Payment Glossary

The payment industry loves jargon. Here's what it all means.

All (77)Pricing (10)Infrastructure (12)Risk & Compliance (19)Technical (16)Business Models (10)Regulatory (10)

C

Continuity Merchant

Business Models

A merchant using a business model where customers sign up (often with a trial) and are automatically billed on an ongoing basis until cancellation. Includes subscription boxes, membership services, and auto-replenishment. Higher risk classification due to chargeback patterns from customers forgetting they subscribed. MCC 5968 (Direct Marketing - Continuity/Subscription) commonly applies.

Card-on-File

Business Models

Storing customer payment credentials for future transactions without requiring re-entry. Essential for recurring billing, one-click checkout, and repeat purchases. Must use tokenization for PCI compliance. Card networks have specific rules including obtaining consent and identifying stored credential transactions. Network tokens improve approval rates for card-on-file.

Card Updater

Business Models

Services that automatically update stored card credentials when cards are reissued or replaced. Visa Account Updater (VAU) and Mastercard Automatic Billing Updater (ABU) provide new card details to merchants. Essential for subscription businesses to reduce involuntary churn from expired cards. Updates happen during batch processes - not real-time.

CIT (Customer Initiated Transaction)

Business Models

A transaction initiated by the cardholder at the time of purchase, with the cardholder actively present (physically or online). The initial enrollment for recurring payments is a CIT even though subsequent charges are MITs. SCA typically applies to CITs in Europe. Proper classification affects authorization rates and compliance.

D

Dunning

Business Models

The process of recovering failed subscription payments through retries and customer communication. Includes automated retry attempts, customer notifications, and grace periods before cancellation. Effective dunning recovers 10-30% of failed payments. Optimize retry timing based on decline reason. Balance persistence with customer experience - over-aggressive dunning annoys customers.

I

Involuntary Churn

Business Models

Customer loss due to payment failures rather than intentional cancellation. Caused by expired cards, insufficient funds, or technical issues. Represents 20-40% of subscription churn. Prevention requires card updater services, smart retry logic, and effective dunning. Involuntary churn is largely preventable with proper payment optimization.

M

MIT (Merchant Initiated Transaction)

Business Models

A transaction initiated by the merchant using stored credentials without cardholder involvement at the time of transaction. Includes subscription renewals, auto-replenishment, and delayed charges. Requires prior cardholder consent and proper flagging in the authorization request. MITs may be exempt from SCA in Europe. Distinct from CIT (customer-initiated transactions).

R

Recurring Payments

Business Models

Transactions that repeat automatically at set intervals using stored payment credentials. Includes subscription billing and installment plans. Requires proper cardholder consent and clear terms. SCA exemptions may apply for fixed-amount recurring in Europe. Card updater services essential to maintain payment continuity when cards are reissued.

S

Subscription Billing

Business Models

A payment model where customers are charged on a recurring schedule (monthly, annually, etc.) for ongoing access to products or services. Requires card-on-file capability and careful attention to authorization rates, dunning, and involuntary churn. Card networks have specific rules for subscription billing including clear disclosure and easy cancellation. Higher risk classification due to chargeback patterns.

T

Trial Offer

Business Models

A promotional model offering free or discounted initial access before full-price billing begins. High-risk due to chargeback patterns when customers forget conversion or didn't understand terms. Acquirers scrutinize trial-to-paid conversion rates. Clear disclosure of trial terms, billing dates, and cancellation process essential. Some acquirers prohibit 'negative option' trials entirely.

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