriting
When a business applies to for payment processing services, the underwriting process assesses their individual level of risk to decide whether or not to provide services. In some cases, a business’ risk profile can either prohibit them being accepted completely or lead to restrictive terms, such as high rolling reserves. At PayCompass, our merchant accounts have a high acceptance rate, and if a business isn’t accepted, we give detailed information to help them achieve success the next time around.
Virtual Card Issuing
Virtual cards are used for remote or online transactions to pay digitally for goods and services. These are more secure than standard cards because they cannot be lost and they’re easy to manage online, setting limits if necessary, and cancelling once they’re no longer needed. Virtual cards can be used continuously or as a one-time requirement.
Virtual Terminal
Virtual terminals are online applications that merchants use to process credit or debit card payments without using a standard card reader. Designed for remote payments, virtual terminals provide a smooth service for such businesses, streamlining payment processing in a secure manner. Our virtual terminal services reduce the chance of chargebacks and offer a convenient payment method without additional hassle.
Void Transaction
A void transaction is one that is quickly cancelled before the money leaves the customer’s account. For instance, if a customer goes to buy something in a store but then changes their mind within a few seconds, the cashier can void the transaction and no money is debited from the account. However, the payment may still appear on the customer’s account for a few days, until the process is complete.
White-Label Payment Gateway
Rather than choosing a third party payment processor, a white-label payment gateway allows a business to use a ready-made system that they can rebrand as their own. This can then be used to handle card payments, without the hassle of having to develop their own technology. This type of gateway is very popular with banks, software companies, and fintech startups in particular. All the business needs to do is change the logo and branding, and then it’s ready to use.
