Payments vocabulary is not hard, but it is used loosely, and a term that means one thing to a gateway can mean another to a bank. These are the definitions this site works from.
Acquirer
The licensed bank or payment institution that holds your merchant account, receives the settlement from the card schemes and carries the credit risk on your sales. The party that can be fined for your dispute ratio.
Authorization
The issuer's approval of a payment and the hold it places on the customer's funds. Not money in your account, and it expires if nothing claims it.
Capture
The instruction that turns an authorization into an actual debit. Usually immediate online; deliberately delayed by businesses that ship before they charge.
Card-on-file (credential-on-file)
A card stored with your customer's agreement for future charges. The agreement is recorded with the first payment and referenced by every later one.
Chargeback
A forced reversal of a settled payment, started by the cardholder with their own bank. Comes with a reason code, a deadline for evidence, and a fee.
Descriptor
The text your customer sees on their bank statement. An unrecognisable descriptor produces fraud disputes from honest customers.
Interchange
The part of your fee that goes to the bank that issued the customer's card. Set by the schemes, varies by card type and geography, not negotiable by anyone in your chain.
Issuer
The bank that gave your customer their card. It approves or declines each payment, runs the authentication challenge, and decides disputes.
MCC (merchant category code)
The four-digit code that classifies what you sell. It drives interchange, some issuer rules, and whether certain schemes will process you at all.
Merchant of record
The legal seller: the party on the customer's statement, in the terms and on the tax invoice, and the one liable for the refund.
MIT and CIT
Merchant-initiated and customer-initiated transactions. A renewal is merchant-initiated; the checkout the customer completes is customer-initiated. Issuers judge them by different rules.
Payment gateway
The software that collects the card details, authenticates and tokenizes them, and talks to the acquirer. It does not hold your money.
PCI DSS
The card industry's security standard for handling card data. A merchant whose customers type their card on the processor's hosted page carries a much smaller share of it than one that touches card numbers directly.
Refund
You returning the money voluntarily. Cheaper than a chargeback in every way that matters, though the original interchange is usually not returned to you.
Reserve (rolling reserve)
A percentage of each settlement held back for a fixed period against future refunds and disputes, then released on a schedule. It is your money, later.
Settlement
The movement of funds from the issuing banks to the acquirer for a batch of captured transactions. The reason your balance lags your sales.
Statement descriptor
See Descriptor. Worth setting deliberately: it is the only part of your brand most customers see on their bank app.
3-D Secure
The authentication step where the issuer confirms the customer is present, silently or with a one-time password. Shifts fraud liability to the issuer when it succeeds.
Token
A stand-in for a card number, stored so later payments can be made without keeping the card itself. Useless to anyone who steals it from you.
Underwriting
The review that decides whether an acquirer will take your business, at what rate, with what limits and what reserve.
A term you cannot find, or one being used at you in a way that does not add up? Ask us — sales@utopia-payments.com.