Reference

Payment Processing Glossary — Key Terms Defined

A reference guide to the terminology used in payment processing, the NMI gateway, and the broader payments industry. Bookmark this page for quick lookups.

ACH (Automated Clearing House): An electronic funds transfer network for bank-to-bank payments. NMI supports ACH/eCheck processing for merchants who want to accept direct bank debits.
Acquirer (Acquiring Bank): The financial institution that processes card transactions on behalf of the merchant. NMI connects to multiple acquirers through its multi-processor gateway.
Authorization: A request to the card-issuing bank to approve a transaction. The authorization places a hold on the cardholder’s funds without capturing them.
AVS (Address Verification Service): A fraud prevention tool that compares the billing address provided by the cardholder with the address on file at the card-issuing bank.
Batch: A group of authorized transactions submitted for settlement at the same time. NMI processes batch settlements daily or on a merchant-defined schedule.
Capture: The process of finalizing an authorized transaction for settlement. A captured transaction moves from the authorization stage into the current batch.
Cardholder: The person or entity whose name appears on a credit or debit card and who is authorized to use it for transactions.
Chargeback: A forced reversal of a transaction initiated by the cardholder’s issuing bank. Chargebacks can result from fraud, disputes, or processing errors.
CNP (Card Not Present): A transaction where the physical card is not presented to the merchant, such as online, phone, or mail orders. CNP transactions typically carry higher interchange rates.
Customer Vault: NMI’s secure storage for tokenized payment credentials. Used for recurring billing and card-on-file transactions without handling raw card data.
CVV (Card Verification Value): The 3-4 digit security code on a credit or debit card, used to verify that the cardholder has physical possession of the card during CNP transactions.
DCC (Dynamic Currency Conversion): A service that converts the transaction amount into the cardholder’s home currency at the point of sale. NMI supports DCC for international transactions.
EMV: The chip-card standard (Europay, Mastercard, Visa) that provides stronger authentication than magnetic stripe. EMV reduces counterfeit fraud for card-present transactions.
Gateway (Payment Gateway): Software that encrypts and routes card transaction data between the merchant and the acquiring processor. NMI is a payment gateway.
HPP (Hosted Payment Page): A payment form hosted by the gateway provider rather than the merchant. Reduces PCI scope because the merchant’s server never handles card data.
Interchange: The fee paid by the acquiring bank to the card-issuing bank for each transaction. Interchange rates vary by card type, transaction method, and merchant category.
ISO (Independent Sales Organization): A company authorized to sell merchant processing services on behalf of an acquiring bank. Most NMI merchants are onboarded through ISOs.
ISV (Independent Software Vendor): A software company that integrates payment processing into its product. NMI provides APIs and SDKs specifically for ISV partners.
Level 2 / Level 3 Data: Additional transaction data fields (purchase order numbers, tax amounts, line-item details) that qualify B2B and government transactions for lower interchange rates.
MFA (Multi-Factor Authentication): A login security method requiring two or more verification factors. NMI supports MFA via authenticator apps and SMS codes.
PCI DSS: Payment Card Industry Data Security Standard — a set of security requirements for organizations that handle card data. NMI is PCI Level 1 certified.
PayFac (Payment Facilitator): A master merchant that onboards sub-merchants under its own merchant ID. NMI’s gateway supports PayFac models for platforms and marketplaces.
Refund: A transaction that returns funds to the cardholder after a sale has been settled. Refunds are processed against previously captured transactions.
Settlement: The process of transferring funds from a batch of captured transactions to the merchant’s bank account. Settlement timing depends on the acquirer and merchant agreement.
Source Key (USAePay): A unique identifier for a processing endpoint within a USAePay merchant account. Merchants select their source key during login. See USAePay Login.
Tokenization: Replacing sensitive card data with a non-sensitive token that can be stored and reused for future transactions. NMI’s Customer Vault uses tokenization for recurring billing.
Void: Canceling an authorized transaction before it is captured and settled. Voids do not incur interchange fees because the funds were never moved.
Virtual Terminal: A web-based interface for keying in card transactions manually. Used for phone orders, mail orders, and card-not-present sales. Available in both NMI and USAePay.
Webhook: An automated HTTP callback triggered by a gateway event (transaction approved, chargeback received). NMI’s API supports webhooks for real-time notifications.
White Label: A product sold by one company but rebranded by another. NMI’s gateway is white-labeled by ISOs who present it to merchants under their own brand.