Frequently Asked Questions

Purchases happen nearly instantaneously. The card information and amount of the sale are sent to the payment processor, which transmits the information to the card network, and then to the issuing bank to approve the transaction and requested amount. If the transaction is authorized, then an approval code is returned to the merchant from the processor. This process happens in real-time, meaning that within a few seconds, the transaction will be approved or denied by the card network. Pre-authorizations and captures verify that sufficient credit exists on a customer’s card before a sale is processed. Like a purchase, the transaction is processed in real time, and an approval code is provided to the merchant for the desired amount. While the funds are not immediately debited from the cardholder, the amount is frozen and subtracted from the cardholder’s credit limit. The merchant is guaranteed those funds for up to 7 days and must submit a capture request to complete the sale. While captures can be completed up to 30 days after the original pre-authorization, funds are only guaranteed only for the first 7 days. As a two-step process, pre-authorization and capture offer added protection against fraud and chargebacks.

Authorization rates are the percentage of transactions that are submitted to and then accepted by issuing banks.

The inverse of authorization rates, decline rates are the percentage of transactions that were declined, in comparison to the total number of attempted transactions.

An authorization hold is a temporary freeze of an approved amount of a cardholder’s money or credit from their account. This hold lasts until the merchant clears the transaction, the transaction is completed or aborted, or the hold expires after a set period of time.

A card on file is when a merchant stores a customer’s card and their payment information for future use. Cardholders must first initiate a customer-initiated transaction (CIT) and then authorize the merchant to perform merchant-initiated transactions (MIT) through agreed upon terms for automated billing.

A credit card authorization form is a document granting a merchant permission to charge a cardholder for recurring payments over a period of time. This form is helpful for protecting merchants against chargebacks, as it serves as proof that the cardholder has agreed to a specific number of recurring payments.

Decline codes are either usually a number or phrase that specifies the reason for a declined transaction. There is no standardized set of error codes, so they vary from gateway to gateway. Some common reasons for declines are insufficient funds, expired card and Do Not Honor, but different banks and processors may refer to them differently).

Do not honor is a generic decline code. It’s used when the issuing bank doesn’t have a specific reason for why a transaction was declined and instead prompts the customer to contact the bank for more information. Do not honor is the most common decline code.

A void is used to cancel a transaction that was previously authorized but before it has been settled. A void transaction will be made in real-time to the card network, telling the customer’s issuing bank to cancel the transaction and approval code. The customer will not be charged for voided transactions.

A refund debits an amount from the merchant to repay a customer after they have already been charged. After a refund is processed, the customer will see both the original transaction amount and the refunded amount on their balance.

The acquiring lender bank, or acquirer, acquires the transaction on behalf of the merchant. The issuing bank, or issuer, serves the customer. It issues credit and manages the cardholder’s funds. These terms apply to where the banks lie within a transaction process. One bank may serve as an acquirer for one transaction, and then as an issuer for a different transaction.

Open banking is a system built on the use of application programming interfaces (APIs) to allow authorized third-party providers greater access to a customer’s financial data and banking account information.

Learn how to become PCI Compliant in our Support Guides and see which integration method meets specific PCI requirements.

A credit to a cardholder, usually due to the return of a good or service.

An acquirer (also known as an acquiring bank) is a bank or financial institution that acts as an intermediary between merchants and customers by processing credit or debit card payments on behalf of a merchant and settling funds to the merchant.

An AVS is a method of validating a cardholder’s address against the address held by the issuer, with the purpose of helping to reduce fraudulent transactions. The issuer will return a code specifying the address’s accuracy.

Debit and credit card payments are transfers of money via a card issued by a financial institution, typically a bank, that gives an individual access to their own funds or a line of credit. In cross-border payments, card transactions must consider where the card was issued, the FX fee, currency conversion fees, the potential that the card is being used for fraud and so on.

Card Present transactions occur when a credit or debit card is physically present at the point of sale. The shopper will physically swipe or insert the card.

A CVV is the numeric value found on the back of Visa, MasterCard and Discover cards, and on the front of American Express cards.

A chargeback is the process initiated by a cardholder when they contact their issuing bank to dispute a transaction on their account. Once initiated, the funds are debited from the merchant and returned to the shopper. A chargeback can be initiated for reasons such as fraud, goods damaged/not received, etc.

Capture is merchant submission for payment from the issuer on an authorized transaction.

EFT, or electronic funds transfer, is the transfer of money from one bank account to another without using paper checks, card networks, wire transfer or cash.

A wire transfer is an electronic payment service for transferring funds by wire, for example through SWIFT, the Federal Reserve Wire Network or the Clearing House Interbank Payments System.

The currency in which the merchant receives funding.

The currency in which the shoppers purchase goods or services from the merchant.

Omnichannel is a multichannel approach to sales that seeks to provide the customer with a seamless shopping experience through a variety of channels, whether it be a desktop, mobile device, telephone, retail store, etc.

Mobile payments are when payment services are performed via mobile devices that have many payment methods and can use a wide variety of technology, such as eWallets, single-card NFC payment and alternative payment methods, including bank transfers.

An eWallet is a secure environment on an electronic or online platform that allows a shopper to store multiple payment cards and bank account numbers. This eliminates the need for shoppers to enter their account information multiple times when making a payment. Examples of eWallets are Apple Pay and Google Pay.

A bank transfer is a general term used to represent a wide range of online bank transfers that are credit transfers: These can include cash payments, giro-payments and wire transfers, and are transfers made through an associated bank.

A Card Not Present transaction is when a credit or debit card is physically not present at the time of the sale. The merchant does not see or swipe the card and no shopper signature is obtained. These transactions will typically be done online or via the telephone.

Payment orchestration is the back-end management of the full payment process from start to finish. A payment orchestration platform simplifies the complexities of payments, giving companies full control to manage payments, allowing for differences by country, by product, by issuer and more.

If a company offers a subscription service and provides relevant payment options, then:

A purchasing customer may choose their preferred payment plan and payment method (debit or credit card, direct deposit, digital wallet, etc.).
The company will receive the order info and use a payment solution to manage the subscription billing details.
The payment solution stores the payment information and processes the payment request.
The customer is charged and then issued regular statements on the agreed-upon schedule.

Recurring billing and subscription billing are essentially interchangeable terms for a payment model where a business automatically charges a customer’s credit card for products or services on a regular billing schedule. Recurring payments occur when customers enter their billing information once and grant the merchant permission to charge them at an agreed-upon cost and frequency. Subscription services will charge recurring payments on a monthly or annual schedule, until the customer withdraws permission or cancels their subscription.

Buy Now, Pay Later, or BNPL, allows customers to make a purchase and receive it immediately, but pay for it at a later time, often over a series of installments via a type of installment loan.

An authorization is verification of the validity of a shopper’s credit or debit card and the available balance on the shopper’s card. A company’s authorization rate shows the percentage of approved transactions. Learn more about improving your authorization rate.

Alternative payment methods are payment methods that are used as an alternative to mainstream credit and debit cards. Some examples include direct debit, online banking methods such as SOFORT and GiroPay, and eWallets such as Apple Pay.

3-D Secure is an XML-based protocol that is designed to add an extra layer of security through authentication for online credit and debit card transactions. It has been adopted by most card brands, including Visa (VerifiedbyVisa), MasterCard (SecureCode), American Express (SafeKey), Discover ProtectBuy and JCB (J/Secure).

ACH is an acronym for Automated Clearing House, which is a US financial network used for electronic payments and money transfers from one bank account to another without using paper checks, card networks, wire transfer or cash. Also known as a direct payment, ACH is a type of EFT.

There are six key regulatory categories businesses must consider and adhere to when conducting any financial transaction:

Payment network policies: These include any rules, regulations, guidelines or specifications put forth by payment networks, including EFT networks and Credit Card Associations.
Data privacy: These regulations cover the rights given to individual data subjects concerning the personal data being stored (information like an individual’s name, email, location, online identifier, IP address, home address, etc.), including the right to prior notification of what the data is being used for, how it will be processed and when it will be deleted.
Consumer security: These regulations protect consumers from fraud and theft, such as the Revised Directive on Payment Services (PSD2), enacted by the European Parliament, which requires Strong Customer Authentication (SCA) via three levels of identification for every transaction, from card number confirmations to texts with authorization codes. Payment Card Industry Data Security Standards: Payment Card Industry (PCI) is a Data Security Standard (DSS), which is a set of requirements established by the major card companies to ensure that all businesses that process, store and/or transmit credit and debit card information maintain a secure environment. These standards help to defend against cyber-attacks, data hacks and other security breaches, which can result in extensive costs associated with loss of business, credit monitoring, post-breach audits and security updates.
Tax collection: Tax responsibilities for businesses depend on a variety of factors such as the sales revenue, transaction volume and the location in which sales occur. In addition to the specific local tax laws, the payment model under which your business operates also has an impact.
IT security: These regulations ensure that businesses are protected against hackers, cybersecurity regulations have been drafted to cover elements including data center redundancy, data storage, data recovery and other security investments.

As international commerce grows, B2B cross-border payments are increasingly important as B2C payments, but functionally they often lag behind B2C payments in terms of customer experience, transaction speed, amount of manual effort required and more. B2B companies can close that gap, and see a 25% uptick in conversion rates, by choosing a payment processor optimized for cross-border transactions.

The exact cost of fees will depend on where in the world your business is based, and the currency used for the transaction, but they can run up to an additional 2%.

Whenever someone buys your goods or services using a credit or debit card, you pay a card processing fee. The majority of the fee, which varies by type of card, is the interchange fee. When the customer uses a card issued in a different country or region from where the payment is processed, there may be an additional cost for a cross-border fee that is added on top of the regular interchange fee.

Processing card payments comes with associated fees. When you process cross-border card payments, additional fees are charged on top of them. These additional cross-border fees are fixed, non-negotiable and set by card networks.

Cross-border payments can take any of the same forms as domestic payments, from eWallets and card payments to bank transfers. It's important to be able to accept all types of payments, including payment types native to particular countries you sell in. That way, customers from around the world find it easy to pay. Shoppers in different countries also have different purchasing habits, such as on mobile vs. laptop. The more you tailor the experience to your customers’ locations and preferences, the more you will sell.

Local card acquiring is when the acquiring bank and issuing bank are both in the same region. Using local card acquiring whenever possible reduces fees and increases authorization rates.

Yes, unnecessary cross-border fees and foreign transaction fees can be avoided. When you use a payment provider that can help you process your payments as if they were local with local card acquiring, helping to increase your authorization rates and avoid unnecessary fees.

Cross-border payments, or cross-border transactions, occur when the acquiring bank and the issuing bank are in different regions. When banks process cross-border payments, they perceive them to be riskier than domestic transactions, leading to higher fees and a greater likelihood of being declined.

Dunning refers to the process of businesses communicating with customers to get the money they are owed. This can include phone calls, emails, formal letters demanding payment, hiring collection agencies, and threatening and executing legal action.

While you can automate your entire AR process, you certainly don’t have to. The flexibility of our AR automation solution ensures that you only automate the processes that you want to. This includes integrating with accounting, ERP and CRM software systems. Our AR automation solution comes pre-integrated with the software that you already use, so when you do want to start the automation process you can avoid complex onboarding or coding.

Yes. Subscriptions are automatically calculated in terms of recurring revenue. All of this information is placed in the reports section. The system breaks down all subscription revenue to its recurring monthly component, keeping track of all subscription revenue.

Fewer manual tasks mean less busy work for your teams, allowing them to focus on higher value operations. Automatic account updating means immediate updates and instant notifications, reducing costly downtime and ensuring that payments are faster. Dashboards are updated in real time, providing instant insights into important metrics such as AR performance, customer accounts, payment processing and more, for better overall data management. Faster turnaround times and fewer errors result in less frustration for customers, while branded portals offer secure places for them to pay online. Overall improved efficiency saves your company money, makes it easier to scale and can lead to more business opportunities.

A surcharge is a fee that a business charges to a customer that pays by credit card to cover the cost of processing the transaction.

Days Sales Outstanding (DSO) measures the average number of days it takes a business to collect payment for a sale.

AR automation, or accounts receivable automation, is the process by which manual accounts receivable tasks such as producing, sending and uploading invoices are instead handled by software. AR automation software can handle the entire accounts receivable process, allowing you the ability to automate any task you’d like to optimize.

You can lower your merchant processing fees by accepting cards using a card reader (chip or tap) rather than keying in a transaction or accepting payments online.

Using an embedded partner involves signing on with a partner that has developed embedded payments technology that your clients can access through your platform. The embedded payments partner will typically handle compliance, onboarding and customer support, depending on how you would like to structure the partnership.

Embedded payments are when payment functionality is embedded directly within a software platform, so clients do not need to integrate with another service to accept payments.

A few different models exist. You may be able to implement no- or low-code platform models without development help, but development resources are typically needed for implementations that have more customizable options. Depending on the model that you choose, your payments can be up and running in a day or two, or if you choose a more customizable model, a few months. You may also choose different fee structures, such as revenue sharing or buy rate.

Payfac-as-a-service is a hybrid option for software providers that want to embed payments into their platforms. It allows platforms to leverage a payments partner’s technology to facilitate payments for their clients without taking on the full risk of becoming a registered payment facilitator.

You can lower your merchant processing fees by accepting cards using a card reader (chip or tap) rather than keying in a transaction or accepting payments online.

The Revised Directive on Payment Services (PSD2) is a set of regulations intended to establish a clear set of rules for payment providers across the EU and the UK. The intent is to better protect customers when they make electronic payments and to open up competition among providers.

The major PSD2 requirement is the use of Strong Customer Authentication (SCA) for all online payments processed by an acquiring bank in the European Economic Area or United Kingdom. Other requirements include:

• The use of open APIs to allow authorized third parties to have access to accounts
• Greater transparency in a provider’s terms and conditions and the details of their financial products
• Resolution of complaints and reporting of security incidents within a set amount of time
• No credit card surcharges to ensure equity among payment methods

The intent of the PSD2 was to reduce the amount of fraud, increase competition and encourage the use of more local payment methods. As a result, customers can enjoy greater protection and security over their transactions and more options in how they conduct their transactions. It also opened the space for FinTechs to better compete with established banks.

If you are a merchant within the European Economic Area (EEA) or UK, then you must abide by all PSD2 regulations when processing transactions from an EEA or UK acquiring bank. If you are a merchant outside these territories, you are still impacted by PSD2 if the acquiring bank you use for payment processing is in either of those regions. While some transactions may be exempt or excluded from needing to be PSD2 compliant, merchants can ensure their transactions are not declined by enacting Strong Customer Authentication.

Strong Customer Authentication (SCA) is a requirement in the European Economic Area and the UK that is intended to make online payments more secure. SCA requires at least two of the following unique customer identifiers for all transactions:

• Something only the customer has
• Something only the customer knows
• Something only the customer is

The following is the full timeline for the adoption of PSD2 regulations:

• 2007: The European Economic Area (EEA) enacts the very first Payment Services Directive (PSD) to create a unified payment market in the European Union.
• 2013: The EEA recognizes the need to update PSD based on technological changes and formulates the groundwork for PSD2.
• January 2016: EEA member countries vote to pass the PSD2 regulation to be enacted in 2018.
• June 2017: An open, harmonized API for the EEA is introduced, enabling third-party access under PSD2 standards.
• November 2018: Strong customer authentication measures are introduced under PSD2 to better protect consumers from digital payment fraud.
• January 2018: All EEA member states officially pass PSD2 and agree upon a future timeline for implementation.
• December 31, 2020: After multiple deadline postponements, PSD2 SCA officially goes live and in effect for all EEA member countries.
• September 14, 2021: PSD2 SCA goes live and in effect for the UK post-Brexit. The UK had voted in favor of PSD2 when it was still part of the EEA.

This is a method used to detect fraud by looking at the number of times a particular data element (card number, name, address, etc.) appears within a predetermined time frame.

PCI DSS is a set of requirements designed to ensure that all companies that process, store and/or transmit credit and debit card information maintain a secure environment.

Payment tokenization may not automatically make your transactions compliant, but it can reduce your PCI burden and thereby increase authorization rates.

Encryption is the classic means of protecting sensitive data by transforming information with an encryption key, which can then only be read with the correct decryption key. Unlike tokenization, when encrypted data is transferred, the actual sensitive information is still transmitted, leaving it vulnerable to being intercepted and stolen. And all encrypted files, no matter how sophisticated, are eventually decryptable. Tokens, however, are functionally useless if copied or stolen. They act more like unique keys to get access to data, which issuing banks will not provide outside the intended specific context or approved vendor.

Payment tokenization is the process of replacing sensitive payment data online (or digitally), such as the primary account numbers (PAN) of a credit card, with a placeholder token. Using this token in place of the actual data during a transaction greatly reduces the risk of that data being compromised. Even if it’s stolen, the data is useless to the thief outside of the specific context it was intended for.

Friendly fraud is when a customer makes a card purchase online and then disputes the charge with their card issuer.

Fraud prevention involves using tools to help analyze customer data and purchase behavior on every transaction to identify and stop fraudulent orders, and to reduce false positive rates.

Payment fraud is when a cybercriminal completes a false or illegal transaction, depriving the victim of funds, property, interest or sensitive information.