Talking about payments gets technical really fast. From the outside, it seems like such a simple process; you tap your card and seconds later you’re walking out the door with a new outfit you didn’t need to buy. Unbeknownst to you are the number of parties involved in those few seconds that make sure money is transferred securely from one bank account to another.
Before you dig into how secure, compliant payments are completed, I thought I would start by explaining the many terms associated with payments and how they apply to your business. I want this list to be a living document you can refer to whenever you need it, so bookmark this page for future use. See a term missing from this list? Let us know! You’ll help to build the best payment reference in telecom.
A bank or financial institution that processes credit or debit card payments on behalf of the merchant.
Once they accept payment, the funds are deposited into the merchant account. The acquiring bank might be the same as the merchant account, but this isn’t always the case.
This is a new term given to a new generation of payments so seamless, they seem invisible. You will no longer need cards or wearables to physically pay for goods or services, it will just happen automatically.
Uber is a great example of this, as you are charged automatically once you exit your ride.
A Basis Point refers to 1/100th of a percent. So, 0.01% would equal 1 point, 0.25% would equal 25 points, and so on.
Like a PIN or signature would confirm your identity and authorize payment on your credit card, biometrics use a physical component on your body to validate your identity.
Current trends for biometric authentication include fingerprint scans and facial recognition technology.
Also known as e-commerce fraud, card-not-present refers to online payments as opposed to presenting your card in store, so card-not-present fraud is fraud that occurs online.
These are not to be confused with refunds for returned goods. Chargebacks are ‘refunds’ made to the customer as a result of a dispute on their credit card for a fraudulent transaction.
Certain POS systems, like RQ, make it easier to deal with chargebacks and prove whether or not the transaction actually took place.
|COF (Card on File)||
When a customer authorizes a merchant to store their credit card information for future use.
|Connected Payments||See Integrated Payments.|
Payments made when a card (or digital wallet) doesn’t touch a machine, instead just by being in close proximity, usually a few centimetres.
Tap and Wave are examples of this. Transactions are securely processed using NFC (Near-Field Communication).
Pay Anywhere is also a method of contactless payment where a customer can complete a transaction away from a physical terminal.
|CVM (Cardholder Verification Method)||
Used to validate that the person presenting a card is the owner of the card. PIN and signature are examples of CVM.
|DCC (Dynamic Currency Conversion)||
Also known as cardholder preferred currency (CPC), DCC is when an international transaction made on your card is converted to the currency of your credit card.
For example, if you live in Canada and buy an item online from a European store, you will be charged in Euro, but the total amount is converted to CAD when you see it on your statement.
Also known as e-wallet, digital wallets refer to an electronic service that allows an individual to pay for a transactions.
An example of this is Apple Pay where you can use to make a payment online or via your smartphone in-store.
|DUKPT (Derived Unique Key Per Transaction)||
A type of end-to-end encryption that uses a key (code) management scheme. When processing a payment, a new, non-reusable key is generated for every transaction.
DUKPT can be used by both P2PE and E2EE solutions. However, under P2PE, the key management must be done by a third party, not the merchant.
See Digital Wallet.
|E2EE (End-to-End Encryption)||
Describes any solution that encrypts communication from one system or device to another.
The data is encrypted on the sender’s side and prevents third parties from accessing it while it’s transferred, so only the recipient is able to decrypt it. Nobody in between (Internet provider, application service provider or hacker) can access it. Also see P2PE.
|Effective Rate||This describes the rate a merchant pays per payment made. To find what your Effective Rate would be, you simply divide total fees by total sales volume. The formula would look like this:
Total Fees/Total Sales Volume = Effective Rate
|EIRF (Electronic Interchange Reimbursement Fee)||
A Visa-only interchange rate (see interchange fees in glossary below).
An EIRF is applied when the merchant does not meet all the requirements when processing a transaction, and thus must pay a higher EIRF rate. Both Visa debit cards and credit cards can be charged an EIRF interchange fee.
Smart payment cards (also called chip card, microchips, or IC cards) which store their data on chips as well as magnetic stripe.
EMV originally stood for ‘Europay, Mastercard, and Visa’, as they created the original credit card standard for smart cards. EMV is now managed by an organisation called EMVCo, which is made up of a combination of financial institutions.
|Gateway (Payment Gateway)||
The middleman between your store and the payment processor that receives the payment from your customer.
Once a customer uses their credit or debit card, the payment gateway sends the data securely to the payment processor to authorize the transaction and ensure the data entered is enough to finalize payment.
|IC Card (Integrated Circuit Card)||
Also referred to as unified payments and connected payments, integrated payments refers to payment terminals being connected to the POS software.
When your payments are connected or integrated, the amount due automatically shows up on the payment device, avoiding human error and extra reconciliation time with manual entry.
Interchange fees that the merchant’s bank pays whenever a customer uses a credit or debit card to make a purchase online or in-store.
The fee is paid by the merchant bank to the card-issuing bank to cover handling costs, fraud, bad debt, and the risk involved in approving a payment.
This describes the interchange set by the card bank plus the fee added by the acquiring bank.
Processing fees for an Interchange Plus model could look like this: 1.6% interchange from the card brand, plus 0.20% from the acquiring bank for a total of 1.8% in fees.
See Autonomous Payments.
The financial institution that issues credit or debit cards to consumers: the customer’s bank.
|MCC (Multi-Currency Conversion)||
MCC gives merchants the ability to show international customers what their purchase totals in their own currency.
A Canadian consumer shopping on a US store’s website will have their order amount converted from USD to CAD before they confirm the order.
The ability to provide MCC creates transparency for the customer and also reduces abandoned carts and chargebacks.
Refers to the retailer.
The retailer’s bank account where funds are deposited.
|MID (Merchant Identification Numbers)||
A unique code provided to merchants by their payment processor. It’s like your store name, but in numerical format to identify you in the banking world.
|MSP (Merchant Service Provider)||
The company that provides merchants with the tools and services they need to process credit and debit cards.
iQmetrix for example offers an MSP program in addition to our POS software.
Where a merchant will receive funds from credit and debit transactions the next business day.
|NFC (Near Field Communication)||
A wireless technology that allows users to make payments by placing an NFC device like a smartphone or credit card within a few centimeters of another NFC device such as a payment terminal.
Near-field communication sends data through electromagnetic radio fields and is the technology behind e-wallets like Apple Pay. See contactless payments for more info.
|NSF (Non-Sufficient Funds)||
More commonly known as insufficient funds, NSF refers to a checking account that does not have enough funds to successfully process a payment.
Online retrieval and chargebacks go hand in hand. Online retrieval is a request for information on a transaction.
If a transaction does turn out to be fraudulent it then becomes a chargeback. See chargeback for more information.
|P2PE (Point-to-Point Encryption)||
A type of E2EE and was established years after E2EE by the PCI Security Standards Council.
Payment solutions that offer similar encryption but do not meet the P2PE standard are referred to as E2EE solutions. See E2EE for more info.
See PCI DSS.
|PCI DSS (Payment Card Industry Data Security Standard)||
Also referred to as DSS or more commonly just PCI, PCI DSS refers to the security standards around credit card acceptance.
There are measures in place that ensure merchants are meeting these requirements when storing and processing payments, so that customer data is kept safe.
|PED (Pin Entry Devices)||
As the name suggests, PEDs or Pin Pads, are devices used to accept and encrypt a cardholder’s personal identification number (PIN), when paying with debit or credit.
|Processor (Payment Processor)||
Facilitates the disbursement of funds between the card networks, issuing and acquiring banks, and the merchant’s account.
An upgraded chip technology by Visa that speeds up payment processing and approval when using chip credit or debit cards.
Refers to hardware payment devices that are able to process payments from more than one workstation or POS.
Keeps a customer’s card data safe when processing a payment. It does this by swapping out sensitive card data with a completely random set of data that has no meaning or value. Tokenization makes the data completely useless if it was to fall into the wrong hands.
Refer to Connected Payments.
As you can see, there’s a lot going on in the world of payments and the right retail software can help you simplify the payments process. If you’re interested in learning about how iQmetrix can take care of your retail payments, head here.