Fintech 101: Payments Glossary

The ultimate payments glossary, including everything you need to know

The financial and payments industries are ever-evolving theaters. However, unlike spectators at a performance, when it comes to making and receiving payments, you cannot remain passively in your seat. Payments glossary can be tricky. You need to be able to define and understand the many unique fintech terms and acronyms.

To help you take the right action and make the best decisions for your business, we created the following payments glossary. You may already be familiar with some of the more basic terms. Others are more intricate but are just as important for you to know.

So, what are you waiting for? Your crash course in fintech terms starts right now!

Payments Glossary:

3D Secure.

Developed by VISA and Mastercard, 3-D Secure is a protocol designed to streamline and improve the online payment authentication process that always involves three parties or domains (hence the 3-D name):

  • The company the purchase is being made from
  • That company’s (the merchant/seller) bank
  • The credit card’s issuers.

Secure Sockets Layer (SSL) encryption and a merchant server plug-in are utilized to transmit cardholder information during an on-line purchase, maximizing personal data protection.


A bank or company that acquires the transaction data needed to complete the transaction and transfer funds to the merchant. Also known as Acquiring Bank.

Address Verification Service (AVS).

A method used by the merchant to verify that the provided customer billing address matches the address on the buyer’s credit card. This fraud protection process is mostly used to verify North American and UK-based cardholders.

Bank Identification Number (BIN).

Visa and Mastercard use an identification number that consists of the first six digits of a credit or debit card number for purposes of identifying the card’s origin.

Card Verification Code (CVC2, CVV2, or CID).

The extra, three-digit security code printed on the back of MasterCard and VISA, and on the front of American Express credit cards. While the name of the code differs between credit card companies, its presentation at the time of purchase provides an extra security layer to AVS protection, confirming that the cardholder is in possession of their card at the time of purchase. This helps to limit credit card fraud and chargeback instances.


Otherwise known as a reversal, a chargeback is the process of funds being returned from the merchant (or seller) to the buyer, after said buyer claims their card has been charged, without their having received a product or service. The buyer files a dispute, during which they ask the issuing bank to remove the charge from their credit card bill. It is up to the buyer’s credit card company to make critical decisions.

  • Was the charge legitimate?
  • Did credit card fraud take place?
  • Did the seller fail to complete their side of the transaction?

If the credit card company determines that the transaction was not legitimate, the seller must return the payment AND is issued a chargeback fee. Sellers using non-coded merchant accounts have little to no recourse in challenging a chargeback.
Transactions made under the 3D Secure protocol will generally shift the liability for chargebacks away from the merchant and to the issuing bank.

Credit Card Processor.

A company that acts as a go-between for merchants/sellers and financial institutions involved in credit card transactions. The processor manages the authorization and settlement of credit card payments from a variety of credit cards. Processors provide merchants retaining their services with a merchant ID. Sometimes, payment processing equipment that facilitates seamless and secure payment processing and support.

Discount Rate.

The percentage of each transaction paid to the merchant account processing company, in exchange for a certain amount of money being transferred via the payment processor. If your monthly charges are not matched, the processor may charge a higher percentage, based on the agreement signed. Also referred to as Disagio.

High Risk.

A term used typically to indicate the increased risk of credit card fraud, chargebacks, and other transactional problems.


Also referred to as a reserve, a holdback is a portion of a payment made to a merchant that is retained by the credit card company, until certain conditions are achieved, so as to cover any possible chargebacks or disputed charges.

Issuing Bank.

Also known as an “Issuer,” an issuing bank is a financial institution, such as a bank or credit card union, that offers its customers credit cards and is responsible for the cards’ use. This includes ensuring that merchants receive payments when customers make credit card purchases.

Know Your Client (KYC).

Is a due-diligence process to protect financial institutions against fraud. Furthermore, customers provide personal documentation such as government-issued photo ID (driver’s license, passport), date of birth, and a utility bill with their home address, as a means of verifying their identity, and ensuring they are not involved in malicious activity.

Market Segment.

A group of people sharing a distinct customer profile and set of buyer characteristics. Depending on on-going trends and other variables, they are usually clustered together for the purpose of targeting, highly focused, and effective marketing purposes.

Merchant Category Code (MCC).

A four-digit number assigned to a business by MasterCard or Visa for the purpose of processing their transactions. In addition, the code indicates the type of business providing a service or selling merchandise, in order to categorize the business according to the type of products or services it provides, as well as to track or restrict certain types of purchases.

Merchant Collective.

A term applied to retailers selling their products or services via a specific online or web-based platform.

MOTO Transaction.

A Mail Order/Telephone Order (or internet) (MOTO) transaction takes place when the buyer completes purchases by providing their purchase request and credit card information without physically presenting the merchant with their credit card.

Original Credit Transactions (OCT).(formerly CFT – Credit Funds Transfer).

A transaction type used to withdraw instant funds and transferred them back into an account. This term includes Visa‘s OCT and MasterCard‘s Payment Transaction (PT) protocols.


A numerical code that serves as the customer’s unique identifier in many electronic financial transactions. PIN codes are generally associated with added security layers to credit cards and are often required to complete transactions.

Point Of Sale terminal (POS).

A physical, electronic device used by retail businesses to connect to financial institutions and process credit card transactions. In addition, the customer either physically swipes or slides their card through the machine, or provides the relevant information via a telephone call, to verify their payment information and complete the purchase transaction.

Real-Time Processing.

The processing of a card transaction as soon as the purchase has been made; the preferred choice for internet-based merchants.

Retrieval Request.

A request made by either the credit card issuer or the cardholder for a transaction receipt, in either print or electronic form. Using the receipt typically as evidence in a transaction dispute.


Refunding or canceling or a transaction made due to an error. 

SSL – Secure Sockets Layer.

A standard security technology developed by Netscape Communications Company. Above all, made to securely transmit information over open networks such as the internet, via an encrypted connection and the use of a digital certificate. This establishes trust between customers and server programs, which, in turn, encourages customers to make more purchases.

To Summarize

It is clear that understanding important Payments Glossary terms is critical. Therefore, this is true, whether you’re part of the payments industry or you simply make payments to merchants from time to time.

We hope that this payments glossary is useful for you and enables you to make better payment decisions.

For more information on secure payment processing, visit our homepage!