Here are some of the main terms that you need to know to get started if you are moving into the online payment space or want to learn more about it.

Many of the definitions may seem to be obvious, but you may have preconceived notions that are not exactly aligned with the actual definition. So please take a look and test yourself!

Here are the most basic terms. You may know exactly what all of these things are, but you never really thought about what they are or how they work:


Cash is money in the form of currency. Examples would be bills or coins. 

Prepaid Card

A prepaid card is a card that is not linked to a bank account, and Instead of using your money from a bank account, you are using the money that is already loaded on the card.

Credit Card

A credit card is a card used to make payments that is issued by a bank or credit card company. The card allows the cardholder to access revolving credit from the issuer.

Debit Card 

A debit card is a payment card linked to a bank account. It allows the cardholder to use the card in place of cash to make purchases.

Now let’s move on to some terms that are a little less basic.

Digital Wallet (Apple Pay, Google Pay, Samsung Pay, WeChat Pay, Alipay, Venmo, PayPal, Cash App, etc.)

A digital wallet is an application that allows a user to make electronic transactions seamlessly and securely. It stores the user's payment information and login credentials for websites and apps all in one place. Through a digital wallet, users can make secure payments, send and request money, as well as access financial accounts.

Payment Processing Lifecycle (authorization, settlement, clearing, etc.)

The payment processing lifecycle refers to the entire process involved in completing a payment transaction. It can be broken down into three main stages: authorization, settlement, and clearing. Authorization is verifying the transaction details and approving or declining the charge. Settlement is transferring funds from the issuer to the acquirer, completing the transaction. Clearing is the exchange of transaction details and funds between payment networks, issuers, and acquirers. This entire process is necessary to ensure that payments are processed accurately and securely.

Payment Processor (Visa, Mastercard, American Express, etc.)

A payment processor is responsible for verifying and authorizing payments by facilitating communication between the bank that issued a customer's debit or credit card and the seller's bank. (Note: If the customer is using a third-party payment gateway like PayPal, the payment processor communicates with the payment gateway and the seller's bank to carry out its tasks.)

Payment Gateways (PayPal, Stripe, and Authorize.Net)

Payment gateways are software applications that facilitate transactions between merchants and payment processors. They encrypt sensitive data, such as credit card numbers, to ensure secure transmission between the customer, merchant, and payment processor. Payment gateways are responsible for verifying the transaction details and authorizing the charge. They also handle settlement and clearing of funds.

Regulations and compliance (PCI DSS, KYC, AML, etc.)

Regulations and compliance refer to the rules and requirements that payment industry participants must follow to ensure that payments are processed accurately and securely. Some common regulations include the Payment Card Industry Data Security Standard (PCI DSS), Know Your Customer (KYC), and Anti-Money Laundering (AML) regulations. These rules are designed to protect the interests of all parties involved in the payment process, including consumers, merchants, and financial institutions. Failure to comply with these regulations can result in penalties, fines, or legal action. 

Payment Card Industry Data Security Standard (PCI DSS)

The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure that all payment companies (companies that accept, process, store, or transmit credit card information) maintain a secure environment. The standards were developed by major credit card companies in order to protect against credit card fraud and other security breaches.

Know Your Customer (KYC)

"Know Your Customer" (KYC) is the process of verifying the identity and legitimacy of clients or customers of a business. This process is typically used in the financial industry to ensure that financial institutions are not unknowingly facilitating fraudulent or illegal activities. KYC regulations require financial institutions to obtain and verify certain information about their clients, such as their name, address, and date of birth, as well as information about the source of their funds and the nature of their financial transactions.

Anti-Money Laundering (AML)

Anti-Money Laundering (AML) refers to a set of laws, regulations, and procedures aimed at detecting and preventing the practice of disguising the proceeds of illegal activity as legitimate funds. AML regulations require financial institutions and other regulated entities to monitor financial transactions and report suspicious activity to the appropriate authorities. The goal of AML measures is to prevent criminals from using the financial system to launder money and finance illegal activities.

We hope you learned a few new terms in this article. If you didn’t, we hope that it will help newcomers to the industry.

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