Payment Glossary
Clear, jargon-free definitions for the most important terms in payment processing. Whether you are evaluating providers or integrating a payment system, this glossary has you covered.
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A
Acquiring Bank
An acquiring bank (acquirer) is a financial institution that processes credit and debit card transactions on behalf of merchants, receiving funds from card networks and depositing them into the merchant's account.
Authorization
Authorization is the process by which a card issuer approves or declines a transaction request, verifying that the cardholder has sufficient funds or credit and that the transaction is not fraudulent.
C
Capture
Capture is the process of finalizing an authorized card transaction, confirming the payment amount, and submitting it for settlement so that funds are actually transferred from the cardholder to the merchant.
Chargeback
A chargeback is a forced reversal of a credit or debit card transaction, initiated by the cardholder's bank, that returns funds to the customer and debits the merchant's account.
I
Interchange Fee
An interchange fee is the transaction fee paid by the merchant's bank (acquirer) to the customer's bank (issuer) each time a credit or debit card payment is processed, representing the largest component of card processing costs for merchants.
Issuing Bank
An issuing bank (issuer) is a financial institution that issues credit or debit cards to consumers on behalf of card networks like Visa and Mastercard, and is responsible for authorizing transactions and bearing the credit risk.
M
O
P
Payment Facilitator
A payment facilitator (PayFac) is a company that enables merchants to accept card payments by processing transactions under its own master merchant account, eliminating the need for each merchant to obtain their own acquiring relationship.
Payment Gateway
A payment gateway is a technology service that captures, encrypts, and transmits payment data from the customer to the payment processor, serving as the secure bridge between the merchant's checkout and the financial network that authorizes and settles the transaction.
Payment Orchestration
Payment orchestration is a technology layer that connects a merchant to multiple payment service providers, acquirers, and payment methods through a single integration, enabling intelligent transaction routing to optimize cost, conversion, and reliability.
Payment Processor
A payment processor is a company that handles the technical routing, authorization, and settlement of electronic payment transactions between merchants, card networks, and banks.
PCI Compliance
PCI compliance refers to adherence to the Payment Card Industry Data Security Standard (PCI DSS), a set of security requirements designed to protect cardholder data during and after payment transactions.
PSD2
PSD2 (Payment Services Directive 2) is a European Union regulation governing electronic payment services, mandating Strong Customer Authentication (SCA) for online payments and enabling open banking by requiring banks to provide API access to licensed third-party providers.
PSP (Payment Service Provider)
A PSP (Payment Service Provider) is a company that enables merchants to accept electronic payments — including credit cards, debit cards, bank transfers, and digital wallets — by providing the technology, infrastructure, and banking relationships needed to process transactions.
R
Recurring Billing
Recurring billing is the automatic, periodic charging of a customer's payment method at regular intervals (weekly, monthly, annually) for ongoing subscriptions, memberships, or services.
Refund
A refund is a merchant-initiated return of funds to a customer for a previously completed payment transaction, typically due to a product return, service cancellation, or billing error.