Each industry has its own industry terminology, which is officially known as "terminology". If you’re new to the payments industry, or are struggling to gain a deeper understanding of this complex but full of opportunity space, mastering industry terminology is key to opening the door.
The requirements documents and technical solution documents of the payment system are full of professional vocabulary and industry terms. Some terms are easy to understand, while others are more obscure.
In this article, we will demystify the terms commonly used in payment systems, explain these professional terms in the most concise and popular language, and help you thoroughly understand these necessary terms.
It should be added that these terms are a summary of personal professional experience and are mainly used for requirements discussion and communication during design. They may not be as rigorous as authoritative books, but they are practical enough.
In addition, some terms may have different meanings in different fields, and the following definitions only apply to the scenario of online payment systems.
Universal class
Pay
Pay. Users can transfer funds to PSP through the online payment system. In the subsequent stages of payment settlement, the payment platform will divide the payment amount into platform handling fees and merchant payments to be settled. The handling fee will be retained on the payment platform, and the pending payment will be paid to the merchant at subsequent settlement.
Refund
Refund. The payment system will return the money to the user. Typically occurs after canceling a transaction or returning an item. There are two types of refunds: full refunds and partial refunds. Some platforms will provide refunds and refunds, while some platforms will only provide refunds without refunds.
Acquiring Products
Purchase products. A payment service provider (PSP) provides payment services to merchants. These payment services need to clearly record buying and selling behavior in the system based on transaction orders. Due to differences in business strategies, different companies provide different acquiring products.
Secured Transaction
Users need to pay money to the payment platform first, and then pay the money to the merchant after confirmation of receipt.
Instant arrival
Funds will be transferred directly to the receiving account without the user having to confirm the payment again.
Funding products
Funding products usually refer to services related to processing customer fund flows, including various functions such as recharge, transfer, cash withdrawal, and agency issuance.
Recharge
Recharge refers to the operation of adding funds to an online payment system account, such as recharging to Alipay or WeChat accounts.
Transfers
Transfers are the process of moving funds from one account in an online payment system to another. This process can be done within the same payment platform, or across platforms or banks. Person-to-person transfers, referred to as P2P transfers, are a special form of payment.
Withdraw
Withdraw funds. Users can transfer the balance in their online payment system account to a designated bank account.
Dropshipping
companies or organizations can transfer funds directly to personal accounts through online payment systems. Transfer methods include transferring to balance and transferring to card. T day/T+N means the Nth day after a specific point in time. T day refers to the date when the transaction actually occurs.
T+N means counting from N working days after the transaction date.
For example, T+1 clearing refers to clearing on the second working day after the transaction is completed.
Risk Control
Risk management plays an important role in trading. These include aspects such as fraud detection, credit assessment and compliance checks.
Payment method and channel selection
Payment method
A payment method or instrument visible to the end user. This concept is relatively abstract, and different companies may have different definitions. However, generally speaking, credit cards, debit cards, e-wallets, virtual accounts, offline payments, credit payments (such as Huabei, Baitiao, often called BuyNowPayLater abroad), etc. can be abstracted as payment methods.
Channels
Financial institutions usually refer to institutions that can provide external financial services. For example, payment channels, foreign exchange channels, fund transfer channels, etc., respectively provide financial services such as payment, currency exchange, withdrawal and transfer.
Quick Payment
By binding bank card information in the payment system in advance, payment transactions can be completed quickly without having to fill in complete card details every time.
Withholding:
Individuals can authorize merchants to deduct money directly from the payment platform or bank without requiring the user to participate in the payment process. For example, it can be achieved through automatic deduction of water, electricity and coal or Didi taxi deduction.
Card Payments
You can choose to pay with a credit or debit card.
Online Banking Payment
In order to make a payment, you need to go to the payment page provided by your bank and enter your bank account information.
Third-party wallets or electronic wallets for payment
Online payment services provided by non-financial institutions, such as Alipay, WeChat Pay, and international PayPal, etc.
QR code payment
In mobile payment scenarios, payment transactions can be made by scanning QR codes. This method is widely adopted.
Forward scanning:
The merchant generates a QR code, and the customer scans the merchant's QR code.
Anti-Scan
Consumers can generate their own QR codes, and then merchants can scan the consumer's QR code.
Subsystems/subapplications can be classified according to their functions and characteristics.
The open gateway
is mainly responsible for connecting with merchant interfaces, including functional entrances such as ordering and payment. Higher security is usually required. Some companies may integrate capabilities such as mobile gateways, PC portal gateways, and merchant notifications into open gateways, or they may be deployed separately.
Acquiring and settlement
is responsible for receiving orders from merchants and performing settlement processing. The scope of acquiring products includes online acquiring, offline acquiring, secured transactions, instant payment, etc., and each company provides different acquiring products based on the differences in its business strategies.
Fund products:
Pure fund transfer capability refers to the fund transfer method without buying or selling objects. Typical examples include: recharge, transfer, cash withdrawal, and sending on behalf of others. The difference from payment is that payment has specific purchase and sale targets, while capital products do not. In other words, there is no record of buying and selling in the system, but it may exist offline.
The payment engine
handles the actual deductions and transfers. Some companies call it payment core or asset exchange. I think asset exchange is more appropriate, because various transactions, whether it is payment, refund, recharge or transfer, are essentially the exchange of assets from one account to another.
The channel gateway
is responsible for processing the deduction tasks of external channels. Usually, related functions such as channel routing and channel consultation are also provided. Some companies even further segment this into channel products, message gateways, and file gateways.
The membership platform
is responsible for member registration, login, password and real-name authentication and other management work.
The merchant platform
is responsible for managing merchant registration, login, transactions and other matters.
Product Center
Generally speaking, only large-scale payment systems will be independent into a subsystem so that the management platform can provide product capabilities to the outside world.
Capital Accounting:
Responsible for opening accounts, recording accounts and other tasks.
The reconciliation center
is responsible for reconciling detailed accounts and capital accounts.
Risk control platform
In order to control the risk of accounts and transactions, we provide real-time and offline risk control measures to manage the risks of the platform.
Data Platform
This tool is mainly used for data aggregation and analysis. After distributed deployment, data will be scattered in different subsystems and need to be summarized on a data platform for business analysis.
Quota Center
The quotas of users and merchants are usually calculated cumulatively according to different categories, such as by day, month, year, etc.
The foreign exchange platform
is responsible for providing foreign exchange quotations and exchange services.
Regulatory Compliance
Payment Service Providers
PSP , payment service provider.
This company provides payment solutions to merchants. Banks and third-party payment companies are providers of payment services.
Acquirer Acquirer
/Acquirer: A financial institution or payment service provider (payment service provider) responsible for processing and settling merchant transactions.
License
License. It refers to an official license issued by a regulatory agency or the government, allowing the holder to engage in specific financial services or payment businesses under specific legal frameworks and regulations. Payment-related licenses mainly include:
Bank license: allows companies to carry out traditional banking services, such as savings deposits, loans, etc.
A payment institution license allows a company to provide payment services, including payment processing, funds transfers, e-wallets and other services.
Electronic Money Institution License: Allows companies to issue and manage electronic currencies such as prepaid cards and funds in e-wallets.
Business development:
Developing business activities in a specific area is usually handled together with application for licenses, regulatory compliance and other related matters.
Regulation and Compliance
Payment or financial institutions must comply with the requirements of relevant laws, regulations, standards and industry codes of the country in which they are located. They are required to regularly report their business activities and financial status to regulators to demonstrate their compliance.
Anti-Money
Laundering Anti-Money Laundering (AML) is the practice aimed at preventing, identifying and combating the conversion of illicit funds into legitimate funds through the financial system.
Anti-fraud
Anti-fraud. Designed to prevent, detect, trace and deter fraud. In the payments world, this responsibility is typically held by risk control systems. Some common frauds include credit card skimming and account takeover.
Pre-authorization
authorization, also known as Auth. By temporarily authorizing the user's credit card, the corresponding funds will be frozen and will not be unfrozen until the payment is charged or revoked (whether it is active or automatically revoked upon expiration).
Chargeback
occurred. When a user disputes a credit card transaction (such as being swiped), the bank will usually refund the money to the user first, deduct the money from the merchant's account, conduct an investigation, and notify the merchant of a refund request.
Proof of chargeback and appeal
for chargeback. After the merchant receives the chargeback notice, if it believes that the user's payment behavior is genuine or that there is no problem with the product, the merchant will provide relevant supporting materials to the bank to appeal the chargeback. If the bank deems the merchant's evidence to be valid, the chargeback will be revoked and the user's money will be deducted again and settled to the merchant.
Chargeback reversal
Chargeback reversal means that after the merchant provides valid evidence, the card group recognizes the evidence, returns the chargeback to the merchant, and cancels the user's refund.
QR Code Payments
In the past, off-site payments were typically credit card payments via mail or phone. However, in online payment systems, offsite payment refers to using a payment method without having to go to a separate authentication page. This payment method has a higher success rate, but the risk is also higher.
3DS payment
In order to add additional security verification, users need to enter password, OTP, billing address and other information on a separate identity verification page to confirm their identity. This does improve security for the platform, but the payment success rate is reduced.
3DS1.0/3DS2.0 is an authentication protocol for electronic payments.
3DS1. Identity verification is usually performed by the card issuer.
3DS2. Authentication is implemented by an independent third party, increasing security. This service is the first to be launched in Europe.
The first 6-8 digits of the card BIN number are used to identify the card issuer and card type.
Card Issuing
Bank A bank or financial institution that issues payment cards to users.
Acquirer
A bank or financial institution that provides payment collection services to merchants.
Card Groups/Card Brands
VISA, MASTERCARD and UnionPay are the organizations responsible for credit and debit card transaction networks.
