Glossary
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- 3-D Secure (3DS)
the authentication step that sends the cardholder to their own bank to confirm identity. It shifts fraud liability towards the issuer.
A
- Account updater
a network service that gives a merchant's provider the replacement details for cards it holds on file, so renewals keep working after a card is reissued.
- Account-to-account (A2A, pay by bank)
a payment pushed straight from the customer's bank account to the merchant's, with no card in between. No chargeback, and final if the rail underneath is instant.
- Address verification service (AVS)
the issuer's comparison of the numeric parts of the billing address the customer typed against the one it holds, returned as a match code.
- Arbitration
the network deciding a dispute the issuer and acquirer could not settle, and charging a fee to whoever loses.
- Assessments
the network's own fees, charged on volume and transaction count. Separate from interchange, which goes to the issuer.
- Auth code
the issuer's reference for an approval. A later capture is linked back to it.
a reduction in the cardholder's available balance. It is not yet a charge, and no money has moved.
releasing an unused hold. It is the cheapest way to undo a payment, and the only one available before capture.
Visa's single deadline covering approval through clearing, counted in calendar days from approval.
fraud where the payer is deceived into sending their own money to a criminal's account. The dominant fraud type on instant rails, and the rail cannot reverse it.
B
- Banking day
a day the settlement system runs, so not a weekend or a bank holiday. Funding schedules count in banking days rather than calendar days.
- Batch
the day's captured transactions, submitted for clearing together.
- Batch close
the daily cut-off at which captured transactions go for clearing. The funding clock starts here rather than at the purchase.
- Beneficial owner
an individual who ultimately owns or controls a business, above a threshold set in law that differs by country.
- Billing descriptor
the text that appears on the cardholder's statement for a transaction. One the customer does not recognise is a common cause of fraud disputes.
- BIN (bank identification number)
bank identification number. The leading digits of a card number identifying the issuing institution, and on the acquiring side the membership a transaction is submitted under.
- BIN sponsorship
the arrangement letting a non-bank operate under a licensed bank's network membership.
- Blind refund
a credit with no matching original sale. Restricted and monitored, because it is a money-laundering route.
- Buy now, pay later (BNPL)
a provider that pays the merchant up front, less a fee, and collects from the customer in instalments, taking the credit risk.
C
- Card testing
attackers checking which stolen card numbers still work by running small transactions through a merchant's checkout, at the merchant's expense.
- Card verification value (CVV)
the three-digit code on the back of a card, four on American Express, sent at authorization and never stored afterwards.
- Card-not-present (CNP)
a transaction made online, by phone, or from stored details, where nobody can prove the card existed. The merchant generally carries the fraud loss.
- Card-present
a transaction made with the physical card at a terminal, dipped, tapped or swiped. The issuer generally carries the fraud loss.
- Cardholder-initiated transaction (CIT)
a transaction where the customer is present and chooses to pay now, including with a stored card. The counterpart of a merchant-initiated transaction.
- Chargeback
the issuer reversing a settled transaction on the cardholder's behalf. The money is debited from you before you are asked for your side.
- Chargeback ratio
disputed transactions as a share of volume. Both networks run monitoring programmes against it, and your acquirer sets your reserve by it. Refunds do not count towards it.
- Clearing
the exchange of records that decides who owes whom, assigns each transaction its interchange category and calculates the fees. This is where a transaction's price is finally set.
- Creditor identifier
the identifier issued to a merchant in its home country for collecting SEPA Direct Debits.
- Cross-border fee
the network's extra charge when the card's issuer and the merchant are in different countries. It applies even when the currencies match.
- Cut-off time
the daily deadline for joining the current batch, set by your processor and usually in its timezone rather than yours.
D
- Disbursement
paying third parties out of funds you collected, such as sellers on a marketplace. A separate flow with its own regulatory position.
- Dispute fee
your provider's per-dispute charge. You pay it whether you win or lose, so winning a small case can still cost money.
- Downgrade
a transaction landing in a worse interchange category than it qualified for, usually through late capture or missing data, and nobody tells you at the time.
- Dual-message
authorization and clearing sent as separate messages. Because they are separate, you can capture later, capture a different amount, or void.
- Dynamic currency conversion (DCC)
the merchant or acquirer offering to charge a foreign card in its own currency at the point of sale, at a rate they set. The cardholder must be given a real choice.
E
- Effective date
the date ACH funds are meant to post, rather than the date the file was sent.
a hold for an amount that is not yet final, as at a fuel pump or on a bar tab.
F
a request flagged as settled, whose amount will not change. It carries a shorter clearing deadline than a preauthorization.
- Final payment
a payment that has no return or dispute process on its rail once it has settled. Wires and instant payments are final.
- First-party misuse (friendly fraud)
a cardholder disputing a purchase they made themselves. Also called friendly fraud, and a large share of all fraud disputes.
- Force capture
a capture with no matching authorization. It works, but you pay a per-item fee, get no confirmation the funds existed, and stand weaker in a dispute.
- Four-party model
issuer, acquirer, network and merchant, with the two banks connected only through the network. Because of this, a card works in a country neither bank operates in.
- Fraud screening
the merchant's own assessment of whether a transaction is genuine, using the order, device, and history. It involves no bank and shifts no liability.
- Funding
your provider paying you. It is a separate event from settlement, governed by your contract rather than by network rules.
- Funding hold
a temporary stop on one specific payout, usually following a risk review or a volume spike.
G
- Gateway
a message router between the merchant and the processor. It never holds funds, and that is the quickest way to tell it apart from the rest of the stack.
I
- Idempotency key
a value attached to a payment request so that sending the same request twice returns the first result instead of charging again.
an addition to an existing hold as a bill grows. It does not extend the original clock.
- Instant payment
a push payment that settles in seconds at any hour with immediate confirmation, over a rail such as RTP or FedNow.
- Interchange
the fee the acquiring side pays the issuer on each transaction. It is the main reason issuing cards is profitable.
- Interchange schedule
the network's published table assigning each transaction category its interchange rate. The network sets it but is not paid from it.
- Interchange-plus
pricing that itemises interchange, assessments and the provider's markup separately.
K
- Know your business (KYB)
the checks that establish what a company is, what it sells, and who directs it, run before it is allowed to take payments.
- Know your customer (KYC)
the checks that establish who the people behind a business are, covering its directors and its beneficial owners.
L
- Liability shift
the transfer of a fraud loss from the merchant to the issuer because the transaction was authenticated. It covers fraud disputes only.
M
- Mandate
the customer's instruction authorising a merchant to collect SEPA Direct Debits from their account. Every debit references it.
- Master merchant account
a facilitator's own merchant account, through which its sub-merchants transact.
- Merchant account
the account an acquirer holds for a merchant, distinct from a normal business bank account. Settlement funds land here before they reach you.
- Merchant agreement
the contract between a merchant and its acquirer or provider. It sets the fees, the funding schedule, the reserve terms, and the dispute fee.
- Merchant category code (MCC)
the four-digit code an acquirer assigns to describe what a merchant sells. It drives interchange, authorization rules, and risk treatment.
- Merchant ID (MID)
the identifier a provider assigns to one merchant contract, carried on every transaction. A business with several channels often has several.
- Merchant of record
the party responsible for the sale and its disputes. On a platform this is frequently not the seller who shipped the goods.
- Merchant-initiated transaction (MIT)
a charge raised against a stored card without the customer present, on consent given earlier. Subscriptions and installments are the common cases.
Visa's charge for an approved authorization that is neither settled nor reversed. It is small per item and adds up at volume.
- Multi-currency settlement
a provider arrangement that pays the merchant in each currency it takes, so no conversion happens on the payments side.
N
- Negative net position
a period where refunds and chargebacks exceed sales, so there is nothing to fund and the provider recovers the difference.
- Net funding
fees deducted before the deposit arrives, so the deposit does not match any figure the rest of the business recognises.
- Net settlement
sales, refunds and chargebacks offset into a single figure. So no settlement amount will match a single order.
- Network token
a token issued by the card network for one merchant, restricted to that use, with a fresh cryptogram each time. The network updates it when the card is replaced.
- NOC (notification of change)
notification of change. An ACH message telling you to correct the account details you are debiting.
O
- ODFI / RDFI (ODFI, RDFI)
the originating and receiving banks in an ACH transaction.
- Over-capture tolerance
the allowance to claim slightly more than was held. Tips and fuel purchases depend on it.
P
- Partial capture
claiming less than the authorized amount, typically because you shipped less than was ordered.
- Pass-through wallet
a wallet such as Apple Pay or Google Pay that presents a tokenized card to the ordinary card rail. Underneath, it is a card transaction.
- Payment facilitator (PayFac)
a PSP that onboards sub-merchants under its own master merchant account, doing the underwriting and carrying the losses itself.
- Payment service provider (PSP)
an aggregator placing many merchants under one acquiring relationship.
- PCI DSS
the Payment Card Industry Data Security Standard, the rules every system that handles card data must follow. Enforced by the acquirer.
- Pending and posted
the two states of a charge on a cardholder's statement. Pending is an authorization hold; posted means the transaction cleared and the money moved.
- Pre-arbitration
a second exchange after a representment is rejected, before the case goes to arbitration.
- Pre-notification
the notice of amount and date a customer must receive before a SEPA Direct Debit is collected, by default at least 14 calendar days ahead.
a request flagged as an estimate, with the real amount to follow. Given longer to clear than a final authorization.
- Presentment currency
the currency the cardholder is charged in.
- Primary account number (PAN)
the card number itself. PCI DSS restricts who may store it, so most merchants store a token instead.
- Processor
the party running authorization and clearing messages on an acquirer's behalf. Batches are a processor construct.
- Pull payment
the payee instructing the payer's bank to take money in. Cards and ACH debits are both pulls.
- Push payment
the payer instructing their own bank to send money out.
R
- R-transaction
a SEPA Direct Debit that was rejected, returned, or refunded, reported with a reason code. Providers track a rate of them.
- Reason code
the network's identifier for what a cardholder is claiming in a dispute. It determines which evidence counts, so it is the first thing to read on a dispute notice.
- Refund
a new transaction going the other way, referencing the original, after settlement. It carries its own fees and its own settlement delay.
- Representment
re-presenting a disputed transaction to the issuer with evidence. It is the merchant's one substantive move in a dispute.
- Request for payment
a message over an instant rail asking the payer to send a stated amount, which they approve in their own banking app. The nearest thing to a debit on a push-only rail.
- Reserve
funds an acquirer withholds against future chargeback risk. A **rolling reserve** holds a percentage of each day's volume for a fixed window then releases it; a **fixed reserve** accumulates a set amount once.
- Return
the receiving bank sending an ACH transaction back, with a reason code. Unlike a chargeback, it cannot be contested.
S
- Safeguarding
holding client funds separately from your own so they survive your insolvency. It comes attached to the licences that let you hold other people's money.
- Sale
a single message that authorizes and captures at once. It suits instant delivery and is the wrong choice for anything you ship later.
- Sanctions screening
checking the parties to a payment against government lists. It runs at onboarding and again on every transaction, and a possible match stops the payment before anyone judges whether it is genuine.
- Scheme rules
the network's published rulebook, setting deadlines, dispute rights and evidence standards.
- SDD B2B
the SEPA Direct Debit scheme for business payers. The payer's bank checks each debit against the mandate, and there is no refund right for an authorized debit.
- SDD Core
the SEPA Direct Debit scheme open to all payers. The payer can have any debit refunded within eight weeks, no reason needed.
- SEC code
the ACH entry class identifying how a debit was authorized.
- Settlement
the movement of funds between issuer and acquirer, normally the next banking day after clearing. It does not put money in your bank account; funding does.
- Settlement currency
the currency the merchant is paid in. When it differs from the presentment currency, somebody converted the money and charged for it.
- Single-message
authorization and clearing combined into one message, fixing the amount at approval. Capture later, partial capture and void do not exist on it.
- Soft decline
a decline inviting a retry with stronger authentication rather than a refusal.
- Soft descriptor
a billing descriptor set per transaction, used to put a seller's name on the statement rather than the platform's.
- Staged wallet
a wallet such as PayPal that the customer pays first, and which then pays the merchant from its own account. The wallet is the merchant of record on the card networks.
- Stand-in processing
the network approving on the issuer's behalf when the issuer is unreachable, within limits the issuer set in advance.
- Strong customer authentication (SCA)
the PSD2 requirement in the EEA and UK for two-factor authentication on most electronic payments the customer initiates. For cards, 3-D Secure 2 meets it.
- Sub-merchant
a merchant operating under a facilitator's master account rather than holding its own.
- Suspicious activity report
the filing a regulated entity makes when a pattern looks like financial crime. It is usually forbidden from telling you it filed one.
T
- T+n
funding counted in banking days from batch close. T is the day the batch closed, not the day of the purchase.
- Three-party model
a closed loop where one company both issues the card and acquires the merchant, so there is no interchange to pay.
- Token
a stand-in for a card number that is useless outside the system that issued it. A provider token works only at that provider.
- Transaction monitoring
watching payments for the patterns that indicate laundering, such as structured amounts or refunds to cards that never bought anything.
U
- Underwriting
deciding whether a merchant may trade and pricing the risk of it. Done by whoever will carry the loss, which is the acquirer or the facilitator rather than the network.
V
- Velocity limit
the issuer's cap on how often a card may be used in a period. It is a rate limit rather than a judgement, so the transaction will usually succeed later.
- Void
cancelling a captured transaction before the batch closes, so it never reaches the network. Usually avoids interchange, and the customer's pending charge disappears.
W
- Wire
a same-day, final bank-to-bank push of a specific amount, settled through a central bank or clearing house. Expensive per item and used for high-value payments.
Z
- Zero floor limit fee
Visa's per-item charge for a settled transaction that cannot be matched back to an authorization.