Navigating the world of payments can feel like learning a new language. Whether you’re a business looking to integrate a payment provider, thinking about BaaS, or just trying to understand the terminology, this glossary breaks down the most important terms in simple, no-nonsense language.
A to Z of payments: key terms explained
A – AML (Anti-Money Laundering) & Authorization
- AML – Anti-Money Laundering: Regulations and processes designed to prevent money laundering and financial crimes by monitoring and reporting suspicious transactions.
- Authorization: The process of verifying a cardholder’s payment details before a transaction is approved.
B – Banking as a Service (BaaS) & BaaS Agent
- BaaS – Banking as a Service: A model that allows businesses to offer financial services without becoming a bank themselves. Think of it as renting banking capabilities instead of building them from scratch. Also called embedded finance.
C – Compliance & Cross-Border Payments
- Compliance: Ensuring all payment operations adhere to financial regulations and security requirements. Sometimes, compliance can be built into BaaS.
- Cross-Border Payments: Transactions that occur between parties in different countries, requiring currency exchange and regulatory compliance.
D – Digital Wallet & Data Security
- Digital Wallet: A wallet that can be integrated into an app or platform, it stores IBAN account and balance information and allows for fast, secure transactions without using a physical card.
- Data Security: Measures and technologies to protect payment and financial information from cyber threats.
E – Embedded Payments & Electronic Money Distributor (EMD)
- Embedded Finance: Payments, cards and IBAN accounts seamlessly integrated into a platform, so customers don’t have to leave the site or app to complete a purchase.
- EMD – Electronic Money Distributor: A partner authorized to distribute and manage electronic money under an Electronic Money Institution’s (EMI) license.
F – Fraud Prevention & Foreign Exchange (FX)
- Fraud Prevention: A set of tools and processes to detect and stop fraudulent transactions before they happen. This includes monitoring, two-factor authentication, and more.
- FX – Foreign Exchange: The exchange of one currency for another, crucial for international payments and multi-currency support.
G – Gateway (Payment Gateway)
- Gateway or Payment Gateway: The technology that securely connects merchants to payment processors, encrypting transaction data to keep it safe.
I – IBAN (International Bank Account Number), Instant Payments & Inter-Ledger Transfers
- IBAN – International Bank Account Number: A standardized way to identify bank accounts internationally, making payments smooth and reliable.
- Instant Payments: Real-time payments where funds are transferred immediately, like SEPA Instant.
- Inter-Ledger Transfers: money transfers within one ecosystem system, e.g. one marketplace.
K – KYC (Know Your Customer)
- KYC – Know Your Customer: A mandatory process where businesses verify the identity of customers to prevent fraud, money laundering, and other financial crimes.
M – Merchant Service & Multi-Currency Support
- Merchant Service: Payment solutions that allow businesses to accept card transactions or other payment methods online and process payments securely.
- Multi-Currency Support: The ability to process payments in multiple currencies.
O – Open Banking
- Open Banking: A system where banks share financial data with third-party providers (with user consent) to create better financial services. They also enable straightforward payments from one bank account to another.
P – Payment Initiation Service (PIS) & PSD2 (Payment Services Directive 2)
- PIS – Payment Initiation Service: A service that enables businesses to initiate online payments directly from customer bank accounts without using cards. It’s usually used as a synonym for Open Banking payments.
- PSD2 – Payment Services Directive 2: A European regulation improving security and transparency in payments.
Q – Quality Assurance
- Quality Assurance: Ensuring payment processes and services run smoothly with minimal errors.
R – Recurring Payments
- Recurring Payments: Payments that happen on a scheduled basis, like monthly subscriptions for streaming services.
S – SEPA (Single Euro Payments Area), Strong Customer Authentication (SCA) & SWIFT (Society for Worldwide Interbank Financial Telecommunication)
- SEPA – Single Euro Payments Area: A European payment network that makes cross-border euro transactions as easy as domestic payments, also enabling instant payments.
- SCA – Strong Customer Authentication: A security measure requiring multi-factor authentication for online payments.
- SWIFT – Society for Worldwide Interbank Financial Telecommunication: A global network used by banks and financial institutions to securely send payment instructions across borders.
T – Transaction Monitoring
- Transaction Monitoring: The continuous analysis of transactions to detect suspicious activities and prevent fraud.
U – User Experience (UX) & User Interface (UI)
- UX: The design and usability of the payment process that ensures customers can complete transactions quickly and easily.
- UI – User Interface: The visual and interactive elements that allow users to navigate and complete transactions smoothly.
V – Verification Protocols
- Verification Protocols: Security measures ensuring the authenticity of transactions and user identities.
Final Thoughts
Understanding payments doesn’t have to be complicated. By knowing these key terms, businesses can make better decisions, improve customer experiences, and choose the right payment partner for their needs. Want to learn more? Let’s talk about how embedded payments can help your business grow.
