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)

A

A2A Payments (Account to Account)

Regulatory

Payments transferred directly between bank accounts without using card rails. Enabled by open banking APIs. Lower fees than card payments (typically 0.1-0.5%). Irrevocable once completed - no chargebacks. Growing adoption in Europe and markets with real-time payment infrastructure. Not yet mainstream for e-commerce but expanding.

B

Billing Descriptor

Regulatory

The merchant name and information appearing on cardholder statements. Clear, recognizable descriptors reduce 'I don't recognize this charge' chargebacks. Typically limited to 22-25 characters. Can include dynamic elements for clarity. Some PSPs allow 'soft descriptors' that differ from the merchant's legal name. Poor descriptors are a leading cause of friendly fraud.

C

Cross-Border Fees

Regulatory

Additional fees applied when the card-issuing country differs from the merchant's country. Includes both interchange surcharges and scheme fees. Cross-border transactions typically cost 0.5-2% more than domestic. Can be mitigated through local acquiring in key markets. Significant cost factor for international merchants.

D

DCC (Dynamic Currency Conversion)

Regulatory

A service allowing cardholders to pay in their home currency rather than the merchant's currency at the point of sale. The exchange rate includes a markup (typically 2-4%) split between merchant and processor. Controversial due to unfavorable rates for consumers. Requires cardholder consent. Can increase revenue for merchants but may create customer complaints.

F

FX Markup

Regulatory

The margin added to currency conversion, expressed as a percentage above the interbank rate. Applies to cross-border transactions, multi-currency pricing, and payouts. Typical markups range from 1-3%. Some PSPs offer at-cost FX; others build significant margin into conversions. For international merchants, FX costs can exceed processing fees.

I

Interchange Regulation

Regulatory

Government-mandated caps on interchange fees. The EU caps consumer card interchange at 0.2% for debit and 0.3% for credit. UK retained similar caps post-Brexit. US Durbin Amendment caps regulated debit interchange. Commercial and cross-border transactions often exempt from caps. Regulation reduced merchant costs but affected card rewards programs.

L

Local Acquiring

Regulatory

Processing transactions through an acquirer in the same country as the cardholder. Reduces cross-border fees and often improves approval rates due to issuer preferences for domestic transactions. Requires merchant account in each country or a PSP with local acquiring capabilities. Cost-effective for merchants with significant volume in specific markets.

M

MATCH List

Regulatory

Mastercard's Member Alert to Control High-risk merchants - a database of merchants terminated for cause by acquirers. Also called TMF (Terminated Merchant File). Being on MATCH severely limits ability to obtain new merchant accounts. Listings remain for 5 years. Grounds include excessive chargebacks, fraud, collusion, and illegal activity. Erroneously listed merchants can appeal for removal.

O

Open Banking

Regulatory

A framework enabling third parties to access bank account data and initiate payments with customer consent. Mandated by PSD2 in Europe. Enables account-to-account payments bypassing card networks. Growing as alternative payment method. Benefits include lower fees than cards and real-time payment confirmation. Adoption varies by market.

P

PSD2 (Payment Services Directive 2)

Regulatory

European regulation governing payment services, effective since 2019. Key provisions include Strong Customer Authentication (SCA) requirements, open banking mandates, and enhanced consumer protections. Applies to EEA countries and influenced UK regulations. PSD2 changed the payment landscape by requiring 3DS for most online transactions and enabling third-party access to bank accounts.

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