Payment Terminology: a Glossary for Commerce

Commerce is all about buying and selling goods. But, with the recent advancements in technology, commerce has evolved into something bigger, where businesses can now trade anywhere with ease. As a result, before a business can enter the eCommerce space, there is some payment terminology to be familiar with.

Account Updater

It allows business merchants to automatically update customers' stored card information, which is quite crucial when dealing with recurring payments. It also notifies the acquiring bank about changes like lost or stolen cards, closed accounts, or issued but not used cards.

Up to 2024, Account Updater services are more advanced with near real-time card details updates and better global coverage. These services now allow businesses to reject fewer repeat payments and keep more customers by pre-emptively synchronizing card credentials across card networks like Visa and Mastercard.

Acquiring Bank

An acquiring bank is a financial institution that operates on behalf of a merchant to accept payments and facilitate the transfer of funds from the account of the customer. The acquirer will either be certified by the respective card networks or operate in association with a licensed payment processor to process card transactions.

ARN (Acquirer Reference Number)

This is a unique number assigned to a transaction after it moves from the acquiring bank via the card scheme at the issuer or cardholder’s bank. The ARN is a reference for tracking employed by merchants and customers to monitor the status of refunds or payments throughout the transaction.

Bank Identification Number

The Bank Identification Number, or Issuer Identification Number, is the first six or eight digits of a payment card and is used to identify the issuing institution. These numbers are used to determine the card networks quickly.

Capture or Clearing & Settlement

After a payment has been accepted by the processor, it should be captured so that the transaction can be finished. This movement effectively moves the money from the customer into the merchant's account.

Cardholder Verification Method

A cardholder is a customer that uses a bank-issued card to complete cashless transactions. A CVM or cardholder verification method is used to confirm any payment instrument like credit cards.

Card Networks

Card schemes, also known as card networks, are systems that prescribe the platform and rules on which payment cards are issued and payment card transactions effected with them processed. For a transaction to succeed, the acquiring bank and card issuer of the card used need to be on the same network as the card.

Card Security Code

These are three to four-digit codes printed on a card in addition to the existing card number. This code is used in certain transactions to verify the cardholder’s identity.

Chargeback

If a customer is not able to obtain a refund from the merchant directly in case of disagreement, then they can request a chargeback from the issuing bank. Then, the chargeback process begins until it is resolved, with either the customer getting their money back or staying with the merchant.

Digital Customer Recognition

Digital Customer recognition or DCR is used to identify shoppers that have purchased goods previously with the merchant across channels. This can help tailor loyalty programs.

Dynamic Currency Conversion

Cardholder Preferred Currency (CPC), or DCC, permits a card holder to make foreign payments in their native card currency. In case the payment terminal has been made DCC-compatible, the buyer has the facility of paying in his or her own card country currency.

In 2025, DCC has reached online platforms as well, not just POS terminals. Many international e-commerce websites these days offer DCC at the checkout, with customers being given the option to view and pay in their local currency — with transparent exchange rates.

Floor Limit

This is the highest amount that a terminal can approve on a single transaction when it happens offline. Then there is also an internal limitation, which can be set to apply to all transactions processed offline.

In-app Payments

In-app or mobile payment is an electronic transaction initiated directly by consumers via mobile applications. These payments no longer end with wallets and cards — they integrate with UPI, biometric authentication (face or fingerprint, for example), and tokenized payment credentials. One-click checkout support embedded has also grown incredibly fast, especially in mobile-first markets.

Interchange Fee

An interchange fee is a payment by the acquiring bank to the issuing bank per transaction that goes through a card network. The exact fee and accompanying scheme charges are decided by the respective card network.

Issuer/Issuing Bank

This is simply a bank that issues a card for shoppers to make cashless transactions through eCommerce websites, physical stores, or a mobile app. To issue a card, the issuer must be part of the numerous card networks. Or they must subscribe to one of the card services.

Basic E-Commerce Payments Terms

Having an idea of payment gateway terminology and the different payment terms and abbreviations is vital to running a successful e-commerce business.

Anti-Money Laundering – AML

AML or Anti-money laundering is a term used mainly in the financial and legal industries to explain a set of rules, procedures, legal controls, or regulations built to prevent, detect, and report the practice of generating a source of income using illegal activities such as money laundering.

Alternative Payment Method – APM

An alternative payment method or APM relates to an electronic payment not made through a debit or credit card. This method includes e-vouchers, digital wallets, prepaid cards, P2P solutions, cryptocurrencies, and mobile payments.

Bank Identifier Code – BIC

Bank Identifier Code or BIC is also referred to as a SWIFT address or SWIFT code since SWIFT owns and operates the BIC system.

Continuous Linked Settlement – CLS

CLS or Continuous Linked Settlement is run by the CLS international bank. This is a financial institution that is dedicated to settling foreign exchange trades. CLS administers a multi-currency system for settlement to mitigate the risk associated with Forex transactions via the provision of its payment against a payment settlement service. This directly links to the Real-Time Gross Settlement systems of each 18 currencies it handles.

Card Not Present – CNP

What we mean by Card Not Present is when a remote purchase is made where the payment card and cardholder are not present physically for visual examination at the POS. This is classified under purchases made over the phone, by mail, on the merchant’s website, fax, or even mail-order.

Electronic Funds Transfer – EFT

Electronic Funds Transfer or EFT is any transfer of funds that is started electronically, such as ATM withdrawals, card payments, debit transfers, and others without the help of bank staff. These transactions occur in the same organization or between accounts spread across one or more financial institutes in the same banking network.

Foreign Exchange – FX/Forex

Forex or Foreign Exchange, or FX is converting or exchanging a particular currency to another. It is also a global trading market where currencies are exchanged 24/7, with its largest trading centers in London, Tokyo, New York, and Singapore.

International Bank Account Number – IBAN

IBAN is an account number written in a standardized internationally recognized format used to identify a particular individual’s account. With that, it is faster and easier to process cross-border transactions all over Europe. A typical IBAN comes with codes that identify the country and bank the account belongs to and the account number.

Knowledge-Based Authentication – KBA

KBA is a security measure, which seeks to provide proof to identify the user attempting to access an online service by asking them to give answers to one or more secret questions. It is now obsolete for secure authentication. Biometric and risk-based authentication are the standard on most platforms as of 2025. KBA is being phased out due to its susceptibility to social engineering and data breaches.

Know Your Customer – KYC

Know Your Customer or KYC is a mandatory regulation in banking designed to protect the integrity of the banking system. To prevent risks, financial institutions perform KYC checks by getting sufficient information that is useful in developing a comprehensive profile of customers.

Payment Card Industry – PCI

PCI consists of all the organizations that store, transmit, and process cardholder data, which includes ATMs, point of sale (POS), credit, prepaid, debit, and electronic money cards, and terminals. PCI is regulated by the PCI Security Standards Council

Payment Card Industry Data Security Standard – PCI DSS

The Payment Card Industry Data Security Standard, or PCI DSS, is an information security standard that businesses must comply with in handling payment card information. The PCI Security Standards Council operates the standard, which focuses on improving data protection and minimizing possibilities for credit card fraud. Compliance is also validated annually through a qualified security assessor or self-assessment questionnaire, based on the volume of transactions each organization makes.

Since 2024, the PCI DSS v4.0 standard is in effect, introducing stricter requirements around multi-factor authentication, continuous monitoring, and customized implementation approaches. Businesses must now align with these updated controls to maintain PCI compliance.

Real-Time Gross Settlement Systems – RTGS

Real-Time Gross Settlement Systems or RTGS are fund transfer systems created to move high value and multiple wholesale payments from one bank to another instantly. RTGS is often controlled by the central bank of the country. When payments are made through an RTGS, they are settled once the processing is complete. Once this happens, the payments are final and irreversible. Since these payments are high value, there is no need to be bundled or netted. As a result, each transaction is settled on a one-on-one basis in real-time.

Society for Worldwide Interbank Financial Telecommunication – SWIFT

SWIFT is a cooperative utility with the goal of developing a standardized messaging and processing of transaction services for global financial institutions, enabling cross-border transfers. SWIFT payments refer to cross-border transactions which are forwarded across the SWIFT messaging system. While SWIFT facilitates the safe exchange of payment messages between banks, it doesn't have a role in making the transfer itself.