A payment processor makes credit card transactions easier for businesses by removing the need for merchant accounts. It's vital for accepting online and offline card payments. When choosing one, consider features, costs, and software integration. Make a wise choice to optimize your business's cash cycle.
A payment gateway is vital for accepting card payments. It securely transfers payment data, working in-store and online. Types include redirect, hosted, and self-hosted gateways. It involves merchants, banks, and card schemes.
A Payment Facilitator helps sub-merchants accept card payments, streamlining the process. It differs from a Payment Processor, as it onboards sub-merchants and takes on more risk. It’s a good choice for managing liabilities with acquiring banks, but it may have higher fees.
B2B Payments involve money exchange between businesses. When choosing a B2B payment provider, consider their international capabilities, integration with your ERP system, security, customer-friendly options, payer incentives, and cost-saving features.
ERP (Enterprise Resource Planning) systems streamline accounting, HR, and supply chain operations. They reduce expenses, share data, automate tasks, improve reports, and enhance company performance. These systems centralize data, eliminate silos, and automate delivery of crucial information.
Cash velocity is a way to measure how quickly money moves between a business and its customers. Calculating cash flow for financial stability is essential, especially during economic uncertainties. You can digitize payments, automate AR tasks, and reduce transaction fees to increase cash velocity.
The Cash Cycle is an important measure that shows how well a company turns its investments into cash from sales. It looks at inventory, materials, and resources. By digitizing the cash cycle, companies can speed it up, lower DSO, and eliminate expensive merchant fees.
A chargeback happens when someone disputes a payment on their card, saying it was fraud or unauthorized. Chargebacks differ from refunds as they involve the bank's intervention. Reducing chargeback risks involves proof of shipment, avoiding manual processing, easy communication, and precise billing details.
A chargeback fee can cost your business significant money. It's influenced by factors like your business's risk level and the product or service sold. Reducing payment processing fees, like with a zero-fee bank-to-bank network, can help protect your bottom line.
Straight Through Processing improves financial operations by automating tasks, eliminating paper, and reducing human involvement. This technology enhances efficiency, accelerates transaction processing, reduces errors, and boosts control over payment timing.
Days Sales Outstanding (DSO) measures how long credit sales take to become cash, which is crucial for assessing liquidity and cash flow. A low DSO signals efficient collections, while a high DSO indicates potential issues.
In business accounting, a write-off is an expense that accounts for losses on assets and unpaid payments. This helps lower taxable income. It's different from a write-down, which reduces an asset's book value when its market value falls below its carrying amount.
A billing cycle is the time between two billing statement dates. It's essential for businesses to charge customers and estimate revenue. Knowing the length of their billing cycle is vital to help with budgeting, making payments on time, and projecting revenue.
EFT payments, or electronic fund transfers, include different digital transactions. These transactions include peer-to-peer transfers, eChecks, and card payments. They make it easier to move money between people using algorithms and digital channels, which makes it safer and faster.
Wire transfers, done electronically, move money quickly and safely worldwide without using paper. Wire transfers can be either international or domestic. They are great for fast, safe transactions, especially over long distances. However, they may have fees and transaction limits.
A credit card is a tool that lets people and businesses buy things using borrowed money. There are limits on how much you can borrow. They offer various perks like rewards points and cashback. Alternatives like paper checks have drawbacks, while wire transfers and ACH payments are slow and outdated.
An international wire transfer is a secure and speedy method of sending funds from one country to another. Agencies monitor these transfers to ensure adherence to regulations and sanctions. International wire transfers are fast and dependable, but they have higher fees. This makes them less suitable for smaller payments.
ACH payments transfer funds electronically between bank accounts using the Automated Clearing House network. They replace paper-based methods. They encompass direct payments and deposits, serving various entities. The benefits include more security, faster transactions, automatic payments, flexibility worldwide, lower costs, and easy connections to accounting software.
An eCheck is a digitalized version of a traditional check processed via the ACH Network. Unlike paper checks, they are swift and secure and reduce the risk of fraud. Obtaining an eCheck merchant account is like getting a credit card processing account and is generally quick.
A paper check is a manual payment method filled out by the payer, directing the bank to pay a specific amount to the payee. They are delivered and processed through banks, allowing secure transactions but susceptible to fraud and hidden costs. Despite their drawbacks, over 50% of B2B payments are made via paper checks.
A payer portal is an important online payment tool. It makes it easier for customers to pay bills by showing them how much they owe and processing payments quickly. Payer portals are different from payment gateways. They are user interfaces for starting payments. They also differ from payment processors, which mediate transactions between merchants and customers.
Payment acceptance is crucial for eCommerce, SaaS, and online businesses. SaaS companies can be affected by recurring revenue, international payments, and online transactions. A low acceptance rate means lost revenue from existing and potential customers. It is calculated by dividing successful payments by attempted payments. Analyzing failures can reveal issues to address.
Collections is a critical finance function to recover payments owed to a business after invoicing. It involves strategies to ensure timely payments, including credit approval processes and automation through accounting software. Businesses evaluate collection success using tools like aging reports and the AR turnover ratio, where a high ratio signifies financial health.
A virtual terminal is software that allows card payments without being present. It can transform any device into a card terminal, boosting payment flexibility. Differing from payment gateways, virtual terminals are merchant-oriented. Various types exist, including mobile/desktop apps, web-based, and card machine screens.
A lockbox securely handles customer check payments for businesses, streamlining collections. Virtual lockboxes eliminate paper checks, reducing mail float and fraud risk. Cash flow is faster, and reconciliation is easier with seamless digital processing and ERP integration.
Check payments are a proven way to transfer funds securely without using physical cash. Checks still play a big part in B2B transactions, making up 40% of payments, despite digital options increasing.
Automated collections streamline finance operations by digitizing the AR department and eliminating paper-based processes. By using B2B payment software, this approach provides scheduled, autopay, and recurring payments. It improves cash flow predictability and reduces DSO.
Blockchain is a decentralized technology that creates a secure, unchangeable ledger. It underpins cryptocurrencies but has broader applications. Its security lies in consensus, making it ideal for enterprise use, from supply chains to finance. It's distinct from cryptocurrencies, which depend on blockchain but have different functions.
Payment reconciliation is an important accounting process. It checks bank balances by comparing internal records to bank statements. This helps detect errors, fraud, and unpaid invoices. Regular reconciliation ensures up-to-date accounts and informed financial decisions.
An invoice is a detailed record of what a seller provides, including how much is owed, when it's due, and how to pay. It aids in accounting, clean audit trails, and tax filing. There are many types of invoices, such as interim, debit, credit, recurring, pro forma, past due, and commercial invoices.
Short payments can result from various reasons, some valid, others not. Some causes of the issue are negotiated payment plans, delayed or damaged goods, earned discounts, and pricing discrepancies.
Funds-on-file tokenization is a secure way to store customer payment data. It replaces the data with tokens, so sensitive information can't be accessed. Tokenization is frequently used in payment processing. It allows for smooth, secure transactions and encourages new payment technologies.
Payments-as-a-Service changes B2B payments by using a subscription-based model. This model removes transaction fees and gives access to a bank network. This new method helps finance teams know costs ahead of time and revenue to grow faster.
A payment network helps transfer money between parties, like credit card networks and ACH. Credit card networks involve cardholders, banks, and merchants. ACH payments transfer funds electronically between bank accounts, albeit slowly. When choosing a payment network, consider security, fees, reputation, and customer support.
A B2B payment network helps businesses easily exchange money online, avoiding paper checks and high credit card fees. These networks make payments faster, safer, and more efficient by automating processes and reducing chargebacks.
A clearing house is an important link for buyers and sellers in financial markets. It verifies and completes transactions. This intermediary function enhances market security and efficiency, reducing risks. Clearing houses are pivotal for trading, payments, and derivatives.
A Business Bank Account is important for any business. The IRS requires it, so the business can stay organized and qualify for loans and investments. There are different types of accounts for businesses, such as checking, savings, merchant, and investment accounts.
A credit card issuer, often a financial institution like a bank or credit union, provides credit cards to consumers and businesses. They manage credit limits, interest rates, fees, and approvals. Unlike card schemes, issuers focus on customer accounts.
A front company is a physical entity criminals and organizations use to conceal illicit activities. These deceptive businesses operate legitimately on the surface while serving as a cover for illegal operations behind the scenes. Different groups, like terrorists and organized crime, use front companies for things like money laundering and spreading propaganda.
An Independent Sales Organization (ISO) helps businesses get credit card processing services. It is separate from banks and other financial institutions. ISOs help determine which cards to accept, manage transaction fees, and provide equipment. They help customers with credit card issues and work with payment processors for transactions.
Integrated payments simplify financial processes by automating payment acceptance in different business software. This includes ERP systems, POS, and accounting software. This connectivity makes payment data synced instantly, reducing errors and saving time.
An Independent Software Vendor (ISV) creates and sells software to consumers and businesses. Licensing agreements usually let the ISV keep its intellectual property. They create software for different uses, like ERP systems for business management, CRM tools for customer data, and ERM products for risk management.
The Bank Secrecy Act (BSA) was introduced to combat money laundering in the US. It mandates financial institutions to report suspicious activity and cash transactions over $10,000. These rules enhance oversight and data collection, aiding in detecting illicit financial behavior.
B2C payments involve businesses making payments to individual customers or small businesses. Refunds are included in these transactions. Businesses return funds for errors or unmet promises, promoting customer loyalty.
A card network is the backbone of credit card payments worldwide, seamlessly transferring funds from customers to merchants. These networks rely on payment processors and gateways to manage transactions efficiently.
A custodian is a financial institution that safeguards assets. It manages accounts, settlements, and regulatory compliance. Custodians provide security for individuals and institutions unable to oversee their assets daily.
Custody services safeguard customer assets and securities while facilitating settlement and reporting. This minimizes the risk of theft or loss. They also oversee accounts and transactions and ensure compliance with regulatory bodies such as the SEC, IRS, and FINRA.
A freeze is a restriction banks or brokerages impose that prevents withdrawals or transfers but allows deposits. It's often used to combat fraud, secure a deceased account holder's assets, or curb suspicious activity.
Foreign exchange (Forex) is changing one country's currency into another. Rates are affected by tourism, investment, politics, and inflation. The Forex market offers flexibility but raises concerns about transparency and regulation.
An issuer is a legal entity like a corporation or government that creates and sells securities, such as stocks and bonds, to raise capital. These securities can be traded on stock exchanges like NASDAQ or NYSE.
An issuing bank provides consumers with credit or debit cards and assumes liability for cardholders' transactions. They play a crucial role in the payment cycle, involving the merchant, acquirer, cardholder, and issuer.
An issuer processor helps merchants accept online payments and handle credit and debit card transactions. Issuer processors help both cardholders and merchants. They make online payments secure and increase the ways cards can be used.
Know Your Customer (KYC) is a standard that requires institutions to verify customer identities. This helps combat money laundering and financial crimes. It involves identity verification, funds source validation, and government ID checks and biometrics risk assessment.
Know Your Employee (KYE) is a comprehensive solution to vet potential hires. It builds solid and trustworthy relationships between employers and employees. KYE helps onboarding and fosters ongoing communication to enhance corporate security and employee satisfaction.
A Merchant Identification Number (MID) is a code assigned to merchants by their acquiring bank that enables electronic card payments. MIDs are crucial for securely routing customer payments to the right merchants.
Middleware is software that bridges gaps between applications, platforms, tools, and databases. It helps them communicate easily and makes the operating system last longer. It is especially valuable in cloud computing and distributed applications.
SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a Belgian cooperative that facilitates secure global financial transactions for its members. It's a messaging system that enables international payments and settlements.
An Originating Depository Financial Institution is crucial to the ACH network because it helps with ACH payments. It connects the ACH network or Federal Reserve to the person sending the transaction, ensuring they follow NACHA rules.
An originator is the entity initiating an ACH transaction, whether an individual, business, or party. It can use Third Party Processors (TPPs) or work directly with an Originating Depository Financial Institution to ensure compliance.
A Standard Industrial Classification (SIC) code is a four-digit numerical identifier the US government and businesses use to categorize industries and their activities. These codes help organize economic data and promote uniformity in reporting.
A Terminal ID Number (TID) is an eight-digit code financial institutions use to track transaction terminals. It's found on transaction receipts and helps merchants locate specific transactions for refunds or disputes.
An eCheck return occurs when a receiving bank rejects an electronic check payment, similar to a bounced paper check. eChecks are digital forms of payment processed by the ACH Network. Returns can happen due to reasons like insufficient funds or incorrect account details.
Autopay is a convenient process where bills are paid automatically on the same date of every billing cycle, usually two days before the due date. It can be linked to various bank or credit accounts, such as checking, savings, or credit cards.
A bank transfer is a method for moving money between bank accounts, whether internal or external.
An Automated Clearing House (ACH) credit is a method of electronic funds transfer where funds are initiated by the sender and deposited into the receiver's bank account. ACH credits are commonly used for payroll, government benefits, tax refunds, etc.
An Automated Clearing House (ACH) debit is a type of electronic funds transfer where money is withdrawn from a bank account at the payer's consent.
An Automated Clearing House (ACH) refund is a process for returning funds related to transactions like purchases or payments. ACH refunds enable customers to receive their money back for reasons like dissatisfaction with a purchase, non-delivery of goods, or overpayment.
An Automated Clearing House (ACH) return occurs when an ACH transaction can't proceed as intended. When an ACH request is denied, an RDFI sends an ACH return to the originator with a specific code explaining the issue.
Embedded payments simplify the transaction process, allowing customers to pay with a single click. This enhances customer experience, increasing engagement and reducing cart abandonment. These systems use open APIs to embed payment processing within apps or websites, part of the broader trend of embedded finance.
Payment failures occur when a transaction between two parties fails. There are different reasons, such as payment method issues or insufficient money in the account. Other factors include expired credit cards, incorrect data, or reaching transaction limits.
A push-to-card (P2C) payment is a solution that enables cardholders to send money directly to other cardholders. These transactions utilize existing card networks, allowing instant access to funds.
Cash application is crucial for managing a business's accounts receivable, matching incoming customer payments with corresponding invoices. It plays a pivotal role in tracking cash flow accurately and efficiently.
Bank reconciliation allows businesses to align their internal cash records with external bank statements, addressing discrepancies caused by errors, timing issues, or potential fraud. It enables finance teams to correct mistakes, monitor financial health, track expenses, etc.
Good funds represent the capital in a company's treasury that is readily accessible and guaranteed for immediate use. They should not be confused with accounts receivable (AR), which are outstanding payments due to a business for products or services delivered but not yet paid for.
A Bank Identification Number (BIN) is a set of four to six digits. It is found at the start of payment card numbers and identifies the issuing financial institution. They are crucial for detecting fraud, helping merchants process transactions efficiently, and ensuring compliance.
A Business Identification Code (BIC) 8 to 11-character alphanumeric code assigned to banks and financial institutions. They consist of a bank, country, location, and optional branch codes.
Basis points are a precise way to measure financial changes. Each basis point represents 0.01%, making communicating small interest rate shifts or asset value easier. This clarity is crucial when discussing bonds, stocks, or other financial instruments.
A dispute occurs when a cardholder seeks a refund through their issuing bank, usually Visa, Mastercard, or American Express. Such disputes serve to safeguard cardholders against fraud or errors.
Surcharges are additional fees or taxes added to the cost of goods or services, typically during checkout. Governments, businesses, or professionals can add extra charges to cover costs like fuel or regulatory fees. These charges can be fixed amounts or a percentage of the purchase. They can also include interchange fees for credit card transactions.
A debit represents an expense or money paid from an account, increasing assets, or decreasing liabilities/equity. In double-entry accounting, debits and credits offset each other to ensure accuracy.
Credit is the ability to borrow or access goods and services with a promise to repay later. Lenders assess your creditworthiness, often based on credit history provided by credit bureaus like Experian, Equifax, and TransUnion.
Dues and assessments in card processing constitute a significant portion, around 10% to 15%, of the total cost. These fees encompass about 30 charges paid directly to card networks to cover operational expenses.
Interchange fees are charges that merchants must pay when processing credit or debit card payments. Card issuers receive these fees to cover the costs of different processes in card transactions. This includes authorization, fraud protection, and payment processing.