Payment Glossary
Master the language of payments and billing. From MoR to PCI DSS, understand every term you need to run your business.
3D Secure
An authentication protocol that adds an extra security layer for online card transactions. Customers verify their identity through their bank during checkout, reducing fraud and chargebacks.
ACH(Automated Clearing House)
An electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches, commonly used for direct deposits, bill payments, and recurring payments.
Acquirer
A bank or financial institution that processes credit and debit card payments on behalf of a merchant. The acquirer maintains the merchant's account and deposits funds from card transactions.
Annual Recurring Revenue(ARR)
The total predictable revenue a subscription business expects to receive annually from its customers. ARR is calculated by multiplying MRR by 12 and is a key metric for SaaS companies.
API(Application Programming Interface)
A set of protocols and tools that allows different software applications to communicate with each other. Payment APIs enable developers to integrate payment functionality into websites and applications.
Authorization
The process of verifying that a customer's payment method has sufficient funds and is valid for a transaction. Authorization is the first step in processing a payment before capture.
Average Order Value(AOV)
The average amount spent each time a customer places an order. Calculated by dividing total revenue by number of orders. Higher AOV typically indicates better monetization.
Bank Transfer
A method of transferring money directly from one bank account to another. Bank transfers are commonly used for larger payments and B2B transactions due to lower fees compared to card payments.
Billing Cycle
The recurring interval at which a customer is charged for a subscription service. Common billing cycles include monthly, quarterly, and annually.
Buy Now Pay Later(BNPL)
A payment option that allows customers to purchase items and pay for them in installments over time, often interest-free. Popular BNPL providers include Klarna, Afterpay, and Affirm.
Capture
The process of completing a previously authorized payment by transferring funds from the customer's account to the merchant. Capture typically occurs when goods are shipped or services are rendered.
Card Not Present(CNP)
A transaction where the physical card is not present, such as online, phone, or mail orders. CNP transactions typically have higher fraud risk and may incur higher processing fees.
Chargeback
A forced transaction reversal initiated by the cardholder's bank after a dispute. Chargebacks can result from fraud, customer dissatisfaction, or processing errors and carry fees for merchants.
Checkout
The final step in the purchase process where customers enter payment details and complete their transaction. A streamlined checkout reduces cart abandonment and improves conversion rates.
Churn Rate
The percentage of subscribers who cancel or don't renew their subscription within a given period. Lower churn rates indicate better customer retention and subscription health.
Conversion Rate
The percentage of visitors who complete a desired action, such as making a purchase. In payments, this often refers to the percentage of checkout attempts that result in successful transactions.
Customer Acquisition Cost(CAC)
The total cost of acquiring a new customer, including marketing, sales, and onboarding expenses. CAC is compared against LTV to determine customer profitability.
CVV(Card Verification Value)
A 3 or 4 digit security code printed on credit and debit cards, used to verify card-not-present transactions. Also known as CVC (Card Verification Code) or CSC (Card Security Code).
Digital Products
Non-physical goods delivered electronically, such as ebooks, software, music, courses, and templates. Digital products have zero inventory costs and can be sold globally with instant delivery.
Direct Debit
A payment method where a business can collect payments directly from a customer's bank account on scheduled dates. Popular for recurring payments in Europe (SEPA Direct Debit).
Dispute
A formal complaint from a cardholder regarding a transaction, which can lead to a chargeback. Merchants must provide evidence to dispute resolution to avoid losing the chargeback.
Dunning
The process of systematically following up with customers about failed or overdue payments. Effective dunning includes automated email reminders, payment retries, and account status updates.
E-commerce
The buying and selling of goods or services over the internet. E-commerce includes online stores, marketplaces, and digital product sales.
EMV
A global standard for chip-based credit and debit card transactions. EMV (Europay, Mastercard, Visa) chips provide enhanced security compared to magnetic stripe cards.
Failed Payment
A transaction that cannot be completed due to insufficient funds, expired cards, fraud detection, or technical errors. Failed payments require dunning processes to recover revenue.
Fraud Prevention
Security measures and technologies used to detect and prevent fraudulent transactions. Includes tools like 3D Secure, address verification, and machine learning-based risk scoring.
Gateway
See Payment Gateway. A service that authorizes and processes payment transactions between merchants and financial institutions.
Gross Merchandise Value(GMV)
The total value of merchandise sold through a marketplace or platform over a specific period, before deducting fees, refunds, or other adjustments.
Hosted Payment Page
A secure checkout page hosted by a payment provider where customers enter their payment details. Reduces PCI compliance burden for merchants by handling sensitive data externally.
Interchange Fee
A fee paid by the merchant's bank (acquirer) to the cardholder's bank (issuer) for each card transaction. Interchange fees are set by card networks and vary by card type and region.
Invoice
A commercial document that itemizes and records a transaction between a buyer and seller. Invoices include payment terms, due dates, and are essential for B2B transactions and accounting.
Issuer
The bank or financial institution that issues credit or debit cards to consumers. The issuer is responsible for authorizing transactions and billing the cardholder.
KYC(Know Your Customer)
The process of verifying a customer's identity to prevent fraud, money laundering, and terrorism financing. Payment providers require KYC documentation from merchants during onboarding.
Lifetime Value(LTV)
The total revenue a business can expect from a single customer account over the entire relationship. LTV helps determine how much to invest in customer acquisition and retention.
Membership
A subscription-based access model where customers pay recurring fees for exclusive content, services, or benefits. Common for content creators, communities, and software platforms.
Merchant Account
A type of bank account that allows businesses to accept credit and debit card payments. Funds from card transactions are deposited into the merchant account before being transferred to a business account.
Merchant of Record(MoR)
The entity that appears on customer's credit card statements and is legally responsible for the transaction. MoR services handle payments, taxes, compliance, and chargebacks on behalf of merchants.
Monthly Recurring Revenue(MRR)
The predictable revenue a subscription business expects to receive each month. MRR is a key metric for SaaS and subscription businesses, calculated from all active subscriptions.
Net Revenue Retention(NRR)
A metric that measures the percentage of recurring revenue retained from existing customers, including upgrades and downgrades. NRR above 100% indicates positive expansion revenue.
One-Click Checkout
A streamlined checkout process that allows returning customers to complete purchases with a single click using saved payment information. Dramatically improves conversion rates.
Payment Gateway
A service that authorizes and processes payment transactions between merchants and banks. The gateway encrypts payment data and communicates with card networks to approve transactions.
Payment Link
A unique URL that directs customers to a payment page for a specific product, service, or amount. Payment links can be shared via email, SMS, social media, or QR codes.
Payment Method
The means by which a customer pays for goods or services, such as credit cards, debit cards, bank transfers, digital wallets, or buy now pay later options.
Payment Processor
A company that handles credit card transactions on behalf of merchants. Payment processors manage the technical connection between merchants, card networks, and banks.
Payment Request
A formal request for payment sent to a customer, often including a link to complete the transaction. Payment requests can be sent via email, SMS, or messaging apps.
Payment Service Provider(PSP)
A third-party company that helps merchants accept online payments by providing payment gateway services, merchant accounts, and various payment methods in one integrated solution.
PCI DSS(Payment Card Industry Data Security Standard)
A set of security standards designed to ensure that all companies that accept, process, store or transmit credit card information maintain a secure environment. Compliance is required for all merchants.
Platform Fee
A percentage or fixed fee charged by a platform for facilitating transactions or providing services. PayRequest charges 0% platform fees - you only pay your payment provider's fees.
Proration
The adjustment of subscription charges when a customer upgrades, downgrades, or changes plans mid-billing cycle. Proration ensures customers only pay for the time they use each plan.
QR Code
A two-dimensional barcode that can be scanned with a smartphone camera to quickly access a payment link or product page. QR codes are ideal for in-person sales and marketing materials.
Recurring Payment
An automatic payment that occurs at regular intervals, typically for subscriptions or memberships. Recurring payments provide predictable revenue and reduce customer friction.
Refund
The return of money to a customer after a purchase, initiated by the merchant. Unlike chargebacks, refunds are voluntary and don't incur additional fees or penalties.
Retention Rate
The percentage of customers who continue their subscription over a given period. High retention rates indicate customer satisfaction and sustainable recurring revenue.
SaaS(Software as a Service)
A software distribution model where applications are hosted in the cloud and accessed via subscription. SaaS businesses rely on recurring revenue and require specialized billing infrastructure.
Sales Page
A dedicated landing page designed to sell a specific product or service. Sales pages typically include product details, pricing, testimonials, and a prominent checkout option.
Security Deposit
A refundable amount collected from customers as protection against damage, non-payment, or contract violations. Common for rentals, events, and high-value bookings.
SEPA(Single Euro Payments Area)
A payment integration initiative of the European Union for simplification of bank transfers. SEPA enables fast, low-cost euro transfers between 36 European countries.
Settlement
The process of transferring funds from captured transactions to the merchant's bank account. Settlement timing varies by payment method and processor.
Shopping Cart
A software component that allows customers to select and store products before checkout. Shopping cart abandonment is a key metric for e-commerce optimization.
Subscription
A recurring payment arrangement where customers pay at regular intervals for continued access to products or services. Subscriptions provide predictable revenue for businesses.
Tokenization
The process of replacing sensitive payment data with non-sensitive tokens that can be used for transactions without exposing card details. Tokenization enhances security and enables recurring payments.
Transaction Fee
The fee charged for processing each payment transaction, typically a percentage plus a fixed amount. Transaction fees vary by payment method, region, and card type.
Trial Period
A limited time during which customers can use a product or service for free or at reduced cost before committing to a paid subscription. Trials help reduce purchase friction.
Upgrade
The process of moving a customer to a higher-tier subscription plan with more features or capacity. Upgrades increase MRR and indicate product-market fit.
VAT(Value Added Tax)
A consumption tax levied on goods and services at each stage of production. EU VAT rules for digital services require charging the customer's local rate and proper tax invoicing.
Virtual Terminal
A web-based application that allows merchants to process card payments without physical card-reading hardware. Used for phone orders, mail orders, and manual payment entry.
Void
Cancelling an authorized but not yet captured transaction. Voiding a transaction before settlement prevents any charge from appearing on the customer's statement.
Webhook
An automated message sent from one application to another when an event occurs. Payment webhooks notify your systems about transactions, refunds, disputes, and subscription changes.
Wire Transfer
An electronic transfer of funds between bank accounts, often used for large or international transactions. Wire transfers are typically faster but more expensive than ACH or SEPA.
Popular Terms
Quick access to the most frequently searched payment terminology.
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