Payment processing is the technology that allows businesses to accept and process electronic payments. This can include credit card, debit card, and ACH (automated clearing house) transactions. Payment processors typically work with acquiring banks to provide these services.
There are a few different types of payment processors:
- Point of sale (POS) systems: These are the systems that businesses use to accept payments in person. POS systems can be integrated with payment processors to provide additional features, such as invoicing and customer management.
- Online payment processors: These are the systems that businesses use to accept payments online. Online payment processors typically work with eCommerce platforms to provide a seamless checkout experience for customers.
- Mobile payment processors: These are the systems that businesses use to accept payments via mobile devices. Mobile payment processors typically work with mobile apps and wallets to provide a convenient way for customers to pay on the go.
Payment processing is a complex industry, and there are a lot of terms and acronyms that can be confusing for businesses that are new to the space. To help you navigate the payment processing landscape, we’ve put together a glossary of common terms:
- Acquirer: A financial institution that processes credit and debit card transactions on behalf of a merchant.
- Cardholder: An individual who holds a credit or debit card.
- Card issuer: A financial institution that issues credit and debit cards.
- Chargeback: A chargeback is a refund that is processed by the card issuer when a customer disputes a charge on their credit or debit card statement. Chargebacks can be issued for a variety of reasons, including fraud, erroneous charges, or unsatisfactory goods or services.
- Credit card: A credit card is a type of payment card that allows customers to borrow money from the card issuer in order to make purchases. Credit cards typically have high interest rates and require customers to make monthly payments.
- Debit card: A debit card is a type of payment card that allows customers to spend money that they have already deposited in a bank account. Debit cards are typically linked to a customer’s checking account and can be used for point-of-sale transactions or to withdraw cash from an ATM.
- Digital wallet: A digital wallet is a mobile app that stores credit card, debit card, and loyalty card information. Customers can use digital wallets to make purchases in person, online, or in-app.
- EMV: EMV is an acronym for “Europay, Mastercard, and Visa.” EMV is a global standard for credit and debit cards that are equipped with chips that store data. EMV chip cards are more secure than traditional magnetic stripe cards and are less susceptible to fraud.
- Interchange: Interchange is the fee that acquiring banks charge for processing credit and debit card transactions. Interchange fees are set by the card associations (Visa, Mastercard, etc.) and typically range from 1-3% of the transaction amount.
- Merchant account: A merchant account is a type of bank account that allows businesses to accept and process credit and debit card payments. Merchant accounts are typically set up through a payment processor or acquirer.
- Payment gateway: A payment gateway is a software service that authorizes credit and debit card payments for eCommerce businesses. Payment gateways typically work with acquirers and merchant accounts to process transactions.
- Payment processor: A payment processor is a company that provides businesses with the ability to accept and process credit and debit card payments. Payment processors typically work with acquirers, merchant accounts, and payment gateways to provide a complete solution for businesses.
- Point of sale (POS): A point of sale (POS) is the location where a customer makes a payment for goods or services. POS systemscan be used for in-person or online transactions.
- Transaction: A transaction is a credit or debit card payment that is processed by a merchant. Transactions can be processed in person, online, or via mobile devices.
- Vault: A vault is a secure storage location for credit and debit card information. Vaults can be used by businesses to store customer card data for future use.
Now that you’re familiar with some of the most common payment processing terms, you’re ready to start accepting credit and debit card payments for your business!
