We understand that when starting a business, you will probably get bombarded with paperwork filled with all sorts of acronyms that may seem obvious to the sender, but not so obvious to new businesses looking to take payments. For this reason, we’ve collated a list of the most commonly used acronyms in the payment sector.
ACH - Automated Clearing House - An ACH is a fully electronic, digital network that is responsible for facilitating transactions between Banks and Financial Institutions. It allows for automated and recurring payments, usually with small fees to encourage low-value payments. Think of it as an online highway that connects various financial institutions with road tax as the cost of using this highway. If you've ever made a payment via BACS, you'll have noticed a transaction fee cost for using the ACH. The very first ACH was used in the United Kingdom in 1968.
AML - Anti Money Laundering System - AML is a set of procedures that is designed to prevent illegal sources of income from becoming legitimate. Some businesses who facilitate financial transactions must register with the AML scheme as set out by the UK government and FCA. These businesses include financial and credit businesses, accountants, tax advisers, auditors, insolvency practitioners, estate agents and casinos.
APM - Alternative Payment Method - If you consider default payment methods to be those taken via card either through MasterCard or Visa. APM refers to any payments made outside of this. Examples include Bank Transfers, pre-paid cards, financing and e-commerce payments. Paypal, Stripe, Klarna, Apple Pay and Ali Pay are all example companies who can help you start taking APM's. According to BankingCircle, APM's are expected to account for nearly 55% of global e-commerce transactions.
ATM - Automated Teller Machine - We've all used one before but did you know what ATM actually stood for until now? ATM's are an electronic gateway to access your bank account without the need for a physical branch. The very first ATM was created by Barclay's Bank in London back in 1967. They typically comprise of a card reader, keypad, cash dispenser, printer and screen.
BACS - Bankers Automated Clearing System - If ACH is the network for financial transactions, BACS is the network conductor who monitor the transactions. Believe it or not this conductor is actually a private company known as BACS Payment Schemes Limited. This organisation is responsible for clearing and settlement of automated payment methods such as Direct Debit. How much you might might ask? Since it's creation, BACS has been responsible for processing over £5 trillion worth of payments. On any given day they will facilitate around 100 million payments per day.
BIC - Bankers International Code - Also known as the SWIFT code. As the BIC acronym suggests it is used to identify a particular branch or bank. It will typically consist of 8 or 11 digits. If all 11 digits are used, the BIC will identify the Bank as well as the specific banking branch within the country. If only 8 digits are used, the BIC will display the Bank and the head office address. When making or receiving international payments, you'll likely relevant SWIFT/BIC information. To ensure that you've got the correct information we'd recommend using bank.codes to verify information.
CNP - Card Not Present - A type of transaction where the card holder and card are not physically present next to the merchant. This would include online payments through e-commerce, phone transactions, recurring payment and invoices. For a transaction to be considered 'Card Present' both the merchant and payer must be together, in-person. Examples include going to pay for something in-store via a card machine. When accepting payments via CNP, there will likely be additional fees due increased charges of fraud and chargebacks.
CHAPS- Clearing House Automated Payment System - A form of payment that allows for high-value sums of money to be transferred from one bank account to another, quickly and often the same day. An ideal example would be purchasing a house or card. CHAPS is also used for B2B payments. It is the go-to method for settling payments in a risk free and irrevocable manner. CHAPS opening hours are from 06:00 to 18:00, Monday to Friday excluding bank & public holidays in England and Wales.
EFT - Electronic Funds Transfer - An overarching term that is used to describe the movement of money from one account to another, either using the same bank or different banks. Common day-to-day examples include direct debits, ATM transactions, credit or debit card payments, Bank Transfers, phone payments, electronic checks and online payments. Effectively any transaction that isn't paid in physical cash can be classified as an EFT.
EMV - Europay, MasterCard, Visa - These three companies set up the initial technological to standardise chip and pin payments used in card terminals and ATM's. It prevented different card issuers from forming different technological standards meaning that payers could use their payment cards at any bank terminal or ATM, irrespective of the Bank itself. Since it's inception in the 1990's, EMV has added other corporations such as JCB, American Express, China Union Pay and Discover to form EMVco.
EPOS - Electronic Point of Sale - Usually consisting of a system that involves both hardware and software to take payments in-person. Common components include a receipt printer, a tablet or screen, barcode scanner, card machine and a cash drawer. EPOS systems are heavily prevalent in the hospitality sector as they often include everything you need to accept payments from customers whilst also giving you intelligent payment data. Having access to the financial elements of your business is crucial to making informed-based decisions to optimise and hit your business goals.
FCA - Financial Conduct Authority - Operating independently from the UK Government, the FCA has 3 key pillars. 1. To protect consumers and prevent bad financial conduct. 2. To bolster a trustworthy UK financial system that encourages interaction between consumers and firms in open markets. 3. To promote business competition in a way that protects consumers. As with BACS, the FCA is a privately managed company.
IBAN - International Bank Account Number - A 34- alphanumeric string that is used to identify an individuals bank account when making or receiving international transfers. It is different to SWIFT/BIC code as an IBAN is unique to each bank account where as a SWIFT/BIC code is often used to identify the bank itself. You'll be able to find your IBAN on an account confirmation letter provided by your bank. You can validate IBAN's here.
PDQ - Processing Data Quickly - Often used in reference to a PDQ machine, it is a term historically used for the early generation POS devices. This involved swiping the payers credit or debit card via a magstripe and then validating the transaction by the payer through a receipt signature and matching the signature to the back of the payers card. It was highly susceptible to fraud through methods known as 'skimming' which would essentially copy the card data. Knowing the signature, allowed fraudsters to make illegitimate payments. To make matters worse, it just wasn't in merchants interest to monitor this as chances are, you would just want to get paid. Thankfully, we've evolved to Chip and Pin machines which are far more secure and quicker than it's magstripe predecessor.
POS - Point of Sale - Also known as Point of Purchase. These are transactions occur in person where there is an exchange of goods. Typical environments include retail or hospitality shops. Various software and hardware is involved. In order to detect the goods, barcodes and/or weighing scales are used. Self-check outs at supermarkets are good examples. Once the items have been checked, the merchant will display the items and the total amount owed. Customers then make payment either via cash or through a card terminal to own the goods.
mPOS - mobile Point of Sale - Very similar to POS except that it allows for the exchange of goods without near the POS register. For example if you're a restaurant of cafe owner you don't want your customer to have to leave their comfy seats. Rather you bring the mPOS technology to the customer, with a receipt of the goods owed and the customer can make the transaction there and then.
NFC - Near Field Communication - A recent innovation that allows mobile devices such as phones or smart watches to transmit data with other NFC-activated hardware. This is typically done in through wireless, low frequency waves in ranges less than 4cm. To authentication payments, users must enter a unique code or fingerprint on their phone.
PCI - Payment Card Industry - Often used in reference to PCI compliance as set out by the PCI SSC (Payment Card Industry Security Standard's Council). PCI compliance is a set of security standards to ensure that all businesses who accept payments maintain secure data protocols for processing, storing and transmitting credit or debit card information. There are 12 PCI DSS (Payment Card Industry Date Security Standard) steps which you need to follow to be considered compliant. Your Payment Service Provider should largely take care of the PCI compliance and educate you how best to comply should you have any questions.
PSP - Payment Service Provider - As a business looking to start taking payments, you'll need a Payment Service Provider to provide you with the hardware, software and a merchant account. A merchant account is an intermediary bank account that sits in between your customers bank account and your business account to hold funds while they are validated. It is incredibly important to pick a credible PSP when starting your business who can accommodate your individual business needs. They will provide you with card terminals, online customer payment portals, phone payment facilitation as well as cash registers. However in order to really get the most from your PSP, you should look for smart software. This will provide you with personalised data for consumer payments in order to make informed-based decisions.
KBA- Knowledge Based Authentication - This usually refers to prove that the person paying you is in fact that person. The knowledge that the individual holds should be unique to that person in order to validate transactions. The most common example of KBA is a customer knowing the PIN to their credit or debit card. Others include security questions for the purposes of online bank transfers.
KYC- Know Your Customer - Businesses accepting payment must Know Your Customer for the prevention of illegitimate transactions and to comply with Anti Money Laundering (AML) standards. It requires you to know the identity of each individual from whom you've accepted payments. This customer data should be encrypted at all times and will also help prevent any potential bribery charges.
SEPA- Single Euro Payments Area - Created by the European Union, SEPA is a coalition of 36 countries with the joint initiative to make cross-border payments as easy as domestic payments. All payments are made in Euro. 2 key features include the fact that merchants initiate payment and the fact that no card networks are involved for Direct Debit payments such as Visa or MasterCard. These transactions are done directly through the banks themselves
SWIFT- Society for Worldwide Interbank Financial Telecommunication - Also known as the BIC code. See BIC above.
So if you're looking to start accepting payments or an existing payment acceptor, it's helpful for you to understand these key terms along with all the relevant private and government bodies. In doing so, you'll have peace of mind that your business is suitably positioned to start accepting payments. If so, card payment guru would be happy to help you find a Payment Service Provider. Simply fill in a form and we'll do the rest to find you a suitable PSP.