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Payments Glossary

Plain-English definitions for 35 payment processing, underwriting, and chargeback terms — the same language we use when we talk to you.

3D SecureSecurity & Authentication: An authentication protocol that verifies the cardholder before authorisation, reducing fraud liability and meeting PSD2 SCA requirements.
Account Takeover (ATO)Fraud & Risk: Fraud that occurs when attackers gain access to customer accounts and use stored payment credentials for unauthorised transactions.
ACH TransferPayment Methods & Rails: Bank-to-bank payments processed via the Automated Clearing House network, typically in the US.
Acquirer (Acquiring Bank)Ecosystem & Participants: The licenced bank or financial institution that holds the merchant account and assumes liability for card transactions.
Acquirer Reference Number (ARN)Disputes & Chargebacks: A unique 23-digit transaction identifier used to trace card payments for dispute resolution and refund tracking.
Acquiring AgreementLegal & Compliance: The contract between a merchant and an acquirer defining pricing structure, settlement terms, rolling reserves, and liability guidelines.
Address Verification Service (AVS)Fraud & Risk: A system that compares a cardholder's billing address against issuer records to detect potential fraud.
Anti-Money Laundering (AML)Regulatory Framework: Strict obligations to detect, prevent, and report money laundering through transaction monitoring and Customer Due Diligence (CDD).
API GatewayTechnical Infrastructure: Provides direct connection between a merchant's application checkout and the central payments engine managed by Gray Merchants.
AuthorisationTransaction Flow: The process of verifying that a card is active and has sufficient funds or credit to cover a transaction.
BIN SponsorshipEcosystem & Participants: When an institution uses the Bank Identification Number of a licensed bank to route and process transactions.
Card Not Present (CNP)Transaction Flow: Transactions where the cardholder and the physical card are not present at the point of sale, such as e-commerce or phone orders.
Cardholder Data Environment (CDE)Security & Authentication: The people, processes, and technology that store, process, or transmit cardholder data or sensitive authentication data.
ChargebackDisputes & Chargebacks: A forced reversal of funds initiated by the cardholder's issuing bank, typically due to fraud, unrecognised charges, or non-delivery.
Chargeback RatioDisputes & Chargebacks: The percentage of a merchant's total transactions that result in chargebacks. Keeping this below 0.9% is critical for network compliance.
Discount RateFees & Pricing: The fee percentage charged to the merchant for processing a credit or debit card transaction.
Dynamic Currency Conversion (DCC)Fees & Pricing: A service that offers customers the option to pay in their home currency rather than the merchant’s local currency at the point of sale.
Friendly FraudFraud & Risk: When a consumer makes an online purchase with their own credit card, and then requests a chargeback from the issuing bank after receiving the goods or services, often claiming they didn't authorise the purchase.
High-Risk MerchantUnderwriting: A business classified as having an elevated risk of chargebacks, fraud, or legal complications due to industry type or processing history.
Independent Sales Organization (ISO)Ecosystem & Participants: A third-party company, like Gray Merchants, that brokers merchants and sets up payment processing services.
Interchange FeeFees & Pricing: The base fee paid by the acquiring bank (and passed to the merchant) to the cardholder's issuing bank for each transaction processed.
Issuer (Issuing Bank)Ecosystem & Participants: The financial institution that issues the credit or debit card to the consumer and assumes responsibility for the cardholder's debt.
KYC (Know Your Customer)Regulatory Framework: The mandatory process of identifying and verifying the identity of clients when opening an account and periodically over time.
Level 2 & Level 3 ProcessingEcosystem & Participants: Additional data points (like tax amounts and line items) passed during a B2B or B2G transaction to secure lower interchange rates.
MATCH List (TMF)Fraud & Risk: The Member Alert to Control High-Risk Merchants (MATCH) system, a blacklist barring merchants from obtaining new acquiring accounts.
Payment Facilitator (PayFac)Ecosystem & Participants: A designated entity that effectively acts as the master merchant account, sub-boarding smaller merchants underneath its umbrella.
Payment GatewayTechnical Infrastructure: The technology that captures and transfers payment data from the customer to the acquirer and then transfers the payment acceptance or decline back.
PCI DSSSecurity & Authentication: The Payment Card Industry Data Security Standard is a set of security standards designed to ensure all companies that maintain credit card information maintain a secure environment.
ProcessorEcosystem & Participants: The entity that executes the transaction by transmitting data between the merchant, acquiring bank, and the card networks.
Refund vs VoidTransaction Flow: A void cancels a transaction before it settles, whereas a refund reverses a transaction that has already been settled and funded.
Rolling ReserveUnderwriting: A risk management strategy where the acquirer holds a percentage of a merchant's daily processing volume for a set period to cover potential future chargebacks.
SettlementTransaction Flow: The final stage of the payment process where funds are transferred from the cardholder's issuing bank to the merchant's acquiring bank account.
TokenisationSecurity & Authentication: The process of replacing sensitive payment data with a unique, non-sensitive identifier (token) that cannot be reverse-engineered.
UnderwritingUnderwriting: The process where a bank evaluates a merchant's business model, financials, and risk profile to determine acquiring approval and terms.
Virtual TerminalTechnical Infrastructure: A web-based application that allows merchants to manually enter credit card transactions, typically used for MOTO (Mail Order/Telephone Order) businesses.