Payment Industry Overview
Expert-defined terms from the Certificate Programme in Payment Technology Integration course at London School of International Business. Free to read, free to share, paired with a globally recognised certification pathway.
**Acquiring bank** #
**Acquiring bank**
In the payment industry, an acquiring bank is a financial institution that proce… #
Also known as an acquirer, the acquiring bank establishes a relationship with the merchant to facilitate transactions, which involves connecting to the card networks (such as Visa or Mastercard) and ensuring the funds are transferred between the customer's bank and the merchant's bank.
**Authorization** #
**Authorization**
Authorization is the process of verifying the availability of funds or credit fo… #
When a customer makes a purchase, the payment terminal or online checkout system sends a request to the issuing bank to confirm that the funds are available. Upon approval, the issuing bank sends an authorization code back to the merchant, allowing the transaction to proceed.
**ATM (Automated Teller Machine)** #
**ATM (Automated Teller Machine)**
An ATM is an electronic banking terminal that enables customers to perform vario… #
These transactions typically include cash withdrawals, balance inquiries, and deposits. ATMs are connected to financial institutions' networks and can be accessed using a debit or credit card and a personal identification number (PIN).
**Card network** #
**Card network**
A card network, also known as a payment network or card association, is a compan… #
Major card networks include Visa, Mastercard, American Express, and Discover. Card networks facilitate communication between acquiring banks, issuing banks, and merchants, ensuring the secure and efficient exchange of payment data and funds.
**Cardholder** #
**Cardholder**
A cardholder is an individual who holds a payment card, such as a credit card, d… #
Cardholders can use their cards to make purchases, withdraw cash, or perform other financial transactions, subject to the terms and conditions set by the issuing bank.
**Chargeback** #
**Chargeback**
A chargeback is a reversal of a payment transaction initiated by the issuing ban… #
Chargebacks are typically used to address disputes, fraud, or errors related to a payment. During a chargeback, the funds are returned to the cardholder, and the merchant is charged a fee. If a merchant has excessive chargebacks, they may face penalties or have their ability to process payments revoked.
**CPS (Card Present System)** #
**CPS (Card Present System)**
A Card Present System (CPS) refers to payment transactions where the cardholder… #
This type of transaction typically involves the use of a payment terminal, such as a POS system or an ATM, and requires the cardholder to provide their signature or PIN as an additional layer of security.
**CPTI (Certificate Programme in Payment Technology Integration)** #
**CPTI (Certificate Programme in Payment Technology Integration)**
CPTI is a certificate program designed to provide professionals with a comprehen… #
The curriculum covers essential topics, including payment systems, security, and compliance, as well as emerging technologies like blockchain, digital wallets, and mobile payments. This program aims to equip professionals with the skills and knowledge needed to excel in various payment technology roles and contribute to the growth and innovation of the industry.
**Cryptocurrency** #
**Cryptocurrency**
Cryptocurrency is a digital or virtual currency that uses cryptography for secur… #
It operates independently of central banks or governments and relies on a decentralized system for issuance and exchange. Bitcoin, Ethereum, and Ripple are examples of popular cryptocurrencies. Cryptocurrencies leverage blockchain technology to maintain a secure and transparent record of transactions, offering potential benefits in terms of security, speed, and efficiency compared to traditional payment systems.
**CU (Card #
not-Present System)**
A Card #
not-Present (CNP) System refers to payment transactions where the cardholder is not physically present at the point of sale, typically involving online, mobile, or mail-order purchases. Since the card is not present, these transactions rely on alternative forms of authentication, such as the cardholder's name, billing address, and card verification value (CVV) code. CNP transactions have a higher risk of fraud compared to Card Present System transactions.
**CVV (Card Verification Value)** #
**CVV (Card Verification Value)**
A CVV, also known as a card verification code (CVC) or card security code (CSC),… #
The CVV is used as an additional security measure during Card-not-Present transactions to verify the cardholder's identity and prevent fraud. Merchants are not allowed to store CVV information after the transaction, ensuring that the data remains secure.
**DCC (Dynamic Currency Conversion)** #
**DCC (Dynamic Currency Conversion)**
Dynamic Currency Conversion (DCC) is a service that allows cardholders making in… #
When DCC is offered, the exchange rate and any associated fees are displayed to the cardholder, who can then make an informed decision. DCC services are typically provided by independent companies rather than the card networks or financial institutions.
**Decentralized finance (DeFi)** #
**Decentralized finance (DeFi)**
Decentralized finance (DeFi) is a blockchain #
based form of finance that aims to recreate traditional financial systems and services without relying on centralized intermediaries, such as banks or other financial institutions. DeFi leverages smart contracts, which are self-executing agreements with the terms directly written into code, to provide financial services, including lending, borrowing, trading, and insurance.
**Digital wallet** #
**Digital wallet**
A digital wallet, also known as an e #
wallet, is a virtual wallet that stores payment information, such as credit card numbers, bank account details, and loyalty cards, on a mobile device or computer. Digital wallets enable users to make online or offline payments, send and receive money, and store receipts securely. Popular digital wallets include Apple Pay, Google Wallet, and Samsung Pay.
**Direct Debit** #
**Direct Debit**
Direct Debit is a payment method that allows a merchant or service provider to c… #
Direct Debit requires the customer's authorization, and the funds are typically withdrawn on a recurring basis, such as monthly or quarterly. Direct Debit is commonly used for bill payments, subscriptions, and installment plans.
**EMI (Equated Monthly Installment)** #
**EMI (Equated Monthly Installment)**
EMI, or Equated Monthly Installment, is a fixed monthly payment made by a borrow… #
EMIs consist of both the principal amount and the interest accrued on the loan. By making regular EMIs, borrowers can gradually pay off the loan and maintain a consistent monthly payment amount.
**FINTECH (Financial Technology)** #
**FINTECH (Financial Technology)**
FINTECH is a term used to describe the integration of technology and finance, of… #
FINTECH companies aim to improve and automate financial services, making them more accessible, efficient, and cost-effective. Examples of FINTECH applications include mobile banking, digital payments, robo-advisors, and peer-to-peer lending platforms.
**Fraud detection and prevention** #
**Fraud detection and prevention**
Fraud detection and prevention refer to the measures taken by financial institut… #
Fraud detection and prevention tools include machine learning algorithms, risk assessment models, and behavioral analytics.
**HCE (Host Card Emulation)** #
**HCE (Host Card Emulation)**
Host Card Emulation (HCE) is a technology that enables near #
field communication (NFC) devices, such as smartphones and tablets, to emulate a contactless payment card. HCE allows payment apps to securely store payment information and communicate with payment terminals without requiring direct access to the device's secure element.
**Issuing bank** #
**Issuing bank**
An issuing bank is a financial institution that issues payment cards, such as cr… #
The issuing bank maintains a relationship with the cardholder, providing the funds or lines of credit needed for transactions. When a customer makes a purchase, the issuing bank receives a request for authorization from the acquiring bank and determines whether to approve or decline the transaction based on the customer's account status and available funds.
**Interchange fee** #
**Interchange fee**
An interchange fee is a fee paid by the acquiring bank to the issuing bank for e… #
Interchange fees compensate the issuing bank for the costs associated with processing, managing, and servicing the payment card. Interchange fees are typically a percentage of the transaction value, plus a fixed amount, and vary depending on the card network, card type, and transaction type.
**KYC (Know Your Customer)** #
**KYC (Know Your Customer)**
KYC, or Know Your Customer, is a customer identification and verification proces… #
KYC regulations mand