Glossary of Terms

A simple tap of a card to make a payment may appear straightforward to some; nevertheless, there are a number of parties, technology, and regulations involved in ensuring that everyday payments are rapid and secure. Because the world of fintech and payments is ever-changing, we’ve compiled a handy dictionary of key phrases, concepts, and acronyms to help clarify commonly used language.

A

Account Number (UK)
Every bank account in the United Kingdom has an 8-digit account number. An account number, together with the six-digit sort code of a bank account, can be used to set up direct debits payable from the account. A third party will never be able to extract a payment based just on these two factors.

Acquiring
A company that provides acquiring services is a member of Mastercard, Union Pay, and other payment networks, and accepts payments in-store and online. When a credit, debit, or prepaid card is used to make a purchase, the acquirer authorizes or refuses the transaction depending on information provided by the issuing bank (or issuing processor).

Anti-Money Laundering (AML)
Refers to the rules, regulations, and processes designed to prevent criminals from passing off unlawfully obtained funds as legitimate income. AML is a global word that refers to the rules put in place by regulatory authorities around the world to combat money laundering and terrorism funding. This entails banks monitoring transactions and reporting any suspicious behaviour to the appropriate regulators.

API (Application Programming Interface)
An API is a piece of software that allows entities to communicate with one another. Its two main applications nowadays are to ease data sharing and payment initiation. APIs have enabled fintechs to obtain access to banks’ customer data in order to provide third-party services under PSD2 law.

B

BACS – Bankers’ Automated Clearing System
BACS supports two types of bank-to-bank payments: direct debit and direct credit. Bacs Payment Schemes Limited, a subsidiary of the UK retail payments regulator Pay.UK, is in charge of the schemes that clear and settle these two payment methods. A Direct Debit withdraws money from a consumer’s bank account, such as a bill, whereas a Direct Credit deposits money in, such as a salary. Payments take three working days to clear.

Balance Transfer
A balance transfer is the procedure through which a consumer transfers monies from one facility to another. It can also refer to transferring a credit card debt to another card. They’re frequently used to lower interest payments or to consolidate many obligations into one.

BIC (Bank Identifier Code)
A BIC code is the same as a SWIFT code. When a consumer makes an international transaction, the 8-11-digit number is used to identify their bank.

BIN (Bank Identification Number)
Every credit or debit card has a BIN, which is the first 4-6 digits of a lengthy card number. It is also known as an Issuer Identification Number (IIN).

BIN Range
The digits or “range” of a BIN enable issuers to segregate a BIN for country and currency allocation and can identify a corporation producing a card or a specific product.

BIN Sponsorship
Firms can issue payment products without spending time or money on direct scheme membership by partnering with a direct scheme member – or “sponsor.” Companies can enter the market faster since they don’t have to raise the collateral required to maintain direct scheme membership, perform settlement and reconciliation, and keep client assets in segregated accounts.

BNPL – Buy Now, Pay Later
BNPL is a payment method that allows customers and businesses to pay for products or supplies in instalments. The amount of instalments, the time it takes to pay them, and the interest rates charged differ amongst BNPL suppliers.

C

Cardholder
The owner of a payment card. The front of the card bears their name.

CHAPS – Clearing House Automated Payment Systems
This bank-enabled payment option is guaranteed to be processed the same day if a consumer or business customer sets up the payment before 3.30 p.m. or online before 5 p.m. on a weekday (excluding bank holidays). CHAPS is defined by the Bank of England as “a sterling same-day system used to settle high-value wholesale payments as well as time-critical, lower-value payments such as buying or paying a deposit on a property.”

Challenger Bank
Unlike traditional banks, challenger banks were founded during the 2000s and have taken use of technological improvements to offer an alternative, digital-first strategy.

Chargeback
A chargeback, also known as a payments dispute, occurs when a cardholder requests that their card-issuing bank reverse a transaction if a dispute with the merchant cannot be addressed.

Clearing Data
A clearing house or firm is in charge of clearing. It ensures that the correct fund amount is sent to the seller and securities are delivered to the buyer within a specified time range.

Closed-Loop Payment
Funds in a closed-loop payment system can only be used at a limited number of locations or merchants. Single-purpose payment cards, such as a store credit card, gift card, or even a wristband, are only valid in a single store or set of stores operated by a single corporation.

Commercial Card or Corporate Card
Commercial cards, which are usually credit cards, are issued by businesses to their employees through a third party and allow workers to make payments on behalf of their employer as well as cover work-related costs.

Contactless Payment
To register a payment via a point of sale (PoS) terminal, contactless technology employs radio-frequency identification (RFID) or Near Field Communication (NFC). Cards, key fobs, mobile wallets, and wearables are all compatible with the technology.

Country of Issuance
This is the country in which the customer’s card was issued. For example, if your address is in the United Kingdom, the country of issuance will be the United Kingdom.

Credit Card
Credit cards, which are issued by banks and other financial institutions, allow cardholders to borrow funds up to a limit determined by the card issuer and repay the borrowed amounts at a later period with an agreed-upon interest rate.

Customer Due Diligence (CDD)
Customer Due Diligence (CDD) is the process of evaluating your customers’ history in order to identify their identification and amount of risk. Financial institutions must conduct Know Your Customer (KYC) and Customer Due Diligence (CDD) checks.

CVV (Card Verification Value)
The three-digit number located to the right of the signature area on the back of a credit or debit card. The CVV is displayed on the front of some debit cards and can be four digits rather than three.

D

Debit Card
Unlike a credit card, a debit card deducts money directly from a customer’s checking account. A prepaid debit card does not require a current account and can only spend the amount on the card.

Digital Banking
Online banking services, such as a mobile banking app, or the introduction of messaging apps and keyboard-based banking, are examples of digital banking.

E

E-Account / E-Wallet Account
Ecommerce Corporate Account or E-Wallet Linked to a CAD/GBP/EURO Account Number and Sort Code or Euro linked to an IBAN Number which are issued to approved Direct Corporate Customers, or Merchant’s, or under Wholesale Agency E-Account or E-Wallet Sponsor Clients which have been issued via white-label E-Account or E-Wallet Sponsorship Products and Services.

European Economic Area (EEA)
The European Economic Area (EEA) brings together EU member states and members of the European Free Trade Association (EFTA—Iceland, Liechtenstein, and Norway) in the same single market.

Embedded Payment
Embedded Payments are payment methods that are embedded into a product rather than added on top of it, allowing a buyer to complete a checkout procedure with a few clicks.

EMI – Electronic Money Institution
Electronic Money Institutions are financial institutions that have been authorized to develop electronic money services.

E-Money License
EMIs operate under an e-money license, which enables them to issue and redeem electronic money, a digital equivalent of cash that can be kept electronically.

F

Faster Payments
“Faster Payments,” introduced in 2008, is a program aiming to make payments between bank clients’ accounts virtually instantly, though it can sometimes take up to 2 hours.

Fintech
The term “Fintech,” which stands for financial technology, refers to any technology-based solution that solves or disrupts a traditional financial function.

Funding
“Funding” refers to money raised by a corporation or organization, either through a third-party institution or through a crowdfunding effort.

Fund Flow
The “funds flow” of a corporation is the net sum of all cash flows in and out of it.

Foreign Exchange (Forex or FX)
“Forex” or “FX” refers to the conversion of one currency into another at the shifting foreign exchange rate. The foreign exchange market is the world’s largest financial market.

G

Gift Cards
Gift cards are prepaid stored-value cards that are typically issued by retailers and are frequently purchased as gifts.

H

Host Card Emulation (HCE)
HCE is the technology that allows credit or debit cards to use their mobile phone to make a payment at a PoS terminal. Card credentials can be kept in a shared repository rather than on the mobile phone itself.

I

IBANs (International Bank Account Numbers)
IBANs are used to make or receive international payments, working alongside a sort code and account number to provide additional information for overseas banks.

In-App Payments
An in-app purchase is any price that an app may ask for in addition to the initial cost of downloading the app.

Interchange
Interchange refers to the domestic and international systems operated by Mastercard® and Visa® that authorize, settle, and pass-through payments and other information linked to bank card activity.

Interchange Fee
The fee that Bank/Card network providers like Mastercard® and Visa® charge for using their interchange system. The fee is a percentage of each transaction.

Issuer
A financial institution that issues cards directly to consumers on behalf of credit and debit card networks.

Issuer Processor
An issuer processor links card networks and card-issuing banks, supplying the record system, handling card issuance, and authorising transactions.

Issuing
When a company issues a card directly to a consumer, it enters into an “issuing” contract with the payment service provider. Issuing refers to the transfer of a card from one entity to another.

Issuing Bank
The financial institution that offers credit and debit cards to consumers on behalf of card networks such as Mastercard® and Visa®.

J

JCB
JCB, formerly Japan Credit Bureau, is a Tokyo-based credit card company whose cards are accepted internationally.

K

KYB (Know Your Business)
An extension of “Know Your Customer” laws, which necessitates that businesses authenticate their business customers before providing them with financial services.

KYC (Know Your Customer)
KYC focuses on confirming clients before providing them with financial services to comply with legislative standards and reduce fraud and money laundering.

M

Mobile Banking
An extension of digital banking, mobile banking refers to the capacity to bank on a mobile device without using a desktop computer.

Mobile Payment
Using a mobile phone to pay for a digital or hardware service.

Multi-Currency Processing
When a company accepts payments or charges for services in more than one currency.

N

Neobank
“Neobanks,” sometimes known as “challenger banks,” have used technological improvements since the year 2000 to provide an alternative, digital-first strategy.

Non-Bank
A financial institution or corporation that provides some banking services but does not provide the complete range of retail banking services.

O

Onboarding CDD
The process of getting a customer onto your platform, which for financial services necessitates particular checks like KYC and KYB.

Open Banking
Refers to the Second Payment Services Directive (PSD2) legislation in the UK that requires the largest banks to grant third-parties access to their customers’ banking data to increase competition.

P

Primary Account Number (PAN)
The unique 16–19-digit number imprinted or encoded on a plastic card that identifies the issuer and the specific cardholder account.

Payment Initiation (PI)
A use case of open banking that enables clients to authorize a payment straight from their bank accounts without manually entering card details.

Payment Processor
A corporation that facilitates client transactions with a business by communicating and sending information between the customer’s card, their bank, and the business’s bank.

PCI DSS Compliance
The “Payment Card Industry Data Security Standard” is an information security standard for major card schemes that compels businesses to process, store, or transfer credit card information in a secure environment.

PIN Number
A personal identification number, or “PIN,” is a four-digit code needed to access the funds in your account.

Point of Sale, or Mobile Point of Sale (PoS/MPoS)
The location where a consumer pays for an item or service, which can be a physical terminal (PoS), a website checkout (digital PoS), or an in-app checkout (MPoS).

PSP – Payment Service Provider
PSPs are third-party companies that assist retailers in accepting client payments, linking them to the broader financial system.

Prepaid Card
A prepaid card is not tied to a bank account, meaning the cardholder can only spend up to the amount pre-deposited on the card.

Principal Member
A financial institution that directly participates in a card network, such as Mastercard®, as an issuing or acquiring member.

Programme Manager
The entity in charge of developing partnerships with processors, banks, and payment networks, as well as creating and operating a card scheme on behalf of an issuing bank.

P2P (Peer-to-Peer) Payments
P2P payments enable users to send money to one another via their mobile devices using a linked bank account or card.

R

Reconciliation
An accounting technique that compares two sets of records to ensure that the results are consistent and correct.

S

Settlement
The exchange of financial data and funds between a merchant’s (acquirer) and a cardholder’s (issuer) banks.

SEPA (Single Euro Payments Area)
The format in which cross-border euro-based bank transfers are made, aiming to unify payments across the Eurozone.

T

TPP – Third Party Provider
An authorized service provider who provides a supplement to a company’s services, such as a fintech app that accesses a user’s bank account via Open Banking.

Tokenisation
The technique of converting a credit card number into a random sequence of numbers in order to increase credit card security during a transaction.

Transaction Fee
A charge paid to the payment ecosystem every time a company processes an electronic transaction, which is then divided among processing partners.

Transaction Monitoring
The process by which financial institutions monitor all transactions to comply with anti-money laundering legislation and detect financial crimes.

U

UBO (Ultimate Beneficial Owner)
The person or entity who is the ultimate beneficiary when an institution begins a transaction.

UnionPay International
Also known as China UnionPay or “UPI,” it is the world’s largest card network, with over 7 billion cards issued.

V

Virtual Card
A card with all the same characteristics as a physical card, except that it is kept digitally in a mobile wallet.

W

White Labelling
When one company provides services to another, allowing the purchasing company to use its own branding when delivering the service to its own clients.

NUMBERS

3D Secure
The name given to a set of protocols meant to add an extra degree of protection to online credit and debit card transactions.