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Payment Terminology 101: Your Quick Guide

Struggling to understand the payment terminology used in the world of commerce? Don’t fret! You are not the only one having difficulty with this industry jargon. Thus, CloudBanking prepared this go-to glossary of payment terms, core concept, and ambiguous acronyms to help you define and figure out what these payment terms are.

Payment Terms Glossary

Account Number
  • The unique string of numbers assigned by the acquiring bank to a cardholder account.
Acquirer / Acquiring Bank /  Merchant Bank
  • A licensed financial institution that offers business owners with merchant accounts. It also acquires funds for its merchant from a customer by processing credit card transactions.
American Banking Association (ABA) Number / Bank Routing Number
  • A special nine-digit bank-identifying code that direct ACH deposits to the designated bank in the USA. This code is usually printed with magnetic ink at the bottom of a check and precedes the account number.
Application
  • (IT) A program designed to run on a specific platform.
  • (Finance) A form to be filled out when someone applies for a service or request for resources.
Application Programming Interface (API)
  • This is a software intermediary available for software developers when they integrate with a specific application program or service. API is provided by any party involved in the money flow to expedite the process of transferring the money.
Authentication
  • The process of checking and validating a person’s identity and the authority level of the user to perform the tasks within an application.
Automated Clearing House
  • An electronic funds transfer network that handled the processing of electronic fund transfers (credit and debit transactions) among its participants.
Automated Clearing House Payment
  • Electronic payment where the customer gives an originating institution or corporation authorization to debit directly from his/her checking account or savings accounts for bill payment.

Cardholder
  • The individual whose name appears on the payment device issued by the bank or other financial institution and the authorized user of the payment device.
Card Not Present Transaction
  • A payment processing environment where the card (and sometimes even the cardholder) is not physically present at the time of purchase. Card-not-present transactions take place in businesses focused on mail/telephone order, business to business, and internet-based transactions.
Card-Present Transaction
  • A payment processing environment where the credit card is physically presented to the merchant by the cardholder as the form of payment at the time of transaction.
Chargeback
  • A payment transaction disputed by a cardholder or issuer in compliance with the Payment Network Regulations
Cloud Computing
  • An application or programming model where details are stored, accessed, and updated on the internet.
Credit Card
  • A payment card issued by a bank or other financial institution (e.g., Discover Network, American Express (AMEX), Visa and MasterCard Credit Cards and Debit Cards) allowing the cardholder to pay for purchases by credit, charge, or debit.

Debit Card
  • A card or device used to buy goods and pay for services due to the merchant by electronic debit to the cardholder’s designated deposit account.
Digital Wallet
  • A device used to store personal secure data such as ID or banking details on a mobile device like a smartphone, tablet, or other electronic devices to facilitate commerce transactions.

Electronic Commerce (E-commerce) Transaction
  • A transaction where the cardholder uses the internet to purchase from a merchant or the merchant submits the transaction for processing through the internet. Often, this involves a shopping cart software that coordinates with a payment gateway to manage the credit card processing.
Encryption
  • Security or anti-fraud technique that scrambles data in the POS device before data transmission.
EuroPay, Mastercard, and Visa (EMV)
  • “Chip Card Technology.” The global technology standard for embedded chip cards by the business consortium EuroPay, Mastercard, and Visa for authenticating credit card and debit card transactions.

Interchange
  • The exchange of information, transaction data, and money among banks, and is managed by Visa and MasterCard associations in alignment with their requirements.
Interchange Fees
  • A fee paid by the acquiring bank/merchant bank to the issuing bank for each payment transaction made via a credit card network.
Issuer
  • The financial institution or other entity that issued the credit or debit card to a cardholder.

Magnetic Stripe
  • A stripe of magnetic material affixed at the back of a card containing the account information of the cardholder.
Mobile Payment
  • Also e-wallet transactions. Payment transaction processing on a mobile device, especially a smartphone or internet-connected tablet.

Payment Card Industry (PCI) Data Security Standard
  • The data security protocols to regulate cardholder account data maintenance, and other data security best practices endorsed by the major card associations including Visa and MasterCard.
Point of Sale
  • The location of a merchant at which the sale is conducted for the payment of goods or services received.
Point of Sale Terminal
  • An electronic device used by retail businesses in handling and processing credit card transactions.

Recurring Billing
  • A transaction where the cardholder grants permission to the merchant to periodically charge his/her account number for recurring goods or services.

Tokenization
  • The process of protecting the actual payment card numerical data by replacing the sensitive credit card information of the cardholder. The actual data is replaced by a unique identifier called token that cannot be mathematically reversed

Virtual Terminal
  • A platform that enables merchants to process transactions manually through a secure web browser from anywhere they can obtain an internet connection.

Commerce and payments can be a jargon-heavy industry, and we understand that you can get overwhelmed by all these acronyms and unfamiliar terms. So, we hope that this quick guide can be your companion in understanding the intricate world of payments.

For payment processing solution needs of your business, contact CloudBanking to learn how we can assist you.

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