It's essential to get familiar with the glossary and key players in online payments before you understand how the payment gateway works? Here are the parties and terms that usually involve in online payment processing:
- Acquirer / Acquiring Bank
- Annual fee
- Application Programming Interface (API)
- Average Ticket Size
- Bank transfer
- Buy Now Pay Later(BNPL)
- Card Network
- Credit/debit cards
- Digital wallet
- Issuer / Issuing Bank
- Merchant Account
- Merchant Discount Rate
- Payment Gateway
- Payment method
- Payment Processor
- PCI Data Security Standards (PCI DSS)
- Setup fee
- Transaction fee
Acquirer / Acquiring Bank
Also known as a merchant acquirer, the financial institution establishes and maintains the merchant's account. It receives payment authorization, processes transactions on behalf of the merchant, and deposits the funds into the merchant's account. The acquirer is also responsible for assuming some level of risk in case of disputes or chargebacks.
It’s the yearly payment to keep the account active. This annual fee also will include the cost of maintaining the merchant account.
Application Programming Interface (API)
APIs are sets of rules and protocols that enable different software applications to communicate and interact. In the payments industry, APIs are used to integrate payment gateways into websites or applications and facilitate data transmission between two systems, Enables merchants to accept various payment methods such as credit cards, debit cards, digital wallets, etc.
Average Ticket Size
Average ticket size indicates the typical or average amount of customers spend per visit. It helps estimate a merchant's business volume and assess risk limits.
Refer direct transfer of funds from one bank account into another.
Buy Now Pay Later(BNPL)
Buy Now, Pay Later is a payment option that allows customers to purchase products or services immediately and pay for them in installments over time.
Also known as a card scheme, is a system that connects merchants with card issuers and facilitates transactions. The card network establishes a virtual payment infrastructure through which both issuing and acquiring banks can communicate. Some examples of card networks include MasterCard, Visa, American Express, and Discover Card.
A cardholder is a person who owns and uses a payment card, such as a credit card or debit card, to make purchases or transactions.
A chargeback is a credit card transaction reversal process initiated by a cardholder (usually a consumer) who contacts their bank or credit card issuer due to issues with the transaction, such as unauthorized purchases, fraud, non-delivery of goods or services, duplicate charges, or other problems.
A credit card allows the cardholder to borrow money from the card issuer up to a specified credit limit to make purchases, while a debit card is linked directly to the cardholder's bank account, and it allows them to spend money they already have in their account.
A customer is an individual or entity that initiates the payment process and provides payment information to pay for goods or services.
A digital wallet, also known as an e-wallet or virtual wallet, is an electronic device, application, or online service that allows individuals to securely store, manage, and conduct electronic transactions.
FPX, which stands for Financial Process Exchange, is a Malaysia internet-based payment method that enables real-time payments for online purchases or payments using customers' bank credentials.
It is a fraudulent, deceptive, or unauthorized payment transaction made by a criminal.
Issuer / Issuing Bank
Also known as the customer's bank, the financial institution or bank provides funds from a credit or debit card on behalf of the customer. The issuer verifies the customer's card details, approves or declines transactions based on available funds or credit limits, and offers card-related customer support.
A merchant is an individual, business, or entity involved in commercial activities that provide goods or services in exchange for payment.
A merchant account is a specialized bank or financial institution account designed for accepting customer payments. It is distinct from a standard business bank account and serves as an intermediary by temporarily holding funds before transferring them to the merchant's primary business bank account.
Merchant Discount Rate
Also known as MDR is a fee that a merchant pays to the payment processor or acquiring bank for the processing of credit card or debit card transactions. This fee is typically calculated as a percentage of the total transaction amount, sometimes including a fixed fee, and is deducted from the payment amount received by the merchant.
A software application that acts as an intermediary between the customer, merchant, and financial institutions. It securely transmits payment information and streamlines the processing of electronic payments for e-commerce or online businesses.
A payment method is a way to pay for goods or services, like credit cards, cash, or digital wallets.
A payment processor is a financial institution or technology company that serves as an intermediary responsible for processing electronic payment transactions. They play a crucial role between customers, merchants, and banks, ensuring the smooth flow of transactions. Payment processors handle transaction authorization and facilitate the transfer of funds. Stripe and PayPal are common payment processors.
PCI Data Security Standards (PCI DSS)
The Payment Card Industry Data Security Standard (PCI DSS) is a global set of security standards aimed at ensuring the security of handling payment card information. It is designed to ensure that companies that accept, process, store, or transmit sensitive card data maintain a highly secure environment. The primary purpose of PCI DSS is to protect cardholder data and prevent data breaches and fraud.
Settlement is the process in which the acquiring bank handles a batch of authorized transactions, deducts fees like transaction fees and the merchant discount rate (MDR) from them, and transfers the remaining funds to the merchant's bank account. The exact timeframe for settlement varies depending on the agreed-upon settlement schedule, typically within a few business days.
Also known as an activation fee, is a one-time fee charged by certain banks or financial institutions to merchants. This fee is typically charged when a merchant setup or activates a merchant account.
Tokenization is a data security measure used to protect sensitive information, particularly payment card data and personal identification information. In the process of tokenization, sensitive payment data, such as card numbers, is replaced with randomly generated secure substitutes called tokens.
A transaction fee is a cost incurred when performing a financial transaction. It typically charges either a fixed price or a percentage of the transaction amount for each successful transaction.
13 Sep 2023