Glossary

Payments glossary

Twenty-two payment terms defined in plain language, from acquirer to webhook. These are the words that appear on processor statements, in platform agreements and in dispute notices.

Last updated 9 September 2026

Acquirer: The bank or financial institution that holds a merchant's account and receives card payments on their behalf.; Your payment processor works with one or more acquirers behind the scenes; most merchants never deal with the acquirer directly.
Application fee: A fee a software platform collects automatically from each payment it facilitates on behalf of a merchant.; It is separate from the processor's own fee and must be calculated on the platform's servers, never sent from a customer's browser.
Authorization: The step where the issuing bank confirms funds are available and places a hold on them, before the payment is captured.
Capture: Converting an authorization into an actual charge. Some businesses authorize at order time and capture at shipment.
Chargeback: A forced reversal of a payment initiated by the cardholder's bank when the customer disputes the charge.; The merchant loses the funds immediately and usually pays a fee, then may submit evidence to contest it.
Connected account: A merchant's own processor account created and managed through a platform, with its own verification and payouts.
Direct charge: A payment created on the merchant's account, where the merchant appears on the customer's statement and carries processing costs and dispute liability.
Dunning: The process of retrying failed subscription payments and contacting the customer to update their card.
Interchange: The portion of a card fee paid to the bank that issued the customer's card. It is the largest component of most card fees.
Involuntary churn: Subscription cancellations caused by failed payments rather than a customer's decision to leave.
KYC: Know Your Customer — the identity and business verification a processor must perform before enabling payments.
Merchant of record: The legal entity that sells to the customer and is responsible for taxes, refunds and disputes on the transaction.
PCI DSS: The card industry's security standard for handling card data. Hosted checkout keeps most merchants in the simplest validation category.
Payout: The transfer of settled funds from the processor to the merchant's bank account, usually on a rolling delay.
Platform fee: What payment software charges a merchant for using it, typically a percentage of processed volume, a monthly subscription, or both.
Proration: Adjusting a subscription charge partway through a billing period when a customer upgrades or downgrades.
Refund: A merchant-initiated return of funds to the customer. Unlike a chargeback, it does not count against dispute ratios.
Scheme fees: Charges levied by the card networks such as Visa and Mastercard for use of their network.
Settlement: The movement of money between banks that finalises a card transaction, normally a day or more after authorization.
Statement descriptor: The text a customer sees on their bank statement. An unclear descriptor is one of the largest causes of disputes.
Tokenization: Replacing a card number with a meaningless reference that a merchant can safely store and reuse.
Webhook: An automated message a processor sends to software when something happens, such as a completed payment or a cancelled subscription.

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