Articles

Payments jargon explained - A complete list of payments terminology

by Sahil Verma SIFIPAY

It is very common for small business owners to begin researching their options for online payments and end up feeling even more perplexed than when they began. It's difficult to understand payment industry jargon, and as a business owner, you don't know how to explain these payment terminologies to your customers. It may make sense to you after hours of research and multiple conversations with online payment gateway service providers. Your customers, on the other hand, will have no idea what you're talking about. So, how do you explain payment jargon to them?


Share the explanations below with your customers to help them understand some key payment terminology as well as the advantages of accepting online payments.

Payment Gateway

The best payment gateway India, like a toll gate on a highway, allows a customer's payment to pass if they have enough funds, but not if they don't. When a transaction request arrives at the gateway, card issuers (such as Visa and MasterCard) check the card's validity and whether funds are available to complete the transaction. When a transaction is authorized, the amount is deducted from the customer's account, captured, and transferred to the merchant account.

Digital Wallet

A digital wallet, also known as an e-wallet, is an application-based system that securely and virtually stores money that has been loaded into it. It also saves the user's payment information as well as passwords for a variety of payment methods and websites. Users can easily and quickly complete purchases with mobile devices at any business that accepts wallet payments by using a digital wallet. Digital wallets can be used in tandem with mobile payment systems, allowing businesses of all sizes to collect payments from their customers in this manner.

UPI

The Unified Payment Interface (UPI) is a smartphone app that allows users to transfer money between bank accounts. The National Payments Corporation of India created it as a single-window mobile payment system (NPCI). It eliminates the need for customers to enter bank account information or other sensitive information each time they initiate a transaction. It is intended to allow peer-to-peer inter-bank transfers via a single two-click factor authentication process. The system is said to be a safe and secure way of transferring money between two parties, and it eliminates the need to use physical cash or go through a bank.

EMI

An Equated Monthly Installment (EMI) is a fixed payment amount made to a lender by a borrower on a specific date each calendar month. Equated monthly installments are used to pay off both interest and principal each month so that the loan is paid off in full over a specified number of years. Consumer durables loans, personal loans, real estate mortgages, auto loans, and student loans are the most common types of loans. Over the course of several years, the borrower makes fixed periodic payments to the lender with the goal of repaying the loan. The flat-rate method or the reducing-balance method can be used to compute the EMI.

Neo Bank

A neobank is a type of digital bank that does not have any physical locations. Neobanking takes place entirely online, rather than in a physical location. It's a broad range of financial service providers pleading with today's tech-savvy customers. Fintech firms that provide digital and mobile-first financial solutions such as payments and money transfers, money lending, and more are known as neobanks. Neobanks are customer-centric, offering personalized services to their clients that are powered by technology. Customers are shifting away from physical banks and cash in favour of online banking and wallets.

Payments Bank

A payments bank is similar to any other bank, but it operates on a smaller scale and does not involve any credit risk. In other words, it can perform the majority of banking operations but cannot make loans or issue credit cards. It can accept demand deposits of up to Rs 1 lakh, as well as remittances, mobile payments/transfers/purchases, and other banking services such as ATM/debit cards, net banking, and third-party fund transfers. The primary goals of establishing payments banks are to ensure financial inclusion by providing payments/remittance services to migrant labour workforce, and opening small savings accounts for small business owners, low-income households, and unorganized sector workers.

TDR (Transaction Discount Rate) and MDR (Merchant Discount Rate)

The Transaction Discount Rate includes the bank fees/processing fees charged by card issuers and service providers whenever an online payment is made. This also includes the fees charged by the payment gateway for the services and products provided to manage the payment, as well as any applicable taxes. As you may have noticed, several parties are involved in the processing of a single payment, and these parties charge a nominal fee on each transaction, which equals the TDR.

The Merchant Discount Rate is the fee that a merchant is charged for payment processing services on debit and credit card transactions. Before accepting debit and credit cards as payment, the merchant must set up this service and agree to the rate. The merchant discount rate is a fee that merchants must consider when determining the total cost of their products or services. Fees and service level agreements will typically differ between local and e-commerce merchants.

E-NACH

E-NACH (Electronic-National Automated Clearing House) is a computerized process that assists banks, financial institutions, and other government entities in providing automated payment services. When the user signs the E-NACH or electronic NACH form, he authorizes the relevant authority to debit the specified amount from his bank on a monthly basis. The E-NACH system aids customers in the issuance and confirmation of mandates via alternative channels to paper-based mandates. The primary goal is to reduce the burden of processing on the destination bank; therefore, all aspiring E-NACH platform participants should implement end-to-end process automation, including auto submission of authenticated mandates to the NACH system. It is one of the newest electronic payment methods, so it is still in its early stages of adoption.

NEFT

NEFT (National Electronic Funds Transfer) is an electronic payment system that allows funds to be transferred electronically from one bank account to another. According to the Reserve Bank of India, money transfers can be made by an individual or a company to an individual or a company's bank account with any bank that participates in the NEFT scheme (RBI). The amount of money that can be transferred using NEFT is unlimited. NEFT allows any individual, firm, or corporation with a bank account to transfer funds electronically. Individuals who do not have a bank account can transfer funds by visiting a bank branch and depositing cash at NEFT-enabled branches. However, the maximum amount per transaction for cash-based remittances within India is fifty thousand rupees.

RTGS

RTGS (Real Time Gross Settlement), designed primarily for large-value money transfers, is a payment system that allows for the instant transfer of funds from one bank to another in "real time" and on a gross basis. Unlike NEFT, RTGS processes instructions as soon as they are received rather than later. The minimum amount that can be transferred via RTGS is Rs 2 lakh. For RTGS transactions, there is no upper limit.

Chargeback

A chargeback is a payment card charge that is returned after a customer successfully disputes an item on their account statement or transactions report. Chargebacks can occur on debit cards and the underlying bank account, as well as on credit cards. A cardholder may be granted a chargeback for a variety of reasons. A chargeback is similar to a refund because it returns specific funds taken from an account as a result of a previous purchase. Chargebacks can be initiated by the merchant, the customer, or the cardholder's issuing bank. When a chargeback occurs, the merchant is usually charged a fee by the card issuer.

KYC

Knowing Your Customer, also known as KYC, is the process by which businesses verify the identity of their customers before or during the course of doing business with them. KYC can also refer to the regulated bank practices that are used to verify clients' identities. Banking institutions, credit companies, and insurance companies are increasingly requiring detailed information from their customers in order to ensure that they are not involved in corruption, bribery, or money laundering.

Merchant

Online merchants are similar to brick-and-mortar store clerks, but their work is done entirely on the Internet. They are in charge of not only the store's inventory but also the financial process and even the promotion of the products and the brand. A merchant account is a type of commercial bank account that enables a company to accept and process electronic payments and card transactions. Merchant accounts necessitate a partnership between a business and a merchant acquiring bank, which facilitates all communications in an electronic payment transaction. Its sole purpose is to accept payments from card transactions and other online transactions and deposit them into the company's checking account.



Sponsor Ads


About Sahil Verma Advanced   SIFIPAY

15 connections, 0 recommendations, 142 honor points.
Joined APSense since, August 27th, 2021, From Ghaziabad, India.

Created on Apr 1st 2022 04:48. Viewed 77 times.

Comments

No comment, be the first to comment.
Please sign in before you comment.