Ever wondered what that payer lingo was all about? Well, whether you're a merchant or payer, it pays to know the A-Z of key payment terms -
Next time you look at an invoice or any other payment documentation, hopefully this payment glossary will help you to understand those key terms frequently used in the payment industry...
Accelerated Payment: A type of payment where the payee receives their funds earlier than the original agreed-upon date.
ACH (Automated Clearing House): This is an electronic network that processes financial transactions, typically direct deposit and direct debit payments.
Acknowledgment: A confirmation from the receiving bank that they have received a payment order.
Adjustment: A change made to an invoice after it has been paid, typically due to errors or discrepancies. Adjustments may result in a refund or additional payment being owed.
Authorization: A confirmation from the payer's bank that the funds are available for a transaction. An authorization may be obtained prior to or at the time of purchase.
Avatar Payment: A type of online payment where the payer uses an image or icon (their "avatar") to represent themselves during the transaction.
Balance Forward: A type of billing where the payee is charged for all unpaid invoices, plus any new charges incurred since the last statement was issued.
Bill Pay: A service offered by some banks and financial institutions that allows customers to pay their bills electronically. Customers typically need to provide their account information for each bill they wish to pay.
Chargeback: A type of transaction where the payer disputes a charge and requests a refund from the payee or their bank. Chargebacks can be initiated by the cardholder or the card issuer.
Clearing: The process of matching and settling transactions between two parties. This typically happens between banks and financial institutions.
COD: "Cash on Delivery." A type of payment where the payee does not receive their funds until the product or service has been delivered. COD payments may require an upfront deposit.
Commercial Payment: A type of payment made by businesses to other businesses, rather than to individuals. Commercial payments are often processed through different channels than consumer payments.
Credit Card Payment: A type of payment made using a credit card. Credit card payments are processed through the card network (e.g. Visa, Mastercard) and typically involve an interchange fee.
Cryptocurrency Payment: A type of payment made using a digital currency, such as Bitcoin. Cryptocurrency payments are typically made peer-to-peer and do not involve a third party processor.
Debit Card Payment: A type of payment made using a debit card. Debit card payments are processed through the card network (e.g. Visa, Mastercard) and typically involve an interchange fee.
ECheck/Electronic Check Payment: A type of payment where the payer's checking account is debited for the amount of the transaction. Echeck (also known as eCheck or E-Check) payments are processed through the ACH network.
Fraud: Any type of deception or illegal activity intended to perpetrate financial gain. In the context of payments, fraud can occur at any stage of the transaction, from authorization to settlement.
Interchange Fee: A fee charged by the card network (e.g. Visa, Mastercard) for processing a credit or debit card payment. Interchange fees are typically paid by the merchant or pass-through to the cardholder in the form of higher prices.
Invoice: A bill for goods or services rendered, typically issued by businesses to other businesses. An invoice may be due upon receipt or after a grace period.
Merchant Account: A type of bank account that allows businesses to accept credit and debit card payments. Merchant accounts are typically established with a merchant acquirer or payment processor.
Minimum Payment: The minimum amount that must be paid on a credit card bill each month. Failure to make the minimum payment may result in late fees and negative information being reported to the credit bureaus.
Online Banking Bill Payment: A type of electronic bill payment where the payer pays their bills through their online banking portal. Online banking bill payments are typically made using the ACH network.
Payee: The party who receives payment for goods or services rendered. The payee is typically the merchant or service provider.
Payer: The party who makes payment for goods or services rendered. The payer is typically the customer or client.
Payment: The act of transferring funds from one party to another in exchange for goods or services. Payment can be made in cash, by check, or electronically.
Payment Gateway: A technology platform that processes credit and debit card payments on behalf of businesses. Payment gateways typically provide fraud protection and other value-added services.
Payment Processor: A company that provides payment processing services to businesses. Payment processors typically work with merchant acquirers to offer merchant accounts and payment gateway access.
Recurring Payment: A type of payment that is automatically charged on a regular basis, such as weekly or monthly.
Settlement: The process of clearing and funding transactions that have been authorized by the cardholder's bank. Settlement typically occurs within two business days of the transaction date.
Third-Party Payment Processor: A type of payment processor that provides payment processing services to businesses through a third-party provider, such as PayPal or Square. Third-party payment processors typically offer lower rates than traditional merchant account providers.
Tokenization: A security measure that replaces sensitive data, such as a credit card number, with a unique identifier, or "token." Tokenization helps to protect against data breaches and fraud.
Transaction: An exchange of goods or services for money. A transaction can involve multiple parties, such as a customer, merchant, and bank.
Vault: A secure storage location for sensitive data, such as credit card numbers. Vaults are typically used by businesses to store customer payment information for future use.
Validation: The process of verifying that a payment card is valid and has the necessary funds available to cover a transaction.
Verification: The process of confirming that a payment card is valid and has the necessary funds available to cover a transaction.
Voice Authorization: A method of verifying that a payment card is valid and has the necessary funds available to cover a transaction by calling the card issuer and obtaining an authorization code.
Zero Surcharge: A policy adopted by some merchants.
We hope this guide helps! For more payment news including tips and tricks, glossaries and how-tos, subscribe to our weekly payments blog below and keep your business ahead of the curve -
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