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Key Concepts in e-Payment Technology

July 7, 2020

Choosing the right e-payment technology for your merchant website could be a daunting task. However, if you understand the process of online transactions, it may not appear that complex. Read on to figure out certain key terms that come in when you set up an online payment option for your website. 

Merchant Bank / Acquiring Bank / Acquirer
 
The financial institution that enables the merchant to process debit and credit card transactions is acquiring bank. The bank card transactions are authorized by them to pass it to the issuing bank. The acquirers take the risk liability and settle the transactions.

Issuer / Issuing Bank
 
Issuer is a member of the card scheme and issues credit cards and debit cards to consumers. They provide banking services to customers and allow individuals to initiate purchases using their payment cards. They act as a middle man between the card schemes like Visa and Mastercardand the consumer. The card schemes will have ultimate control over the cards that bear their logo. Card networks like Visa, MasterCard, American Express or other networks are intermediary between acquirers and issuers to authorize card transactions. 

Authorization and Authentication
 
The authorization process offered by online payment service providers ensures adequate funds by the cardholder to complete an online transaction. Based on the response of approval or decline, the transaction goes ahead or gets terminated. The authentication process is the verification of cardholder. The customer’s identity is verified based at least one of the authentication factors. The factors are knowledge, inherence, ownership, and user location. A CVV or card verification value is a 3-digit numeric code on Mastercard or Visa and 4-digit code in American Express card. Providing CVV number to an online merchant denotes the possession of the physical card. This helps to reduce fraud. 

Payment Gateway
 
Payment gateways are provided by online payment service providers and it facilitates and authorizes the payment transactions for online businesses. The transaction information is transmitted to acquirers and responses from issuers. These are equivalent to the point of sale terminal (POS) in the physical store. A card-not-present situation is a transaction without the use of a physical card presented to the merchant. 

Miscellaneous Terms
 
The average ticket size is the volume of expected transactions in your portal. A chargeback is a disputed transaction by the cardholder or issuing bank to protect the customers from unauthorized transactions. Interchange fees are paid to the issuer by the acquirer to compensate transaction-handling cost, risk liability and fraud in approval of payments. The PCI DSS or The Payment Card Industry Data Security Standard is a set of guidelines to ensure the security of transactions in e-payment technology. The security guidelines ensure that companies that accept, process, store or transmit sensitive card information do maintain a secure environment.