Card payments glossary
The card payments industry is complicated, highly regulated and often uses technical terminology. This guide provides a glossary to clarify terms and acronyms commonly used in the card payment industry to help you select the right card payments provider for your business.
We have set out below a glossary of the most commonly used card payment terms to be read alongside our card payments articles.
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Card payments glossary
Acquiring bank/Merchant Acquirer: An acquiring bank can provide a merchant with a merchant account and is responsible for receiving card payment authorization requests from the merchant and passing them on to the issuing bank. In return it transmits the issuing bank’s response to the merchant.
Acquiring Processor/Payment Processor: A payment processor may be a division of the acquiring bank although today it is more often a third-party company. The payment processor provides a service or device that allows merchants to accept credit cards as well as sending card payment details to the credit card network and receiving authorisations or refusals from those networks.
Cardholder: The cardholder is the consumer who has a contract with the issuing bank/credit card issuer to use their credit cards for payments.
Credit Card Network/Association: These organisations operate the networks that process credit card payments worldwide and govern interchange fees. credit card networks include American Express, Mastercard and Visa.
Independent Sales Organisation (‘ISO’): An ISO is an organisation that is sponsored by an acquiring bank or banks and acts as an agent for that acquiring bank to recruit, onboard and support new merchant customers in setting up merchant accounts. They can use the large number of their merchant customers to negotiate very low rates from their acquiring bank partner(s). ISO’s must display the name of their sponsor bank on their website and marketing materials. They will also be registered with the credit card networks.
Issuing Bank/Credit Card Issuer: This is the financial institution that issued the credit card involved in the transaction.
Mail Order and/or Telephone Order (‘MOTO’): These are transactions carried out via mail order or telephone calls.
Merchant: This is the store or vendor who sells goods or services to the cardholder. The merchant accepts credit and debit card payments.
Merchant account: A merchant account is a specific type of bank account that is both legally and technically required to enable a business to accept credit and debit card payments. It is not the same as a business bank account and the merchant will not have direct access to it. Instead it holds funds from the point when they are charged on a customer’s card to the point that they are deposited into the merchant’s bank account. The acquiring bank underwrites the merchant account, assuming the risk of fraud and charge backs.
Merchant Identification Number or MID: A MID is a unique number assigned to a merchant account to identify it throughout the course of processing activities.
Merchant services: This is a broad term covering the range of services provided to merchants to allow them to accept card payments.
Merchant service provider: This is a broad term used to cover a range of participants in the card payment process including acquiring banks, payment processors, payment facilitators and payment gateway providers.
Payment Facilitator, PayFac or mobile card reader company: A PayFac or mobile card reader company is a merchant service provider that simplifies the merchant account enrolment process. A mobile card reader’s merchant customers operate on a ‘sub-merchant’ platform. This means that the merchants do not need their own merchant accounts or MIDs but are onboarded directly under the mobile card reader company’s master merchant account and MID.
Payment Gateway: This is software that is required to collect card and transaction details and communicate them between a website’s shopping cart/software and the card payment processing network. Payment gateways can be acquired independently or may be included with a merchant account or with an ecommerce platform.
Payment Gateway Provider: This is a provider of payment gateway software.
Payment Service Provider (PSP): This is a company that provides merchants with individual merchant accounts and assists them with underwriting and payment processing.
Virtual Terminal: This is a software product which enables a computer to be used as a card terminal for MOTO transactions.