Payments Glossary
50 essential payment processing terms defined. Clear, practical explanations for merchants and finance teams.
A
Accounts Receivable Automation
Technology that automates invoicing, payment collection, and cash application processes.
ACH Payment
An electronic bank-to-bank transfer through the Automated Clearing House network.
Acquirer vs Issuer
The two banks in a card transaction—one serves the merchant, the other serves the cardholder.
Address Verification Service (AVS)
A fraud prevention tool that verifies billing address information with the card issuer.
Authorization Hold
A temporary hold placed on a cardholder's funds pending final transaction capture.
B
C
Card Scheme
A payment network that facilitates card transactions between issuers and acquirers.
Card-Present vs Card-Not-Present
Classification of transactions based on whether the physical card is used at the point of sale.
Cash Discount Program
Offering a lower price to customers who pay with cash instead of cards.
Chargeback
A forced transaction reversal initiated by the cardholder's bank, returning funds to the customer.
Convenience Fee vs Surcharge
Two different fee structures for charging customers extra for card payments.
Credit Card Processing
The complete system for accepting, authorizing, and settling credit card payments.
CVV/CVC
The 3-4 digit security code printed on payment cards for fraud verification.
E
I
Instant Payouts
Immediately disbursing funds to recipients rather than waiting for standard settlement.
Interchange Fee
The fee paid by the merchant's bank to the cardholder's bank on every card transaction.
Interchange Optimization
Strategies and technologies to qualify transactions for the lowest possible interchange rates.
Interchange-Plus Pricing
A transparent pricing model showing actual interchange costs plus a fixed processor markup.
ISO vs PayFac
Two different business models for providing payment processing services to merchants.
M
Merchant Account
A bank account that allows businesses to accept credit and debit card payments.
Merchant Category Code (MCC)
A four-digit code classifying businesses by the type of goods or services they provide.
Merchant ID (MID)
A unique identifier assigned to a business for payment processing purposes.
P
Payment Aggregator
A company that processes payments for multiple merchants under a single merchant account.
Payment Facilitator (PayFac)
A company that enables merchants to accept payments under its master merchant account.
Payment Gateway
Technology that securely captures and transmits payment data from customers to processors.
Payment Orchestration
A software layer that routes transactions across multiple payment providers intelligently.
Payment Processor
A company that handles credit card and debit card transactions between merchants and banks.
Payment Reconciliation
The process of matching payment transactions with deposits and accounting records.
PCI Compliance
Adherence to security standards for organizations that handle credit card data.
Point-to-Point Encryption (P2PE)
Encrypting card data at the point of capture and keeping it encrypted until it reaches the processor.
POS System
Point of Sale hardware and software for processing transactions and managing business operations.
Push-to-Card
Sending funds directly to a recipient's debit card account.
R
Real-Time Payments (RTP)
A payment network enabling instant, irrevocable bank-to-bank transfers 24/7/365.
Recurring Billing
Automatically charging customers on a scheduled basis for subscriptions or ongoing services.
Reserve Account
Funds held by a processor as security against potential chargebacks and fraud losses.
Rolling Reserve
A reserve that holds back a percentage of deposits for a set period before releasing them.
S
Same-Day ACH
ACH payments that settle within the same business day instead of 2-3 days.
Settlement Time
The time between processing a transaction and receiving funds in your bank account.
Soft Descriptor
The business name and details that appear on customer card statements.
Surcharging
Adding a fee to credit card transactions to offset processing costs.
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