Payment Terminology: Demystifying Commonly Used Payment Terms
So, you are a business owner looking for a payment gateway and someone suggested you to checkout WibmoPay and explained that WibmoPay will take care of transactions from different channels for merchant acquiring banks. And with their huge experience in the payment authorization, they are the best to handle your business payments.
Or, you are someone waiting for your refund and when you contacted your bank they replied to check with the merchant as the refund is processed by the payment aggregator and then released by the acquiring bank to your bank account.
We know it's hard to get these industry jargon and as a business owner have no idea how to explain payment terminology to your users? Well at WibmoPay, we have some ideas.
Here are the 15 most used terms in the payment industry:
Payment Aggregator/Payment Gateway- A third party payment aggregator is a company who bring all the available payment options in a single place and accepts payment on someone else’s behalf. An example would be an e-commerce store, you buy the products there, and you pay via any method available, be it UPI, Net Banking or any card/wallet. But the e-commerce store is not the ones who built them. They use an aggregator to accept the payments.
Merchant Account/Nodal Account- A merchant account is a pass-through account. Its sole purpose is to accept payments from users and transfer them to the business’s banks account. You can open one with your bank, or through a private service provider like WibmoPay. When you partner with us to get your merchant account, you’ll also get benefits like strong fraud monitoring to ensure safe and secure transactions.
User- A user is a person who is making the payment to a store via payment aggregator. This payment will route from her bank to payment aggregator and finally to the store’s bank account.
Cardholder- A person who has a credit card or debit card issued by a bank or any credit card network.
Authentication- Users aren’t always what they seem — which is why we have authentication. The person who is completing the transaction could be your family or a fraudster. So to verify the person’s identity we have 2FA authentication. As mandated by the RBI, every online transaction in India undergoes two levels of authentication: Verification of payment details: This helps the payment gateway recognize which bank your card belongs to so that they can process your payment faster. Verification of user: This is done through the OTP/PIN/CVV. When you enter these correctly, you essentially tell the bank that you are the person using the payment mode, and have initiated the request for payment.
Acquiring Bank/Merchant’s Bank- Acquiring Bank is a financial institution that maintains the merchant’s bank account and enables a merchant to accept and process card transactions on their store. The acquiring bank is responsible for receiving payment authorization requests from the merchant and sending them to the issuing bank through the appropriate channels.
Acquiring Processor/Service Provider- This third-party entity is sometimes an arm of the acquiring bank. A processor provides a service or device that allows merchants to accept credit cards as well as send credit card payment details to the credit card network. It then forwards the payment authorization back to the acquiring bank.
Credit card Network/Association Member- These entities operate the networks that process credit card payments worldwide and govern interchange fees. Examples of credit card networks are Visa, Mastercard and American Express. In the transaction process, a credit card network receives the credit card payment details from the acquiring processor. It forwards the payment authorization request to the issuing bank and sends the issuing bank’s response to the acquiring processor.
Issuing Bank/Credit Card Issuer- This is the financial institution that issued the credit card involved in the transaction. It receives the payment authorization request from the credit card network and either approves or declines the transaction.
Transaction- A transaction is an instance of buying or selling something. When you purchase a product or service from a merchant you make a payment against it. The process completes when you successfully authorised the payment and the product or service is provided.
Capture- When a payment is made on a store and authorized by the user, the money doesn’t show up in your merchant account until it is captured (which is automatic). It's like the acknowledgement of the transaction by the merchant, and once it is acknowledged, payment aggregator knows where to send the money as a settlement.
Settlement- Once the transaction has been captured, the funds will be then transferred by the payment aggregator to the merchant’s bank account, usually, it takes 2-3 days as the funds are being transferred from the bank to aggregator’s bank account and then from aggregator bank to store’s bank account.
Refunds- Refunds are the reversal of money paid to a merchant while making a purchase. A person can request a refund if she doesn’t receive the services as promised.
Chargeback- Chargebacks are different than refunds, a chargeback can be requested if the customer claims that the payment wasn’t made by her, in this case, the issuing bank or credit card issuer raises the request with the merchant to give the proof of service provided. The business has 15 days give the supporting documents or anything that can confirm the sale is not fraudulent.
TDR/MDR/Bank Charges- As you may have observed, to process a single payment various parties are involved and these parties charge a nominal fee on each transaction. TDR includes the charges charged by the bank/processing fee by card issuers and service providers. This also includes the charges by payment gateway for the service and products provided to manage the payment and finally the taxes involved.
Payments in India is constantly evolving and it’s easy for new businesses to get overwhelmed by all the terminologies and unfamiliar acronyms. We hope this guide helped you in understanding the industry and made your life easier.
And, if you have any questions or would like more information on how WibmoPay could help your business, please get in touch with us at 09599771577 or email us at [email protected]. We’d be happy to talk to you on any queries you may have.
Helping 1000+ businesses in all their payment needs via our infrastructure and solutions!
Team WibmoPay