Dictionary of Payment Processing

POSTED ON: February 17 2021

Payment Processing - The Terminology Dictionary

Merchants around the world are going online to sell their goods. After setting up the online store, then comes the part about accepting payments. It can make one slightly dizzy when coming in contact with the whole payment process for the first time. With a variety of payment service providers, acquirers, gateways and banks, it can all get a bit overwhelming if it is not all clear.

Your online store is ready, stock is up to date, and you’re ready to start selling. The only thing that’s missing is accepting payments in your shop. Here is a list of payment terms which will come in handy when tackling the payment terminology jungle.

Acquirer (Acquiring Bank)

This is a financial institution or bank that allows a company to accept payments. Simply put, this is the company’s bank. We work with a number of acquirers which you can directly integrate into your Wallee account. In case you do not have any acquiring contract yet you can simply request and signup directly. In order to accept you have to undergo a KYC process in order to be compliant with the current anti money laundering rules. After that we will provide you with an acceptance contract. During COVID the workload on the acquiring team is quite high therefore, please allow us about 3-5 business days to activate your contract. Depending on the acquirer you selected this can even take longer. More information about the steps to set up your account can be found in our getting started section.

Authorization

When a card issuer, like a bank or credit card company, verifies a shopper’s request to purchase something, is called an authorization. When the amount of the purchase is approved, the issuer reserves the authorized amount on the cardholder’s account for the next step - the capture. A capture is when actual funds are being transferred. Authorization can be kept open for about 5 days without additional charges. After that the schemes start to charge additional fees. Please also note that the AUTH-Capture process is not available for every payment method.

Card networks (or card schemes)

The largest card networks are Visa, Mastercard, American Express, Discover, and UnionPay. A card network, however, is not the same as a credit card company. The card networks set the technical infrastructure and rules for payment processing, and charge a fee for the service.

Chargeback

When a shopper does not agree with a charge on a card, they can first ask for a refund. However, if the merchant refuses to refund the customer, the customer can ask their bank to raise a chargeback. This is usually the beginning of a dispute process; who will be liable for the transaction depending on the evidence both parties present. Some reasons for chargebacks can include fraud, defective goods, or goods not delivered.

Fraud (fraudulent payment)

A transaction that was either attempted or completed by a malicious agent. Internet fraud is a big topic currently and there are various initiatives like 3D Secure that make sure that beside the credit card additional factors have to be present for an authorization. Furthermore, most payment providers have additional fraud tools running in the background that analyze your transactions. It's also possible in wallee to set up specific fraud rules for the transaction acceptance.

Interchange fee

This is a fee paid by the acquirer bank to the issuers bank. The fee comes through the acquiring bank and the shopper’s bank, for every card-based transaction. The amount of the fee can depend on the card type, transaction value, and merchant category. Interchange fees differ between the different card products and are often subject to regulations.

Issuer (or Issuing bank)

The issuing bank is the shopper’s bank. It equips the shopper with card types such as debit and credit card.

Local payment methods (or alternative payment methods)

Card payments are not a dominant method of payment in all markets. Any payment method which is not a major card network is a local payment method. In some countries, payments are made through bank transfers, direct debit, digital wallets like Apple Pay or Samsung Pay, or cash-based services, like TWINT in Switzerland.

Point of sale (POS)

In a brick and mortar store, a point of sale solution is the combination of hardware and software. This allows the customer to pay for their purchases in store. POS is an important component of the payment ecosystem, if you would like to offer convenient contactless payment. See our devices here and get in touch with our support for further details.

Payment gateway

A payment gateway is a service that helps merchants to begin ecommerce transactions, in-app purchases, and point of sale payments for a variety of payment methods. The gateway is not directly involved in the flow of money. A payment gateway often connects several acquiring banks and the respective payment methods under one system

Payment Service Provider (PSP)

A PSP combines the functions of both a payment gateway and a payment processor, and can connect to multiple acquiring and payment networks. Read about how you as a merchant, can choose the right payment service provider in the payment landscape in Switzerland in our blog post here.

PCI compliance

PCI DSS (Payment Card Industry Data Security Standard) was created by the major card networks to increase the safety of cardholder data and reduce risk of fraud. All organizations involved with payment card processing must be PCI-compliant. Wallee is PCI compliant, and you can read more about it here.

Support/Help

All questions answered and ready to start selling online? Register an account here. Our support team will be happy to help you with further questions.

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#acquirer

#payment processing

#card schemes

#POS

#secure

#pci compliant

#wallee

#terminology

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