Glossary
Payments, in plain English.
From 3DS2 to VRP: the acronyms, rails and rules you'll meet in this industry, defined without the jargon.
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- 3-D Secure (3DS2)
- A card-scheme protocol that lets the issuer authenticate an online cardholder, often invisibly using device and transaction data, and only challenges the customer when risk is higher.
A
- Account-to-account (A2A)
- A payment that moves money directly from one bank account to another, typically over an instant payment rail, without a card network in the middle.
- Acquirer
- The bank or licensed institution that contracts with merchants to accept card payments and settles the funds into the merchant's account.
- AIS / AISP
- Account information service (provider): a regulated third party that, with the customer's consent, reads account data such as balances and transactions via bank APIs.
- AML
- Anti-money laundering: the controls, monitoring and reporting that firms use to detect and prevent the proceeds of crime moving through the financial system.
- APP fraud
- Authorised push payment fraud: scams in which victims are tricked into sending a payment themselves, for example to someone impersonating their bank.
- Authorisation
- The real-time request to the issuer asking whether a card transaction can proceed. Approval places a hold on funds but does not move money yet.
B
- BaaS
- Banking-as-a-service: a licensed bank or platform exposing accounts, cards and payments through APIs so non-banks can build financial products.
- BIN
- Bank identification number: the leading digits of a card number that identify the issuer and card product. Now typically eight digits.
- BIN sponsorship
- An arrangement in which a licensed issuer lets a programme manager or fintech issue cards under the issuer's scheme membership and BIN.
C
- Chargeback
- A reversal of a card payment initiated by the issuer on the cardholder's behalf, for reasons such as fraud or goods not received.
- Clearing
- The exchange of transaction details between institutions after authorisation, so each party knows what it owes before settlement.
E
- Embedded finance
- Financial services such as payments, lending or accounts offered inside a non-financial company's product, usually powered by a BaaS provider.
- EMV
- The global chip-card standard, managed by EMVCo, that secures in-person and contactless card transactions with dynamic cryptograms.
F
- FedNow
- The US Federal Reserve's instant payment service, launched in July 2023, which settles credit transfers between participating institutions around the clock.
- FIDO2 / passkeys
- Open standards for phishing-resistant, passwordless login using public-key cryptography bound to a device and unlocked with a biometric or PIN.
I
- Interchange
- The fee paid by the acquirer to the issuer on each card transaction, set by the card schemes and in some regions capped by regulation.
- ISO 20022
- A rich, structured XML-based messaging standard for payments. It is being adopted by high-value and instant payment systems worldwide, and in cross-border payments.
- ISO 8583
- The long-standing message standard for card transactions, defining how authorisation and financial messages are structured between systems.
- Issuer
- The bank or institution that provides the card to the cardholder, approves transactions and bills the cardholder.
K
- KYC / KYB
- Know your customer / know your business: verifying the identity of individuals or companies, and understanding the risk they pose, before and during a relationship.
M
- MDR
- Merchant discount rate: the total percentage a merchant pays to accept a card payment, including interchange, scheme fees and acquirer margin.
- MiCA
- The EU Markets in Crypto-Assets Regulation, which sets licensing and conduct rules for crypto-asset service providers and stablecoin issuers.
- MPoC
- PCI Mobile Payments on COTS: the PCI security standard for accepting card payments, including PIN entry, on commercial off-the-shelf devices such as phones.
N
- Network token
- A scheme-issued substitute for a card number, bound to a specific merchant or device. It updates automatically when a card is reissued.
O
- Open banking
- Regulated or market-led access for licensed third parties to bank account data and payment initiation via APIs, with customer consent.
- Open finance
- The extension of open banking's data-sharing model to savings, investments, pensions, insurance and more.
- Orchestration
- A software layer that connects a merchant to multiple processors and payment methods, routing each transaction to optimise cost, approval and resilience.
P
- PCI DSS
- The Payment Card Industry Data Security Standard: security requirements for any organisation that stores, processes or transmits card data. Version 4.0 is current.
- PIS / PISP
- Payment initiation service (provider): a regulated third party that starts a payment from a customer's bank account with their consent.
- Pix
- Brazil's instant payment system, operated by the Banco Central do Brasil and launched in November 2020. It is used by most of Brazil's adult population.
- PSD2 / PSD3
- The EU's second Payment Services Directive introduced open banking and strong customer authentication. PSD3 and a Payment Services Regulation are its successors.
R
- Real-time payments (RTP)
- Payment systems that clear and settle individual transfers within seconds, 24/7/365. RTP is also the name of The Clearing House's US network.
S
- SCA
- Strong customer authentication: an EU/UK requirement to verify customers with two independent factors from knowledge, possession and inherence.
- SEPA Instant
- The SEPA Instant Credit Transfer scheme for euro payments that settle in under ten seconds. The EU Instant Payments Regulation now requires euro-area PSPs to offer it.
- Settlement
- The actual transfer of funds between institutions to discharge obligations created by payments, completing the transaction.
- SoftPOS
- Software that turns an NFC-enabled phone or tablet into a card-acceptance terminal, with no extra hardware needed.
- Stablecoin
- A crypto token designed to hold a stable value, usually backed one-to-one by fiat currency reserves, and used for on-chain payments and settlement.
T
- Tokenisation
- Replacing sensitive data such as a card number with a non-sensitive surrogate that is useless if stolen.
- Travel Rule
- The FATF requirement, extended to virtual assets, that originator and beneficiary information travels with transfers between service providers.
U
- UPI
- Unified Payments Interface: India's real-time, mobile-first payment system, run by NPCI since 2016 and one of the highest-volume payment systems in the world.
V
- Verification of Payee (VoP)
- A check, before a payment is sent, that the payee's name matches the account. It is mandatory for euro credit transfers under the EU Instant Payments Regulation.
- VRP
- Variable recurring payments: an open-banking mandate letting a customer authorise a provider to initiate a series of payments within agreed limits.
W
- Wallet (digital)
- An app that stores payment credentials, usually as tokens, for contactless, in-app and online payments. It can also hold identity documents and passes.