Payment Vocabulary for Merchants: How to Talk Confident

Modern payment industry can seem complex, especially considering the number of specialized vocabularies you might encounter when working with payment systems. To stay informed, it's important to enhance your competencies, and understand the industry, you should start with the basics.

Monoup has compiled a dictionary of essential payment industry terms that are important for both payment systems and merchants to know. To effectively collaborate with fintech and communicate on the same level, as well as adapt to changes in operations, a basic understanding is essential. Let's explore this in more detail.

Key Terms in Payment Processing:

1. Merchant — is a business that sells goods or services to customers through a website, mobile app, physical store, or all three channels simultaneously. In other words, it's a company or simply seller. For successful sales, any merchant needs to accept payments via cards or other payment methods. Banks or payment systems provide these services to the merchant. To receive services from a bank, a merchant must have an account with an acquiring bank and connect to the services, or enter into an agreement with a separate payment service provider. Therefore, an e-commerce site is a merchant, an online gaming site is also a merchant, and a grocery store is a merchant, despite the different services they offer.
    
2. PSP (Payment System Provider) — company that provides payment processing services, either independently or in conjunction with an acquiring bank. PSP is a general term for many payment institutions. They can vary significantly and offer different services. For more details on what a PSP is, we have covered this in a separate article.
    
3. POS Terminal — special device that interacts with a customer's card at the point of sale. You've likely seen various terminals; the most popular ones globally are products from Verifone and Ingenico. Cards can be tapped, inserted into the reader, or swiped. These actions allow the card to be read, and after entering a PIN code, the payment is completed.
    
4. NFC — is the technology behind contactless payments, allowing payments to be made without inserting or swiping a physical plastic card. In the context of POS, NFC is the technology used for contactless payments. Apple Pay, Google Pay, and Samsung Pay use the standard NFC protocol, enabling you to pay with your phone in physical stores without having your credit card with you, even though you are essentially using it for the purchase.
    
5. Blockchain — distributed database or ledger that is jointly used by nodes in a computer network. Blockchain is particularly significant in cryptocurrencies, supporting secure and decentralized transaction records and essentially serving as the foundation of this technology. However, blockchain can be used in various industries and sectors. Due to its primary function of preventing the alteration or modification of records, it ensures full transparency of operations.
    
6. MCC (Merchant Category Code) — four-digit code used by card schemes (e.g., Visa, Mastercard) to categorize merchants' businesses. MCCs are based on coding principles and indicate the nature of the merchant's goods or services. MCCs allow all parties involved to understand the type of business during payment processing and make real-time conclusions about the purpose of the payment. Therefore, MCC plays a crucial role in ensuring quality payment acceptance.
    
7. PCI DSS Certification — is certification that directly affects the security of online payment operations. Compliance with PCI DSS standard means that the provider or merchant continuously meets all applicable requirements of Payment Card Industry Data Security Standard (PCI DSS), indicating that they can be trusted with sensitive cardholder data. 
   
   PCI DSS was created by major card networks to enhance the security of cardholder data and reduce the risk of fraud. All companies involved in processing payment cards, including merchants, must comply with the PCI standard and meet a set of stringent data protection requirements. If a merchant cannot meet these requirements, they can operate through a certified intermediary but will not have full access to their customers' card data.
    
8. Gateway — service that helps merchants initiate online payments, in-app payments, and personal payments. It does not directly participate in the money flow; typically, it is a web server to which the merchant's website or POS system is connected. A payment gateway can be provided by a bank or exist as a separate service connected to one or several payment processors.
    
9. Chargeback — the process of disputing a transaction when a customer considers a payment illegitimate and believes it should be refunded. Many merchants have encountered chargeback procedure at least once (and often much more frequently). The nature of this possibility is based on consumer protection, allowing customers to return funds for a purchase that did not meet expectations or was made to fraudsters. To do this, the payer contacts their bank and submits a request to return the funds previously paid to the merchant's website. More details about this process can be found in our other articles.
    
10. API (Application Programming Interface) — API stands for Application Programming Interface. It is a general term for programming methods available to software developers when integrating with a specific service or application. These methods vary depending on the type of software and can include web APIs, remote APIs, SDKs, libraries, frameworks, and more.
     
11. BIN (Bank Identification Number) — is basically the first six to eight digits of a card number, which indicate its network (Visa, Mastercard, JCB, American Express, or others) and the issuer (the financial institution that issued the card). With this information, merchants can learn more about their customers and use it to improve their payment experience.

In conclusion, you have likely already encountered these terms or will in the future if you work with payments. A precise understanding of terminology not only enhances your professional level but also helps communicate more effectively with counterparties and understand each other better. Other articles on Mono Talks, which explore payment industry in iGaming and online business in general, can also assist you with this.