A Glossary of Essential Payment Terms in E-Commerce

If you’re in the e-commerce space, you’ve likely come across a ton of payment-related terms that sound technical, confusing, or even similar to one another.

To make it easier, I’ve put together a glossary of the most common terms you’ll encounter in the world of online payments. Whether you’re a merchant, developer, or just curious, this list should help demystify the jargon.

A-B

Acquirer – A financial institution (usually a bank) that processes credit or debit card payments on behalf of a merchant. Example: Maksu works with acquirers to handle transactions for its merchants.

Authorization – The process where a card issuer approves a transaction and reserves funds on the customer’s account.

BNPL (Buy Now, Pay Later) – A payment method that allows customers to split their purchases into smaller installments, often interest-free. Popular examples include Klarna, Afterpay, and Affirm.

C 

Card Verification Code (CVC or CVV) – The three- or four-digit code on a credit or debit card used to add a layer of security during transactions.

Chargeback – A reversal of funds initiated by a cardholder’s bank when a transaction is disputed, such as for fraud or non-delivery of goods.

Cross-Border Payments – Payments where the payer and payee are in different countries, requiring currency conversion and often incurring additional fees.

D-F

Digital Wallet: An online service or app that allows users to store payment information securely and make transactions easily. Examples include Google Pay, Apple Pay, and Paypal.

Dynamic Currency Conversion (DCC) – A service that allows customers to pay in their home currency when using an international card.

Fraud Detection – Tools and systems used to identify and prevent fraudulent transactions, often powered by AI or ML algorithms.

G-L

Gateway – A technology provider that securely connects e-commerce websites with payment networks, enabling transactions. Think of it as the “bridge” between the customer and the processor.

Interchange Fee – A fee charged by the cardholder’s bank to the merchant’s bank for processing a card payment. This is often part of the overall transaction cost for merchants.

KYC (Know Your Customer) – A compliance process where businesses verify the identity of their customers to prevent fraud, money laundering, and other illegal activities.

Local Payment Methods (LPMs) – Payment methods that are specific to certain countries or regions. For example, iDEAL in the Netherlands or Sofort in Germany.

M-P

Merchant Account – A type of bank account that allows businesses to accept credit and debit card payments.

PCI DSS (Payment Card Industry Data Security Standard) – A set of security standards that ensure businesses handle cardholder data safely.

Payment Processor – A company or service that handles the transaction between the merchant, the cardholder, and the cardholder’s bank. Maksu, for instance, provides processing solutions that make payments simple and secure.

Payout – The process of transferring funds from a business’s payment system to their bank account.

PSD2 (Payment Services Directive 2) – A European regulation designed to improve payment security and foster innovation, particularly through measures like Strong Customer Authentication (SCA).

R-T

Refund – A process where a merchant returns funds to a customer, usually after a returned product or a complaint.

Settlement – The process where funds from a transaction are transferred from the cardholder’s bank to the merchant’s bank.

Strong Customer Authentication (SCA) – A PSD2 requirement where transactions must include two out of three factors: something the customer knows (e.g., password), has (e.g., phone), or is (e.g., fingerprint).

Tokenization – Replacing sensitive payment information (like card numbers) with a unique identifier or “token” to reduce fraud risks during transactions.

U-Z

UPI (Unified Payments Interface) – A popular instant payment system in India that allows users to transfer money directly between bank accounts.

Virtual Terminal – A web-based interface that allows merchants to process card payments manually, often used for phone or mail orders.

Wire Transfer – A direct electronic transfer of funds between banks, often used for high-value payments or cross-border transactions.

Zero Fraud Liability – A policy by many card issuers where cardholders are not held responsible for unauthorized transactions.

Why This Matters?

Understanding these terms isn’t just for payment experts—it’s crucial for anyone involved in e-commerce to make informed decisions. The payments landscape is constantly evolving, and keeping up with the terminology is one way to stay ahead.

How Maksu Simplifies It All?

At Maksu, we believe payments shouldn’t be complicated. We offer solutions that handle everything from gateways to fraud detection, so you can focus on growing your business while we take care of the payments side. Whether you’re navigating interchange fees or exploring BNPL options, Maksu is here to guide you every step of the way.

About Maksu

Maksu provides comprehensive, scalable, and secure payment solutions tailored for online merchants of all sizes. Built on Modirum’s 25-year legacy in FinTech and payment technology, we help businesses maximize conversions and eliminate payment friction with seamless, growth-focused solutions. Our mission is to redefine the online payment experience—delivering security, simplicity, and efficiency at every step. With enterprise-grade security and dedicated support, we empower merchants to focus on growth, knowing their payments are in expert hands they can trust.