Payment Glossary: Key Payment Processing Terms Explained
Thirty terms that come up when a business accepts payments online, grouped into five themes. Each entry is a short, general definition of the industry term, with a link to a deeper Niftipay guide where one exists.
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Pick a theme to jump straight to it, or read through the full list below. Every term has its own anchor, so a single definition can be linked to directly.
- Payment InfrastructureGateways, processors, acquirers and issuers7 terms
- Transactions and SettlementFrom authorisation through payout and disputes8 terms
- Risk and ComplianceUnderwriting, KYB, KYC and authentication7 terms
- Technical and CheckoutAPIs, webhooks and checkout surfaces5 terms
- Crypto PaymentsStablecoins, confirmations and crypto checkout3 terms
Payment Infrastructure
The companies and systems that sit between a checkout and a bank account, and what each one is actually responsible for.
Payment gateway
A payment gateway is the software layer that collects payment details at checkout, encrypts them and passes them to the systems that authorise the transaction. It handles the customer-facing part of a payment: the checkout page, the card or wallet input, and the approval or decline returned to the shopper.
Payment processor
A payment processor moves an authorisation request between the merchant’s gateway, the card networks and the banks involved, then routes the funds once the transaction clears. It handles the transport and execution of a payment rather than the checkout interface a customer sees.
Payment service provider (PSP)
A payment service provider bundles several parts of the payment stack, typically gateway, processing and often the merchant account, into a single commercial relationship. Merchants contract with one PSP instead of assembling each component separately, which shortens onboarding but concentrates the dependency on one supplier.
Acquirer
An acquirer, or acquiring bank, is the licensed institution that holds the merchant’s account with the card networks, submits transactions for authorisation and receives the settled funds before passing them on. It also carries the financial liability for chargebacks raised against the merchants it sponsors.
Issuer
An issuer, or issuing bank, is the institution that gave the cardholder their card and holds the account the payment is drawn from. It makes the final approve or decline decision on each authorisation request, applies its own fraud rules and, where required, triggers cardholder authentication.
Merchant account
A merchant account is the account held with an acquirer that receives card transaction funds before they are settled to the business’s own bank account. It is separate from a gateway: the gateway transmits the transaction, the merchant account is where the money is briefly held.
Payment orchestration
Payment orchestration is a coordination layer that connects a merchant to several gateways, processors or acquirers through one integration, then decides which route each transaction takes. It is used to add redundancy, apply routing rules and compare provider performance without rebuilding the checkout each time.
Transactions and Settlement
What happens to a payment between the moment a customer confirms it and the moment the money reaches the merchant’s bank account.
Authorisation
Authorisation is the check that happens at the moment of payment: the issuer confirms the account exists, has sufficient funds or credit, and passes the applicable fraud and authentication rules. An approved authorisation reserves the amount but does not move money, which happens at capture and settlement.
Capture
Capture is the step that turns an approved authorisation into a request for the funds to actually move. It can happen immediately after authorisation or later, once goods ship or a service is delivered. Until a transaction is captured, the reserved amount is held rather than transferred.
Payment settlement
Settlement is the process by which captured transactions are cleared between the banks and networks involved and the resulting funds are made available to the merchant. It runs in batches on a defined cycle rather than transaction by transaction, which is why approval and availability are separate events.
Payout
A payout is the transfer of settled funds from the payment provider to the merchant’s own bank account or wallet. It happens after settlement, net of fees, refunds, chargebacks and any amounts held back, and follows a schedule agreed with the provider rather than the timing of individual sales.
Reconciliation
Reconciliation is the process of matching transaction records against settlement and payout reports so that every sale, fee, refund and adjustment is accounted for. It is how a merchant confirms that the money received matches the payments taken, and it is normally done per settlement batch.
Rolling reserve
A rolling reserve is a percentage of a merchant’s settled volume that the provider withholds for a fixed period before releasing it. It exists to cover chargebacks, refunds and disputes that surface after a sale, and is common where a business model carries delayed delivery or elevated dispute risk.
Chargeback
A chargeback is a forced reversal of a card payment initiated by the cardholder through their issuer rather than by the merchant. The disputed amount is debited from the merchant, usually with a fee, while the reason is investigated. Sustained chargeback levels can put a merchant account at risk.
Chargeback representment
Representment is the merchant’s formal response to a chargeback: evidence is compiled and submitted through the acquirer to argue that the original transaction was valid. The issuer then re-decides the dispute. Success depends on matching the evidence to the specific reason code that was raised.
Risk and Compliance
The classifications, checks and authentication rules that decide whether an account is approved and how a transaction is verified.
High-risk merchant
A high-risk merchant is a business that acquirers classify as carrying above-average exposure, because of its industry, chargeback history, delivery model, regulatory status or geography. The classification affects how deeply the account is underwritten, what reserves and pricing are offered, and which providers will board it.
KYB (Know Your Business)
Know Your Business is the verification a payment provider runs on a company before activating it: confirming legal existence, registered address, ownership structure, licensing where relevant, and the nature of what is being sold. It is the company-level counterpart to identity checks on individuals.
KYC (Know Your Customer)
Know Your Customer is the verification of the individuals connected to an account, typically directors, signatories and beneficial owners, using identity documents and proof of address. In merchant onboarding it runs alongside KYB, which covers the company itself rather than the people behind it.
UBO (Ultimate Beneficial Owner)
An ultimate beneficial owner is the natural person who ultimately owns or controls a company, whether directly or through intermediate entities. Providers identify and verify UBOs during onboarding because anti-money-laundering rules require the real people behind a corporate structure to be known, not only the registered entity.
MCC (Merchant Category Code)
A merchant category code is a four-digit code assigned to a business that describes what it sells. Card networks, issuers and acquirers use it to apply interchange rates, risk rules and acceptance policies, so an inaccurate code can cause declines or pricing that does not match the business.
3D Secure
3D Secure is an authentication protocol that lets an issuer verify a cardholder during an online payment, using device and transaction data and, when needed, a challenge such as a banking app confirmation. Where it is applied, liability for fraudulent transactions generally shifts from the merchant to the issuer.
Strong Customer Authentication (SCA)
Strong Customer Authentication is a European regulatory requirement that certain electronic payments be authenticated with at least two independent factors: something the customer knows, has or is. In card ecommerce it is normally satisfied through 3D Secure, with defined exemptions for lower-risk transactions.
Technical and Checkout
The integration surfaces a merchant works with, and the behaviour a payment integration is expected to handle correctly.
API
An API is the programmatic interface a payment provider exposes so a merchant’s systems can create payments, read their status and trigger actions such as refunds without using a dashboard. It defines the endpoints available, the request and response formats, and the authentication an integration must use.
Webhook
A webhook is a message the payment provider sends to a URL on the merchant’s server when something changes, such as a payment being confirmed, failing or being refunded. It removes the need to poll for updates; reliable handling means verifying the signature and tolerating repeat deliveries.
Idempotency
Idempotency is the property that repeating the same request produces the same result rather than a second action. In payment APIs it is implemented with a client-generated key, so that a retry after a timeout or a network failure cannot create a duplicate charge or a duplicate refund.
Hosted checkout
A hosted checkout is a payment page served by the provider rather than built into the merchant’s own site. The customer is redirected to complete payment there and returned afterwards. Because card details never reach the merchant’s systems, it reduces both integration work and compliance scope.
Payment link
A payment link is a single-use or reusable URL that opens a prepared payment for a specific amount. It can be sent by email, chat or message instead of being embedded in a website, which makes it useful for invoicing, remote sales and commerce that happens inside a conversation.
Crypto Payments
Terminology specific to accepting cryptocurrency and stablecoin payments, defined the way the wider industry uses it.
Crypto payment gateway
A crypto payment gateway lets a business accept cryptocurrency or stablecoin payments at checkout. It displays the amount due, generates the address or QR code the customer pays to, and monitors the network until the payment has been detected and confirmed before the order is treated as paid.
Stablecoin
A stablecoin is a cryptocurrency designed to track the value of a reference asset, most commonly a major fiat currency. Because the price is intended to stay stable, stablecoins are used for payments and settlement in situations where the volatility of other crypto assets would be impractical.
Blockchain confirmation
A confirmation is the inclusion of a transaction in a block, followed by further blocks built on top of it. Each additional confirmation makes reversal less likely, so payment systems wait for a set number of them before treating a crypto payment as final. Timing depends on the network.
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