Payment Aggregator Terms Every Business Should Know
Nearly every business today accepts payments online from customers every day. While it’s pretty intuitive once you get used to it, the initial phase of setting up a payment gateway can be quite difficult for new business owners. If you are not familiar with the technical terms involved, it could be confusing to navigate any problems that arise.
What is a Payment Processor?
Payment processors help businesses with managing the processes of online transactions. Such a payment aggregator acts as a mediator between financial companies and merchants. It authorises and records every transaction, ensuring the merchant (the business) gets paid timely payments by facilitating fund transfers.
If you partner with a leading payment processing company, you also get additional services and equipment to accept payments, ensure higher security, get assistance for PCI compliance and customer support, among other value-added services.
For all future purposes, here’s a list of all the jargon related to payment gateways that you will come across in daily operations:
- 3D Secure or 2-Factor Authentication: 3D Secure authentication is an additional security layer added to online transactions. When making a payment online, one receives an OTP via SMS as an extra security measure.
- Acquirer or Acquiring Bank: This is the term used for the bank where the online payments are received first. All settlements and transactions are processed from the acquirer and then transferred to merchant banks.
- API: Application Programming Interface gets shortened to API. It allows effective terms of communication between both applications and behaves like a link between the two.
- Authentication: Authentication is a process carried out by the payment gateway to authenticate the identity of the person initiating the payment. They need to enter multiple fields with personal information like card number, name, CVV number, password etc.
- Authorisation: When a customer initiates an online payment, a request gets sent through the payment gateway for authorisation. Once the customer’s bank authorises this transaction based on the availability of funds, the payment gateway receives a message saying the transaction is successful. If not, the transaction fails. There could be other reasons for failed transactions besides lack of funds, such as security reasons, bank server problems etc. Sometimes server problems can get resolved by trying the transaction a while later when the server is relatively freer.
- Bank Identification Number: A Bank Identification Number or BIN is significant in online transactions. The BIN refers to the first 6-8 digits of the credit card number and is useful during processing, payment clearing and authorisation.
- Business Days: This is a term you might have heard in other contexts as well, also used as working days. Business days mean all working days in a week, excluding public and bank holidays. The term is usually used in the context of payment settlements, where acquirers tell merchants they will receive payments in 15 working days, for instance. However, it is also used to discuss any of the functions of payment gateways that need you to perform an action on a business day.
- Capture: When a transaction is authorised by the customer’s bank, the approved amount gets transferred to the acquirer or acquiring bank account. To say that a merchant must capture these funds means that you must acknowledge that you have received the funds in some form or other as a business owner. This capture of funds can be both automatic and manual.
- Chargeback: A chargeback is a technical term for a dispute raised by the customer against the credit card transaction with the customer’s bank.
- Chargeback Minimisation: Chargeback minimisation refers to the steps that both the payment gateway and merchant must take to ensure that both genuine and fraudulent chargebacks are reduced if not eliminated.
- Chargeback Reason Code:Several designated codes help all parties involved to immediately recognise the reason for the chargeback.
- Customer: This is the party purchasing your service or product. Essentially, the party that initiates the transaction online using the available payment methods to acquire your offering is called the user or the customer.
- Electronic Fund Transfer: This refers to the feature that payment gateways offer that allows the transfer of funds using online payment methods such as NEFT, IMPS, RTGS or UPI.
- Fraud Prevention: The steps taken to avoid, prevent or mitigate fraud by either merchants or customers are known as fraud prevention measures. This includes checking balances, risk analyses, completing your KYC etc.
- High-Risk Business: Businesses having a large volume of chargebacks are considered high-risk businesses. These enterprises are generally involved in risky or unstable business activities.
- ICO or Initial Coin Offering: ICO is the process of raising funds to create new forms of cryptocurrency. An Initial Coin Offering is similar to how businesses raise IPOs (Initial Public Offerings) as they try to collect funds when they go public.
- Integration: In simple terms, integration refers to adding a payment gateway to existing mobile apps or websites. Every gateway service provider already has plugins and software development keys (SDKs) for a wide range of platforms that makes it easy to integrate for businesses.
- International Bank Account Number: IBAN is the account number for international transactions.
- Issuing Bank: The customer’s bank is also called the issuing bank. This is the bank from which payments are authorised, deducted or rejected. An issuing bank offers net banking and other types of solutions, such as multiple card types. They make it easier for customers to complete transactions via your online payment gateway.
- KYC: KYC is short for Know Your Customer, a verification process that asks for personal identification documents and details. Every financial institution, payment aggregator and payment gateway provider mandates completing the KYC process so that both the merchant and the customer are verified.
Understanding each distinct term makes it easy to navigate the working of payment gateway systems. It also helps to partner with an experienced and credible payment gateway provider. They will give you access to all the tools, guidance, and data you need for efficient and secure card payments.