The words on your statement,
in English.
Payments has an unusual amount of jargon for an industry whose whole job is moving money from one place to another. Most of it exists because it makes comparing prices harder. Here’s what it all means.
Authorisation
Authorisation is the real-time check where the card issuer confirms a card is valid and has sufficient funds, and reserves the amount. It approves the payment but does not move any money — that happens later at capture and settlement.
Blended pricing
Also: flat rate pricing
Blended pricing is a single flat rate charged on every card transaction regardless of card type, so a debit card and a business credit card cost the merchant the same. It trades some cost efficiency for complete predictability.
Card not present
Also: CNP, online payment, MOTO
A card not present transaction is one where the card is not physically used, such as an online checkout, a payment link or a card number taken over the phone. These payments cost more to process and carry higher fraud liability for the merchant.
Card present
Also: CP, in person payment
A card present transaction is one where the physical card or the customer’s device is used at the point of sale, such as contactless, chip and PIN, or Tap to Pay. Card present payments carry lower fees than online payments because fraud risk is lower.
Chargeback
A chargeback is a forced reversal of a card payment initiated by the cardholder’s bank, usually because the customer disputes the transaction. The money is taken back from the merchant while the dispute is investigated.
Contactless limit
The contactless limit is the maximum value of a single card tap that can be approved without the cardholder entering a PIN. In the UK the limit for a contactless card is £100, while payments made through Apple Pay or Google Pay have no fixed limit because the phone verifies the cardholder.
Dispute evidence
Dispute evidence is the documentation a merchant submits to contest a chargeback, such as receipts, delivery confirmation, customer correspondence and the terms accepted at purchase. It must be submitted before the card scheme’s deadline or the dispute is lost by default.
Effective rate
The effective rate is the total amount a merchant paid in card processing costs over a period, divided by the total card turnover in that period, expressed as a percentage. It is the only figure that allows a fair comparison between providers.
Interchange fee
An interchange fee is the portion of a card transaction fee that the merchant’s payment provider pays to the bank that issued the customer’s card. In the UK it is capped by law at 0.2% for consumer debit cards and 0.3% for consumer credit cards.
Interchange plus
Also: IC+, cost plus pricing
Interchange plus is a pricing model where a merchant pays the actual interchange and scheme fees on each transaction, plus a fixed margin for the provider. The cost varies by card type, and the provider’s margin is stated separately.
Merchant service charge
Also: MSC
The merchant service charge is the total fee a business pays its provider for accepting a card payment, expressed as a percentage of the transaction and often with a fixed amount added. It covers interchange, scheme fees and the provider’s margin.
PCI DSS
Also: PCI compliance, Payment Card Industry Data Security Standard
PCI DSS is the security standard that governs how card data is handled, set by the card schemes rather than by law. Any business accepting card payments must comply, though the burden is small if the business never touches card numbers directly.
Reserve
Also: rolling reserve
A reserve is a portion of a merchant’s takings held back by their payment provider to cover potential future refunds or chargebacks. It is most commonly applied to new businesses, or to those selling goods and services delivered a long time after payment.
Scheme fees
Scheme fees are charges levied by the card networks themselves, such as Visa and Mastercard, for routing and processing a transaction. They are separate from interchange, are not capped by UK regulation, and are paid by the merchant’s provider.
Settlement
Also: payout
Settlement is the transfer of money from a payment provider to the merchant’s bank account after card payments have been processed. Settlement timing determines how long a merchant waits between taking a payment and being able to spend it.
Tap to Pay
Also: Tap to Pay on iPhone, softPOS, contactless on phone
Tap to Pay is technology that turns a standard iPhone or Android phone into a contactless card reader, letting a business accept cards, Apple Pay and Google Pay by holding the customer’s card or device against the phone. No additional hardware is required.