The BIG List of Payments Terminology ISVs and SaaS Players Need to Know
There used to be only a few ways to pay for your purchases: cash, check, and card. Today, businesses get left behind if they don’t have a CX strategy that allows their customers to pay with their preferred method of payment.
The race is on to embed payment solutions that encompass eCommerce, unattended, and mobile payment options but the road is filled with acronym landmines.
This guide for ISVs, SaaS companies, and their merchants is intended to provide a clearer understanding of the many payment buzzwords and acronyms you’ll encounter today and in tomorrow’s world of embedded payments.
Payment Acronyms, Meanings, and Terminology to Know
ARR (Annual Recurring Revenue): ARR is contracted and predictable revenue that can be counted on from your term subscriptions in a one-year period. Software companies typically wait until they’ve reached scale to lower overall costs and monetize payments to boost their ARR.
Application Programming Interface (API): A set of routines, protocols, and tools that are used for building software applications. A company releases its API to the public so that software developers can design products that are powered by its service.
CAC (Customer Acquisition Cost): CAC measures how much you’re spending to acquire new customers. A cost that can be dramatically reduced when embedded payments in your solution.
CP (Card Present): Card present transactions occur when payment details are captured in person for a product or service. This can include cards that are physically swiped, dipped, or tapped via a card reader.
CNP (Card Not Present): CNP transactions are payment transactions in which the physical credit card or debit card isn’t shown to a merchant for visual verification. CNP transactions may lead to fraud due to the inability of a merchant to confirm the person authorizing the purchase is the cardholder.
DCC (Dynamic Currency Conversion): DCC is a feature that allows point-of-sale (POS) credit card purchases made in a foreign country to use the currency of the purchaser’s home country. It’s also referred to as CPC (cardholder-preferred currency).
DCC Can Reduce International Chargebacks
Being able to process cross-border payments is a great business advantage. However, international credit card payments are typically made in the merchant’s base currency and subsequently converted by the card’s issuing bank to the buyer’s home currency, with the cardholder paying a foreign exchange conversion fee to the card issuer. This might lead to disputes and chargebacks that sometimes occur as a result of pricing discrepancies when credits are issued.
To overcome those challenges, you can make use of our DCC solution, a smart alternative that gives international Mastercard, Visa, and Diners Club customers the choice to pay in their home currency. With DCC, your customers will know exactly what their total purchase amount is in their home currency at the time you process the transaction.
DUKPT (Derived Unique Key Per Transaction): A key management scheme that sends a unique encryption key with each transaction. If one transaction is compromised, the rest of the transactions are safe.
Related Reading: In the Age of DUKPT, It Makes Sense to Own Your Device Keys
E2EE (End-to-End Encryption): A method used for securing encrypted data while it’s moving from the source to the destination. It uses a process known as asymmetric cryptography, which can use public-private key pairs or a derived key that uses symmetric encryption to protect data. The objective is to encrypt data at the Web level and to decrypt it at the database or application server.
Embedded Payments: Embedded payments offer ISVs and SaaS companies a new CX (customer experience) strategy for new revenue streams. Providing customers a unified commerce experience across every channel increases customer stickiness, access to larger markets, and an opportunity to lower customer acquisition costs.
EMV (Europay, Mastercard, Visa): A smart card or chip card. EMV represents a standard created by Europay, Mastercard, and Visa. An EMV card has an integrated circuit chip that stores the cardholder’s data. It also has the magnetic strips for MSR compatibility. EMV cards offer improved security and fraud protection.
Related Reading: What You Should Know Before an EMV Migration
IAP (In-App Payments): A mobile payment application that lets consumers purchase goods or services within the application (for example, mobile food order-ahead apps, pay for parking apps).
Integrated Payments: Integrated payments connect the payment processing function with a business’s other systems and software. The integration facilitates data consolidation and a merchant’s ability to accept more payments.
ISV (Independent Software Vendor): A company whose primary function is to distribute software that may operate on many platforms, including in the cloud.
LTV (Life Time Value): This is a measure of revenue that your customer will generate throughout their lifespan as a customer. Adding payments can meaningfully increase the lifetime value of your customer, while even keeping your cost of customer acquisition (CAC) the same, if not lower because the value you bring to your customer accelerates the sale.
Merchant API: An interface that allows developers to connect seamlessly and securely to a payments platform.
Related Reading: Download our Merchant API and see how to connect seamlessly and securely to our platform, so you can get started on building fully integrated and embedded payment applications.
Merchant Category Code (MCC): A code designating the principal trade, profession, or line of business in which a merchant is engaged. The MCC is used by American Express, Discover, MasterCard, and Visa.
MID (Merchant Identification Number): A unique authorization number that’s provided to the merchant by their payment processing provider. The MID makes it necessary for the merchant to securely process electronic transactions and payments.
Related Reading: How to Make Merchant Onboarding Easier
mPOS (mobile Point of Sale): A portable Point of Sale. Usually, on a smartphone or tablet, a mobile POS is a portable register and ideal for mobile businesses (food trucks, market and outdoor vendors, events, etc.)
MRR (Monthly Recurring Revenue): Monthly recurring revenue measures the amount of income received across all streams in a particular month.
MSR (Magnetic Stripe Reader): A magnetic stripe reader is a device that translates the information stored on a credit card’s magnetic stripe for payment processing.
NFC (Near-Field Communication): A technology to exchange data between readers and payment devices like Apple Pay and Google Pay e-wallets in smartphones and smartwatches, or tap-to-pay credit and debit cards.
Omnichannel Payments: Omnichannel payments refer to the ability to process payments through a variety of mediums or channels such as in-store, mobile, online, unattended, or through applications. Also referred to as “integrated payments.”
Omnicommerce: Retailing strategy concentrated on a seamless consumer experience through all available shopping channels.
Payment Facilitator (PFAC, PayFac, PF): A merchant service provider who can facilitate transactions and simplify the merchant account enrollment process on behalf of the sub-merchant. This model gives your users the ability to seamlessly accept payments directly from your platform and allows you to own and monetize the payments experience while transforming your SaaS platform's infrastructure capabilities.
Payments Intelligence: The ability to better know and understand customers through data and information uncovered from the way they choose to pay.
Payment Processor: Company appointed by merchants to handle card transactions for merchant acquiring banks.
Point-of-Sale Developer: A person concerned with researching, designing, implementing, and testing software; point-of-sale developers embed payment technology into point-of-sale systems.
P2PE (Point-to-Point Encryption): Considered the highest level of security for POS credit card payments, P2PE is a security protocol that encrypts credit card information upon swipe or insert and directly transfers it to the payment processor. The security protocol prohibits the storing of a customer’s credit card number on any merchant devices.
PaaS (Payments as a Service): Usually provided by a third-party company, this service permits merchants to accept a variety of online payment methods (such as debit, credit card, and bank transfers) through a single channel.
Payment Gateway: A payment gateway is technology used to accept integrated payments. It is the mechanism that reads a customer’s payment information, confirms funds are available and transfers it from the customer to the merchant's bank account. For online payments, the payment gateway is an integrated and embedded cloud-based software, that connects customers to merchants. In-person, it’s software built into a point-of-sale (POS) system or card reader to capture the transaction.
Secure, Real-time Transaction Processing
The Worldnet Payments platform offers a secure server-based transaction processing service that enables your business to authorize and process credit and debit card transactions online, in real-time. All the information necessary to process the transactions is sent over a secure, encrypted connection.
When a payment comes in, we connect to your acquiring bank to perform the authorization procedures and, once that’s done, a receipt is returned to your customer. At the end of each day, your transactions are settled automatically, and the acquiring bank deposits the funds into your merchant account.
PCI (Payment Card Industry): Companies that process all payment card types.
PCI Compliance: A set of standards developed to reduce data breaches, fight fraud and improve the security of credit card data. Any business that accepts, transmits, or stores private cardholder data must meet certain security standards.
POS (Point of Sale): The moment or place in which a customer pays for goods or services and may be subject to sales tax. A POS transaction can occur in person via device or online via a hosted payments page, with receipts printed or sent electronically.
REST API (Representational State Transfer): An architectural software style that guides the development and design of the internet. It’s a set of rules and parameters for how a system should behave.
RESTful API: An application programming interface that follows the REST API protocols with added unique features.
Worldnet Payments is REST API Compliant
Worldnet Payments complies with the REST API industry standards so we can offer developers a much better experience by exposing predictable resource-oriented URLs as well as a comprehensive range of HTTP response codes and verbs.
SAAS (Software as a Service): A licensing and delivery model that offers customers the useful benefits of an application without requiring continuous updates.
SDK (Software Development Kit): A collection of tools used to enable programming of mobile applications.
Secure Token: To provide two-factor authentication (2FA), users are digitally sent a one-time passcode with a fixed time of expiration, depending on the settings at the server end. These soft tokens are generated either by an authenticator app on the device or sent on-demand via SMS.
Subscriptions: Recurring or repeated payments that are scheduled on a frequent basis. Anytime a consumer has a continued service or product, they may opt for a recurring payment plan (e.g., weekly food boxes, gym memberships, parking memberships).
TID (Terminal ID): An alphanumerically unique identifier that’s used to identify the source of a payment transaction. TIDs can be used in card-present as well as CNP (eCommerce) setups.
Token: A series of randomly generated numbers used to replace a customer’s primary credit card account number.
Tokenization: The process of protecting sensitive data by replacing it with an algorithmically generated number called a token. Tokens can be passed online or through wireless networks for payment processing. Tokenization prevents exposure of actual bank details.
TPS (Transaction Processing System): Any payment or funds transfer to a merchant uses a TPS. These systems use secure channels to send and receive information. POS, mPOS, eCommerce solutions, unattended kiosks, and integrated payment solutions all use a TPS.
Unified Commerce: An embedded payment solution to support complex omnichannel shopping journeys with a unified view of your customer experience.
VAR (Value Added Resale) Sheet: A file summarizing a merchant’s critical account information that allows for a payment gateway to process payment transactions.
Virtual Terminal: A hosted web page application that allows merchants to process transactions anywhere and at any time.
As the payments world evolves, so will we. If you have additional questions or are experiencing a problem with your current payment solutions, send us a message. We’re happy to help.