Glossary.
Plain-English.

Acquirer

The bank or financial institution that holds the merchant account, accepts card transactions on behalf of the merchant, and bears underwriting risk. Distinct from the processor (which performs technical authorization and settlement) and the gateway (which is the API layer).

Authorization

A request to the issuing bank to verify that a card has sufficient credit and is not flagged for fraud. Authorizations place a hold on funds; capture is required to actually settle the transaction.

AVS (Address Verification Service)

A scheme service that compares the cardholder's billing address with the address on file at the issuing bank. AVS results affect interchange qualification, fraud risk scoring, and chargeback liability.

Basis point (bps)

One one-hundredth of a percent. 100 basis points = 1.00%. The unit of measure for interchange, processor margin, and FX margin in the payments industry.

BIN (Bank Identification Number)

The first six to eight digits of a card number. The BIN identifies the issuing bank, card type (credit, debit, commercial, prepaid), and country of issuance.

Capture

The instruction to actually charge the cardholder's account against a previously approved authorization. Auth-now-capture-later flows are common for shipping or fulfillment-based businesses.

Chargeback

A reversal of a transaction initiated by the cardholder through their issuing bank. Chargebacks carry fees and, at sustained ratios, trigger network monitoring programs with additional costs.

Cross-border interchange

A premium added to standard interchange when the issuer and acquirer are in different countries. Typically 1.0%–1.6% on top of standard category rates.

EMV

A chip-card standard developed by Europay, Mastercard, and Visa. EMV transactions carry liability shifts and qualify for distinct interchange categories vs. magstripe.

Gateway

The API layer that merchants and platforms integrate with to submit card transactions. Some gateways also provide MOR services; some are pure pass-through to a processor.

Interchange

The fee paid by the acquirer to the issuing bank on every card transaction. Interchange rates vary by hundreds of categories determined by card type, transaction context, and submitted data.

ISV (Independent Software Vendor)

A software company that integrates payments into a vertical-specific application (medical billing, restaurant POS, dental practice management, etc.). ISV embedded payments is a major fintech category.

KYC / KYB

Know Your Customer / Know Your Business — regulatory processes for verifying the identity and background of a customer or business at account opening.

Level 2 / Level 3

Enriched transaction data submitted with B2B card transactions. Qualifying for Level 2 or Level 3 interchange typically reduces commercial-card processing cost by 50–100 basis points.

MCC (Merchant Category Code)

A four-digit code assigned to each merchant account that classifies the merchant's business type. MCC affects interchange qualification and risk underwriting.

MOR (Merchant of Record)

The legal entity that the cardholder is paying. MORs bear chargeback risk, KYC obligations, scheme compliance, and tax/VAT collection responsibilities.

Network token

A token issued by Visa, Mastercard, etc. that replaces raw card data. Network tokens reduce fraud, improve approval rates, and qualify for some lower interchange categories.

PCI DSS

Payment Card Industry Data Security Standard. The compliance framework for any entity handling card data. Scope reduction is a major architectural concern.

Scheme fees

Fees paid to the card networks (Visa, Mastercard, Amex, Discover) for switching, settlement, brand, fraud monitoring, and regulatory programs. Distinct from interchange.

Settlement

The transfer of funds from the issuing bank to the acquirer to the merchant. Settlement timing is contractually defined and affects working capital.

Definitions reflect general industry usage. Specific contracts, network bulletins, and regulatory citations should be consulted for any decision of consequence.