# Forward's Payments Glossary

BY Jordan Greenberg

[Forward Payments 101 Glossary](https://www.canva.com/design/DAG75XURQfQ/kA5tV8r4xd29C8v7vbNZKQ/view?utm_content=DAG75XURQfQ&utm_campaign=designshare&utm_medium=embeds&utm_source=link) by Jordan Greenberg

## Introduction

Payments come with no shortage of acronyms, jargon, and terms that can feel confusing, especially if payments isn’t your full-time job. This glossary serves as a Payments 101 reference, breaking down commonly used terms across card payments, ACH, settlement, fees, risk, and compliance in plain language.

The goal isn’t mastery, it’s clarity. By establishing a shared vocabulary, teams can communicate more easily, resolve issues faster, and spend less time decoding terminology and more time understanding how money moves.

## Glossary

|     |     |
| --- | --- |
| Term | Definition |
| ACH (Automated Clearing House) | A type of bank-to-bank payment that uses a routing number and account number to move money. Commonly used for memberships, invoices, and payouts, and sometimes called eCheck or EFT. |
| ACH Network | The U.S. banking network that moves money between bank accounts using batch processing, typically overnight rather than in real time. |
| Account Holder | The individual or business that owns the bank account used for an ACH payment. |
| Authorization | The step where a customer’s bank checks whether a payment can go through and either approves or declines it. An approval places a temporary hold on the funds. |
| Bank Identification Number (BIN) | The first digits of a card number that identify the bank that issued the card. |
| Capture | The step where an authorized card payment is finalized and prepared to move funds to the merchant. |
| Card | A credit or debit card issued by networks such as Visa, Mastercard, Discover, or American Express. |
| Card Data | Information associated with a card such as the card number, expiration date, and billing address. Some of this data must be securely stored, while certain elements like CVV cannot be stored at all. |
| Card-Present | Transaction where the physical card is used at point of sale |
| Card-Not-Present | Transaction where card isn't physically present (online, phone, etc.) |
| Cardholder | The individual or business whose name is on the card used for a payment. |
| Chargeback | When a customer disputes a payment with their bank and the funds are temporarily reversed while the dispute is reviewed. |
| Credit Underwriting | The process of evaluating a merchant’s financial risk before approving them to accept payments. It reviews factors like business type, processing history, and credit indicators to determine approval, transaction limits, and whether reserves or additional monitoring are needed to reduce potential losses from chargebacks, refunds, returns, or merchant failure. |
| CVV (Card Verification Value) | The 3 or 4 digit security code on a card used to help verify that the person making the payment has the physical card. |
| DDA (Demand Deposit Account) | A checking or savings account used to send or receive ACH payments. |
| Deposit | The movement of funds from a payments account or ledger into a merchant’s bank account. |
| Descriptor | The text that appears on a customer’s bank or card statement to identify a charge. |
| Dispute | A challenge to a payment initiated by a customer or bank, including card chargebacks and ACH returns. |
| Dues, Fees, and Assessments (DFA) | Fees set by card networks to cover the cost of operating and maintaining the card payment system. |
| EMV | A chip-based security standard used for in-person card payments to reduce fraud. |
| Faster Deposit | An option that allows merchants to receive funds sooner than standard payout timelines, often for an additional fee. |
| FBO (For Benefit Of) | An account structure where funds are held by one entity on behalf of another party. In payments, an FBO account is typically used to hold merchant or customer funds at a bank while clearly indicating who the funds belong to, helping with fund segregation, reconciliation, and regulatory compliance. |
| Funding | When processed payments become available to be deposited into a merchant’s bank account. |
| Gross Funding | Receiving full transaction amount before fees are deducted |
| Hard Decline | A payment decline that will not succeed without changing payment details, such as an invalid card number. |
| Interchange | Fees paid to the issuing bank for processing card payments. These vary based on card type, transaction method, and merchant category. |
| Issuing Bank | The bank that issued the customer’s card or holds the customer’s bank account. |
| ISO (Independent Sales Organization) | A company or individual that sells payment processing services on behalf of a processor or acquiring bank. ISOs typically handle sales and merchant relationships but do not directly process transactions themselves. |
| KYC (Know Your Customer) / KYB (Know Your Business) | The process of verifying the identity of individuals (KYC) or businesses (KYB) before allowing them to accept payments. KYC typically requires personal information such as name, date of birth, address, and SSN. KYB requires business details such as legal business name, EIN, business address, and ownership information. These checks help prevent fraud, comply with anti-money laundering regulations, and ensure merchants are legitimate. |
| Ledger | A record that tracks all money moving in and out of an account, including payments, refunds, and fees. |
| Merchant | A business that accepts payments from customers. |
| Merchant Account | The account set up for a business to accept and process payments. |
| Merchant Billing | The fees charged to a merchant for processing payments and related services. |
| MID (Merchant Identification Number) | A unique number assigned to a merchant account that identifies it within the payments ecosystem. |
| Multi-Factor Authentication (MFA) | A security method that requires more than one form of verification, such as a password plus a code sent to a phone. |
| NACHA (National Automated Clearing House Association) | The organization that governs rules and standards for ACH payments in the United States. |
| Net Deposit | A payout to a merchant after fees have been deducted. |
| NOC (Notification of Change) | A message from a bank indicating that ACH account details should be updated before future payments are submitted. |
| NSF (Non-Sufficient Funds) | An ACH return that occurs when a bank account does not have enough funds to cover a payment. |
| ODFI (Originating Depository Financial Institution) | The bank that sends an ACH payment on behalf of a merchant or platform. |
| PAN (Primary Account Number) | The full card number printed on a credit or debit card. |
| Passthrough Fees | Fees charged by card networks or banks that are passed through without markup. |
| PayFac (Payment Facilitator) | A payments model where a platform manages onboarding, underwriting, and processing for multiple merchants. |
| Payment | Any movement of money on behalf of a merchant, including customer payments, refunds, and payouts. |
| Payin | Money moving from a customer to a merchant. |
| Payout | The transfer of available funds from a payments account into a merchant’s bank account. |
| PCI DSS | A set of security standards designed to protect card data and reduce fraud. |
| Platform | A software company that embeds payments into its product for merchants. |
| Platform Fee | A fee charged by a software platform to merchants as part of using embedded payments. |
| PSP (Payment Service Provider) | A company that provides the infrastructure and services needed to accept and process payments. |
| RDFI (Receiving Depository Financial Institution) | The bank that receives an ACH payment on behalf of an account holder. |
| Reason Code | A short explanation provided by banks that explains why a dispute or return occurred. |
| Reconciliation | The process of matching payment records across systems to ensure transactions, fees, and payouts are accurate. |
| Residuals | The portion of processing revenue that remains after costs and fees are deducted and is paid to a platform. |
| Returns (ACH) | When an ACH payment fails and funds are sent back to the originating account. Common reasons include insufficient funds (NSF), closed accounts, or invalid account details. |
| RISO (Registered Independent Sales Organization) | An ISO that is formally registered with and approved by a processor and sponsoring bank. Registration allows the RISO to board merchants, earn residuals, and operate within card network and bank compliance requirements. |
| Routing Number | A nine-digit number used to identify a bank for ACH and RTP payments. |
| RTP (Real-Time Payments) | A payment network that allows money to move between bank accounts almost instantly. |
| Settlement | The process of moving funds from banks and card networks into a merchant’s payments account. |
| Soft Decline | A payment decline that may succeed if retried, such as insufficient funds or temporary bank issues. |
| Sponsor Bank | A regulated bank that oversees and is ultimately responsible for payment activity. |
| T+2 | Indicates that funds are typically deposited two business days after a card transaction is processed. |
| T+4 | Indicates that funds are typically deposited four business days after an ACH transaction is processed. |
| Tokenization | The process of replacing sensitive payment data with a secure placeholder to reduce risk. |
| Top-up | Money added to a merchant or platform balance from a bank account or third party. |
| WISO (Wholesale Independent Sales Organization) | An ISO model where one organization provides payment processing services to other ISOs or partners at wholesale pricing. The WISO often supplies infrastructure, compliance oversight, and reporting while downstream partners handle sales and merchant relationships.