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Important Terms in Online Payment You Should Know

May 26, 2020

Online payments have become the norm these days, and for the world, it looks like a simple process. But when you look for an eCommerce solution provider for your business, you realize that there are many terms, probably you have never heard of. Read on to become familiar with some important terms you should know when you deal with online payment platforms

 Acquiring Bank

The financial institution that underwrites and processes debit or credit card payments on behalf of your online business is known as acquiring bank or an acquirer. The acquirers are a part of an association such as Master Card or Visa and allow you, the merchant, to accept the card payments from card-issuing banks within the association. They either approve or decline a transaction based on the information available on the cardholder with card association and issuing bank. The transactions can include purchases, refunds, chargebacks, etc.

Issuing Bank

The financial institution that issues debit or credit cards directly to the customers on behalf of the card network is known as issuing bank or issuer. It acts as a middle-man for the consumer and cards association and contracts with the cardholders on the terms of repayment of transactions done wherever applicable. You can identify the issuing bank easily as it is available on the card.

Merchant Account

Another term you come to use when you start on online payment platforms is merchant account. Your business should have a merchant account when you enter into a contract with an acquiring bank.   This is a type of commercial bank account that allows your business to accept and process electronic payment transactions. 

A transaction is said to be completed when the acquiring bank accepts the payment from the customer and deposits the amount into the merchant account. The merchant account pays out the money to the business bank account later. You need to partner with a merchant acquiring bank who facilitates all communications in an online payment transaction.  

Chargebacks or Payment Reversals

Payment reversal or chargeback is a customer protection mechanism where a customer receives the fund back from a transaction. The transaction is reimbursed either to the merchant or to the customer, based on the case.  

This could be due to customer disputes, authorization reversal or refunds. Examples for such situations may include non-receipt of products, drastic differences between the product delivered and advertised, usage of credit cards without the authorization of cardholder, etc. 

Acquiring banks set a ratio of reversals with total sales, which should not be surpassed. Your business will have serious consequences if you process a large number of chargebacks that exceed the limit of set ratio. 

The eCommerce solution providers offer a variety of products and services such as mobile payment solutions, omnichannel solutions, payment gateway, etc. Look for eCommerce management companies who can provide you with comprehensive and cost-effective solutions that are secure and innovative to take your business to new heights.