The payments industry has its own language, and as a merchant, understanding the terminology is crucial for running your business effectively. Whether you're just starting out or expanding into new payment channels, knowing key payment terms can help streamline operations, improve payment acceptance, and minimize confusion. In this glossary, we'll define essential payment terms, including transaction processes, the key players in the payment ecosystem, payment security, billing, and more.
By the time you finish reading, you'll have a solid understanding of the terminology needed to navigate the world of payments like a pro.
3D Secure (3DS)
A security feature for online card payments. When a customer checks out, they may be prompted to enter a password or approve the payment via an app. It reduces fraud and shifts liability away from the merchant. Newer versions (3DS2) offer smoother verification with less friction.
ACH (Automated Clearing House)
A network that moves money directly between bank accounts in the U.S. Commonly used for direct debits and transfers, like paying suppliers or receiving recurring customer payments.
Acquirer
A financial institution or processor that enables your business to accept credit and debit card payments. The acquirer works behind the scenes to get your transaction approved and deposit the funds into your account.
Address Verification System (AVS)
A fraud prevention tool that checks if the billing address entered by the customer matches what the card issuer has on file. Helps reduce the risk of unauthorized use.
Attended vs. Unattended Payments
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Attended: A staff member is present to assist with the payment (e.g., a cashier).
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Unattended: The customer completes the transaction alone, such as at a self-service kiosk or vending machine.
Authorization (Auth)
When a transaction is initiated, the customer’s bank checks if they have funds and places a temporary hold. It doesn’t move money yet—just confirms availability for a future capture.
Average Ticket Size
The average value of each customer transaction. For example, if you process 10 sales totaling $500, your average ticket is $50. It’s a useful metric for analyzing sales trends and risk levels.
Bank Identification Number (BIN)
The first few digits of a credit card number. They identify the card’s issuing bank and help assess fraud risk, detect foreign cards, or route transactions correctly.
Biometric Payments
Payments that are confirmed using physical traits like a fingerprint, facial scan, or voice recognition. This adds convenience and an extra layer of security for your customers.
Buy Now, Pay Later (BNPL)
A financing option where customers can split their purchase into smaller payments over time. BNPL can improve sales conversion and increase average order value for merchants.
Capture
Once a transaction is authorized, the capture step moves the money from the customer’s account to yours. You must capture funds to complete a sale and receive payment.
Card Brand
The network that manages the payment process for a card. Common examples include Visa, Mastercard, American Express, and Discover. These brands define rules for fees, processing, and dispute handling.
Card Issuing Bank
The financial institution that issues a credit card. This institution is responsible for issuing the statement and collecting the payments on the card.
Card Not Present (CNP)
A type of transaction where the physical card isn’t used—like online, over the phone, or via an app. These transactions have higher fraud risk and may incur higher fees.
Card Present
A transaction where the customer uses a physical card in-person, typically by swiping, inserting, or tapping it. These transactions are more secure and usually have lower fees.
Card Scheme
Another term for a card brand. It refers to the rules and infrastructure behind a credit or debit card network.
Card Security Code (CSC / CVV)
A 3- or 4-digit number found on a credit or debit card (typically on the back). Used to confirm the customer has the physical card during a remote transaction.
Cardholder
The person who owns and uses a payment card to make purchases.
Chargeback
When a customer disputes a transaction and asks their bank to reverse it. If approved, the funds are withdrawn from your account. Too many chargebacks can lead to penalties or higher processing costs.
Commercial Card
A card issued to a business or its employees for business-related purchases. May have different processing rates than personal cards.
Contact Payments
Payments that require the card to physically connect with the reader by swiping or inserting it.
Contactless Payments
Payments made by tapping a card or device near the reader using NFC technology. Faster and more convenient than contact-based transactions.
Credit (Transaction Type)
Sending funds to a customer’s card without tying it to a prior purchase. Typically used for special payouts, and may not be available to all merchants.
Credit Cards
Cards that allow customers to borrow money up to a limit to make purchases, then repay it later with interest if not paid in full.
CSC / CVV / CVV2
See Card Security Code above. These terms are used interchangeably.
Customer Verification Methods (CVM)
The ways customers prove they are the cardholder—usually by entering a PIN or signing a receipt.
Debit Cards
Cards linked directly to a customer’s bank account. When used, funds are pulled immediately from their available balance.
Decline
When a card transaction is not approved by the customer’s bank. It could be due to insufficient funds, incorrect information, or suspected fraud.
Digital Wallets
Apps like Apple Pay, Google Pay, or Samsung Pay that store card information for fast and secure payments online or in-store.
Dispute
A broader term for any disagreement about a transaction, including chargebacks.
Doing Business As (DBA)
The name your customers see on their receipts or bank statements. It might differ from your legal business name.
eCommerce
Selling products or services through a website or online platform. eCommerce merchants often rely on secure payment gateways to handle card-not-present transactions.
EMV
A global standard for chip-enabled cards that adds encryption and authentication to reduce card-present fraud.
Expiration Date
The month and year after which a payment card is no longer valid. Shown as MM/YY.
Fraud
Any unauthorized or illegal use of payment information. Businesses use tools like AVS, CVV, and 3DS to help prevent it.
Full Commerce Enablement
A setup that supports both online and in-person sales using the same system for payments, reporting, and customer tracking.
Funding
The process of transferring payment amounts from completed sales into your business bank account. This typically happens within 1–3 business days.
Gift Cards
Prepaid cards that customers can buy and use only at your business. They’re a great tool for loyalty, promotions, and increased sales.
Interchange Fee
Fees paid by merchants for each card transaction. They help cover the cost of the card network and issuing bank. Your overall processing rate includes these.
Issuer
The bank or financial company that provides the payment card to the customer.
Merchant
You! A business that accepts payments for goods or services.
Merchant Category Code (MCC)
A four-digit code used to describe your business type. It can affect your fees, risk rating, and which rewards cards customers can use.
Merchant ID (MID)
A unique number assigned to your payment account. Used by systems to track your transactions and funding.
Mobile Payments
Payments made using a smartphone, typically via a digital wallet or QR code.
MOTO (Mail Order / Telephone Order)
Card-not-present transactions where customers give their card details by phone or mail. Common in catalog sales or call center environments.
Monthly Processing Volume
The total value of payments your business processes each month. This can affect your pricing tier and eligibility for certain services.
NFC (Near Field Communication)
Technology that enables contactless payments by allowing devices to communicate over very short distances (like a tap).
Payment Gateway
A secure service that connects your website or point-of-sale system to the payment networks. It collects and sends transaction data for approval.
Payment Processor
The company that manages the technical steps to move money from your customer’s card to your business account.
Payment Terminal
Also called a card reader, this is the device you use to accept payments in person via swipe, dip, or tap.
PCI DSS (Payment Card Industry Data Security Standard)
A set of rules merchants must follow to protect customer card data and reduce the risk of data breaches.
P2PE (Point-to-Point Encryption)
A security method that encrypts card data the moment it’s entered into your terminal, helping to keep sensitive data safe in transit.
Purchase Order (PO)
An official document used by a buyer to request products or services from a seller. More common in B2B sales.
Refund
Returning funds to the customer for a transaction they’ve already paid for. Can be full or partial.
Routing Number / ABA Number
A nine-digit code that identifies a bank in the U.S. Needed for ACH transfers and direct debits.
Sale
A completed transaction. It usually involves both the authorization and the capture of funds.
SEC Code
A code that explains how a customer authorized an ACH payment (e.g., online, phone, written). Helps ensure compliance with ACH rules.
Settlement
The process of finalizing a transaction and transferring funds to your bank account. Happens after the capture step.
Tap to Mobile
A way to accept contactless payments directly on a smartphone without needing a separate card reader.
Tokenization
A security process that replaces sensitive card data with a "token" that can be stored safely and reused without exposing the real card number.
Transaction ID
A unique reference number assigned to each payment. Useful for tracking and reporting. This ID can be found within the Transaction Reports section of your Merchant Portal.
Transaction Type
Transactions are categorized by type. These types include Sales, Voids, Refunds, Authorizations, and Captures.
Verify
A check to confirm that card details are valid, often done before processing a charge.
Void
Cancels a transaction before it settles. Useful if an error is caught right after the sale is initiated.
By familiarizing yourself with these key terms and concepts, you can navigate the payments ecosystem with greater confidence and ensure that your business remains compliant with industry standards. Understanding how payments work is crucial for optimizing your processes, reducing costs, and enhancing customer experiences.