Glossary

3D Secure
A form of e-commerce authentication used by Visa and MasterCard when a card holder proves that they are the genuine cardholder by entering a pre-set password. This takes place after a cardholder enters their details in a separate webpage. Using 3D Secure reduces a business’ risk of fraud or disputes from transactions processed through their website.

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A
Acquirer
An acquirer is a bank which processes credit and debit card payments for a merchant also known as an acquiring bank or a merchant acquirer. The acquirer provides a single interface for card authorisations, pays all the scheme and issuer fees on behalf of the merchant and acts as an intermediary in the event of card claims, returns and refunds.

Authentication
Payment authentication is the process of identifying who is making a particular payment and ascertaining whether that person has the authority to make that payment. Forms of authentication include chip and PIN and online authentication processes, such as 3D Secure verified by Visa. Increasingly there are alternative authentication processes available, such as voice authentication, whereby customers pay use their unique ‘voice signature’ to authenticate and sign their payment transaction.

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B
Balance sheet
A balance sheet is a financial statement that shows your financial position at any given time or for a specified date period. It provides a summary of what a business owns, owes or is owed.

Basis point
The basis point is one hundredth of a percentage point (0.01%). Basis points are often used to measure and calculate changes in interest rates, equity indexes and the yield of a fixed-income security.

Business bank account
A business bank account is the main bank account of a business, into which payments are deposited and from which financial transactions will be made. A business bank account is essential to the calculation of tax and is often a key element in opening up a business’ access to financial support.

Business overdraft
When a business is suffering from a cash flow issue, many banks offer an overdraft facility for instant, short-term borrowing. The overdraft limit is agreed between you and the banking provider, and varying interest rates are charged depending upon the amount borrowed.

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C
Card issuer
A credit card issuer is a financial service provider which offers credit cards. The card issuer works with payment processing networks, like Visa and MasterCard. American Express is an example of a card issuer which is also a payment processing network.

Cardholder Not Present (CNP)
A transaction category where the customer making the purchase is not present at the point-of-sale (e.g. via the Internet or over the phone) and so does not use Chip and PIN.

Card Scheme
Visa and MasterCard are card schemes, into which a bank or any other eligible financial institution can become a member. Neither Visa nor MasterCard issue credit cards themselves, rather they negotiate the setting up of payment systems with different banks and building societies internationally.

Card Security Code (CSC)
The last three digits on the signature strip on the back of a credit or debit card, often required when a customer is purchasing goods online.

Cash flow
A business’ cash flow refers to the availability of funds for bills and expenses. Cash flow is controlled by a balance between the timing and amount of outgoing costs with incoming payments.
Chargeback
Usually a disputed transaction, where a card issuer charges part or all of the value of a transaction back to the acquirer. The acquirer may subsequently chargeback the value of the transaction to the business.

The customer initiates this process by contacting their card issuer if they cannot resolve the issue with the business directly and the issuer must decide whether the dispute claim is valid.

Clearing
Clearing refers to the procedure through which the actions of a seller and a buyer are matched. A transaction is cleared once the price has been paid and the goods delivered. Many transactions involve a number of third parties, such as brokers, dealers, or specialists, so often a clearing firm will settle transactions in exchange for a fee.

Closed and open loop cards
Prepaid cards (see Prepaid) are divided into ‘closed’ and ‘open’ loop. Open loop cards are issued by banks or credit card companies and can be redeemed by different establishments. Closed loop cards are issued by a specific store or restaurant and can be only redeemed by the issuing provider. There are also increasingly ‘hybrid closed loop’ cards, where the issuer has bundled a number of closed loop cards – for example, increasingly shopping centres issue gift cards for all the shops within the centre.

Contactless
Contactless payment refers to the ability to pay for items by simply tapping the point of sale device with a payment enable device, removing the need to enter the card into the machine and enter a PIN. The embedded chip enables consumers to wave their card over a reader at the point of sale.

Corporate Card
A corporate card is a payment card issued to an individual under a corporate account, used for business expenses and employee incentive schemes.

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D
Deposit accounts
A business deposit account is a higher interest wielding account for any reserve funds a business may have. These have varying interest rates and terms such as: 95 day notice deposit account.

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E
E-Commerce
Electronic commerce, or e-commerce for short, is the name given to the process by which products or services are bought and sold with an electronic system such as the Internet.

Electronic Invoicing
E-invoicing is the exchange of an invoice in an electronic format. E-invoicing has several benefits – from the environmental benefits associated with avoiding paper bills, to the potential for e-invoicing to connect with financial business systems to provide real-time cash flow insight.

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F
Faster Payments
The Faster Payments Service allows customers to make faster automated payments, typically using the phone or online banking, enabling the payments to get to the destination within a couple of hours. The service and infrastructure was launched in 2008 and by the end of 2011 over 85% of phone and internet payments were being processed through Faster Payments.

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I
Interchange fee
The interchange fee is the amount paid between banks for the acceptance of card transactions. In the case of a purchase made in a shop, the interchange fee will be between the retailer’s bank (the acquiring bank) and the customer’s bank which issued the card.

Invoice
An invoice, much like a bill, is a document indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. E-invoicing is the exchange of an invoice in an electronic format.

IIN (Issuer Identification Number)
The IIN replaces the previously used Bank Identification Number (BIN). It refers to the first four to six digits of a credit card. The bank identification number identifies the institution issuing the card. It is critical to the correct matching of transactions to the issuer of the charge card.

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M
Mail Order/Telephone Order (MOTO)
A classification of transaction that enables a merchant to accept a credit card payment without a cardholder’s signature. This type of transaction is common within call centres (where payments are taken over the phone) or with payments for catalogue items.

MasterCard Secure Code
MasterCard’s version of 3D Secure.

M-Commerce
Sometimes called mobile commerce, the process of purchasing goods or services via a mobile device, either through a browser or an app

Merchant
A business that accepts cards as settlement for goods and/or services provided to their customers.

Merchant account
A merchant account is a type of bank account that allows businesses to accept payments by card. A number of UK banks – known as acquiring banks – offer merchant accounts. An internet merchant account (IMA) is a type of account that enables a business to accept customers’ credit and debit card payments directly online.

Mobile banking
Mobile banking is the access to bank account details through a mobile phone browser or Smartphone mobile app. Mobile banking often allows for the checking of an account’s balance, access to mini-statements and the ability to make transfers and payments.

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N
NFC (Near Field Communication)
NFC is the technology by which contactless payments can be made. An NFC enabled Smartphone, for example, could be used to establish radio communication with a point of sale terminal by touching it or simply by being in close proximity to it.

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P
Payment gateway
Responsible for sending card transaction information from a business website to the acquirer to request authorization and settlement of card transactions. In order to accept card transactions from your website, you require both a payment gateway and merchant account.

Payment Service Provider (PSP)
See Payment Gateway.

Prepaid card
A prepaid card is a form of payment card which has funds transferred on to it. Prepaid cards represent an alternative way to manage business-related payments.

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R
Remittance
A transfer of funds from the acquirer to the business after an agreed time period stated in the contract between the two parties.

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S
SEPA
SEPA stands for the Single Euro Payments Area. SEPA is the EU payments integration initiative which aims to achieve simplification and harmonisation of bank transfers. SEPA will align the cost of cross-border transfers with that of domestic electronic transfers. The initiative will assist pan-European trade and help UK businesses compete by making it simpler and cheaper to send or receive Euro payments.

Storebuilder/Shopping Cart
This software lets you create a virtual ‘shop front’ for your website, effectively a catalogue and ordering system. Storebuilders can let you do everything from designing the look and feel of your website, stock control and delivering goods and also integrate with your acquiring and payment gateway services.

SWIFT
The Society for Worldwide Interbank Financial Telecommunication provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure and standardised environment. SWIFT’s secure messaging service to financial institutions facilitates the movement of payment orders.

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V
Verified by Visa (VbyV)
Visa’s version of 3D Secure.