The importance of a payment gateway for business owners is now known to everyone. But the problem comes when the merchants start to search for one for their business – while researching the best payment gateway, they come across many unknown terminologies that confuse them even more.

What about ending this confusion by understanding the common terminologies in the easiest words? 

Let’s dive in:

Most Common Terminologies Used in Payment Gateway

In India, online payment gateway solutions are becoming very popular; however, there has always been some confusion with the words associated with it. Time to have a clear understanding of these: 

1. Two-factor Authentication

Two-factor authentication (2FA) is a two-step verification process. It aims to bring an additional level of security while making a payment. Almost all the online payment gateway solutions offer this feature, so it is a very common terminology.

The first level of two-factor authentication is entering the card details or user ID-password to process a payment, and the second level is OTP or PIN to prevent any misuse of the credentials and cards.

2. 3D Security

3D security indicates an extra layer of security in their mobile device with the help of biometrics. As a result, the users have to verify their identity to initiate their payment. At present, almost all payment gateways offer 3D security, and it will secure all your future transactions.

3. PCI-DSS compliance

Payment Card Industry Data Security Standard or PCI-DSS, is a set of rules or security standards that all merchants accepting card payments must follow. PCI-DSS compliance aims to keep cardholder data secured from fraudulent activities.

4. SSL Protocol

SSL, or Secure Socket Layer, is the encryption for securing online transactions. It is a combination of private and public key encryption to ensure an ultra-secure connection between the two devices.

5. Authorization

Authorization is another common terminology of payment gateway, which occurs after the completion of authentication or verification of the credential. After the card number, CVV, OTP, PIN, biometric, etc. verification, the sender's bank gets the request to check whether the account has sufficient balance or not. This is authorization request.

6. Tokenization

It is also one of the most important terminologies of payment gateways. Tokenization refers to the process of converting card data into a token through encryption and security keys. As a result of these tokens, the upcoming flow of payments becomes smoother and faster. 

7. API

API, or Application Programming Interface, is the communication medium between two applications. It links one application with another.

8. Integration

Integration is the process of adding a payment gateway to a website or app. The Payment gateways provide ready-to-use Plugins and SDKs for the merchants so that they can do their business operations easier.

9. Merchant Account and nodal account

These may not be the most popular terminologies of payment gateways, but these are equally important. A nodal or merchant account is an account that payment gateways must maintain. The sole purpose of these accounts is to store the money paid by the end users till settlement.

10. MID

MID or merchant identification number is a unique number for all the merchants as soon as they onboard themselves with a payment solution and all the transactions of that merchant are recorded under this unique ID.

11. Merchant Dashboard

Merchant dashboard is a dedicated panel for the merchants where they can keep track of all the transfers done so far. It comes with many sort and filter options to help the merchants in extracting the record of any time.

12. Acquiring and Issuing Bank

Acquiring and issuing banks are two somewhat confusing terminologies of payment gateway. Let's understand the functions of both:

An acquiring bank is the bank that processes the transaction through the payment gateway. All the settlements are done from this bank itself. Also, all the payments initiated on your eCommerce store or app get accepted or rejected through the acquiring bank.

On the other hand, the issuing bank is the bank in which the customer has an account. In other words, an issuing bank is the bank using which the customers transact with the merchant and from the issuing bank itself, the money gets deducted after a successful payment.

13. KYC

KYC, or know your customer, is a common terminology for all types of payment solutions. It is the document verification process by the payment service providers before allowing them access to the payment solution to collect online payments.

14. Settlement

Settlement is also among the very common terminologies used in payment solutions. This term refers to paying the money back to the merchants after deducting the charges.

For example, an item on your app or eCommerce store costs 500, including a shipping charge. When a customer pays the amount, it goes to the nodal account and stays there for the stipulated settlement period. Settlement period can vary for different payment solutions – but it will be predefined.

After the settlement period, the merchants receive the money after deducting the transaction or any other charges on their bank account.

15. Payment Fraud

Alongside the increase in online payments, fraudulent activities have increased remarkably. Payment fraud means unethical practices of taking money from merchants or customers by doing malicious activities. Users may not even be aware of these huge withdrawals until they receive an update from the banks.

In order to fight these, payment gateways often use the fraud database to block the truncation requests right then. Also, they use robust and updated security software with advanced technologies to prevent such activities.

End Words

A payment gateway is a techy solution, and one can easily find several technical and financial words here. And there are not just these 15 terminologies associated with payment gateways; however, there are uncountable terminologies, among which these are the most popular ones. By opening the website of any payment gateway, one can easily come across these 15 terminologies. Hopefully, you will have a better understanding of these terminologies after reading this article.