Apr 12, 2020
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5 mins read

The ultimate fintech glossary for Europe

Hristo Borisov - Chief Executive Officer at Payhawk corporate spend management solution. Hristo Borisov
Finance & business strategy
Fintech Glossary
Quick summary

If you're an American business with European entities the financial jargon can be overwhelming. In this article we've put together a glossary to help demystify some of the most common payment terms used to describe financial processes in Europe. From acquiring processor to three-way matching, we've covered pretty much everything you need.

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Payment terms

Acquirer Acquirers provide legal entities with the means to accept card payments. These legal entities are called Merchants and they can use Acquirers virtual or physical POS terminals to accept payments.
Acquiring processor Acquiring processors are the set of system that provide the connectivity to the networks or payment gateways to process transactions
Adverse media Adverse media is a type of screening performed on individuals or businesses. To goal is to check for conviction or link to any criminal activity relating to financial crime (fraud, money-laundering, terrorism funding, etc.)
AML Anti-money Laundering is a set of policies and procedures enforced by European directives and local regulations to prevent the use of financial systems for the purpose of money laundering.
Apple Pay Apple Pay is a mobile payments service that utilizes Near Field Communication (NFC) to initiate secure payments between Apple devices and contactless POS terminals.
Assessment Fees that are charged by networks on both acquirer and issuers for the usage of the network. This is how networks make money.
BIN Sponsor BIN Sponsors are institutions members of schemes (Visa, Mastercard etc.) and are authorized to issue cards. The BIN Sponsors are often used by Fintech companies to avoid becoming members of the schemes which might be a lengthy and costly process.
Card Distributor means Payhawk, being your first point of contact if you have an issue with the Card or this Agreement, the contact details of which are set out in clause 2;
Card Personalization The process used by card manufacturers to encode cardholder data on the chip and magnetic stripe, and also imprint on the physical card body.
Electronic money Electronic money (e-money) is a digitally stored record of monetary value held by an issuer for the purpose of making payment transactions. These are issued by EMI authorized to hold funds and issue e-money.
Electronic Money Institution” Electronic Money Institutions (EMI) are financial institutions granted a license to issue e-money by a local financial regulatory body like FCA (UK), BaFIN (Germany), and BNB (Bulgaria).
EMI agent EMI agents are third-party providers registered with the local regulatory body for the purpose of selling or marketing services of EMIs without the permission to hold customer funds.
Financial Regulator Financial Regulators are national bodies that regulate and supervise the financial services and payment providers on the market. They are members of the European Banking Authority.
Google Pay Google Pay is a mobile payments service that utilizes Near Field Communication (NFC) to initiate secure payments between Google devices and contactless POS terminals.
IBAN International Bank Account Number is a standard numbering system used to facilitate cross-border bank payments.
Issuer Issuers are members of networks (Visa, Mastercard etc.) and are authorized to issue cards by setting up BIN programs. Issuers are either banks, electronic money institutions or payment institutions.
KYB Business Know Your Business is a process performed by an issuer to comply with anti-money laundering regulations and frauds.
KYC Individual Know your Customer is a process performed by an issuer to verify the identity of individual cardholders
Merchant Merchants are legal entities allowed to accept card payments using virtual or physical POS terminals provided by Acquirers.
Merchant Bank The bank that manages the account of a merchant where funds from transactions are accumulated.
Merchant Category Code Code identifying the type of activity performed by the merchant which is often used to identify the type of transaction being performed.
National processors In countries where the schemes are not processing the market directly, there are local third-party processors that facilitate the connectivity between local banks and Mastercard and Visa. For example, Borica is the national processor for all Bulgarian banks.
Passporting Payment and electronic money institutions can passportize their rights to perform services outside of their national boundaries by passporting their license across other European Economic Area member states.
PCI Compliance Payment Card Industry requires certain security standards to be implemented by Issuers, Acquirers and Merchant that process credit card information. Obtaining PCI DSS Level 1 is required for any institution that stores and processes sensitive credit card data.
Politically exposed person (PEP) A politically exposed person (PEP) is a person who has a public status and functions. PEPs are usually subject to stricter measures due to a higher risk of potential involvement in corruption, bribery or money-laundering.
Processed markets Processed markets are one where schemes process transactions directly without the presence of a national processor.
Processor A processor is a software system connected to the networks that process all transactions for the Issuer. The link between a processor and an issuer is usually a configuration setup rather than an integration effort.
PSD2 Second Payment Services Directive (PSD2) is a EU Directive by the European Commission that regulates payment services and providers within the European Economic Area and the European Union.
PSD2 AIS Account Information Service allows third-party providers to access existing banks and provide an aggregate view of accounts, balances and transactions.
PSD2 PIS Payment Initiation Service allows initiation of payments from third-party systems connected to bank accounts after user consent.
QSA Qualified Security Assessors are independent security organizations that are qualified to perform PCI Compliance audits.
Safeguarded account Safeguarded or pooled accounts are used by electronic money institutions to store customer funds.
Samsung Pay Samsung Pay is a mobile payments service that utilizes Near Field Communication (NFC) to initiate secure payments between devices and contactless POS terminals.
Sanction lists Sanction lists are shared between governments and regulators to identify people who have been involved in financial crimes for the purpose of fraud prevention and anti-money laundering control.
Scheme Scheme or Networks (US term) are Mastercard, Visa, Amex and other networks that facilitate card payments.
Source of funds The term relates to the origin of the funds that is subject of movement between a Financial Institution and a customer.
Third-party providers Third-party providers (TPP), service providers or often called Fintech companies that can be licensed under the PSD2 to manage electronic money, payment initiation and account information services

Card types

Charge card A card with a credit line from an issuing bank that has to be repaid in full at the end of the billing term – usually 30 days. Some software companies like Expensify adopt 1 day billing cycle to minimize risk.
Contactless card A card that uses near field communication (NFC) or other radio-frequency transmission protocols to initiate payments with POS terminals.
Credit card A card with a revolving credit line that can be repaid to the issuing bank in multiple installments and not necessarily at the end of the billing term. Any outstanding balances usually incur interest rate from the issuing bank.
Debit card A card that works with a prefunded bank account and immediately transfers funds from it. Payhawk applies spend policies on top of debit cards that facilitate money movement and guarantee maximum acceptance rate with merchants.
Multi-currency card A card that works with multiple bank accounts in different currencies and dynamically selects the account that matches the currency of the transaction thus avoiding exchange rates.
Non-reloadable Prepaid Card A card that can be loaded only once. Non-reloadable prepaid cards are often used for gift cards and vouchers.
Non-reloadable Virtual Card A card that can be loaded only once. Non-reloadable prepaid cards are often used for online gift cards and online vouchers.
Paperless card Any type of card that works with built-in expense management software that is in compliance with local regulation to throw away paper receipts and invoices after card transactions. Payhawk issues debit cards that are paperless.
Prepaid card A card that has a prepayment balance without being connected to a bank account. Prepaid cards are often not accepted by merchants for hotels, car rentals, online purchases and other business-related bookings.
Tokenized Card A card that has it’s Primary Account Number (PAN) replaced with a token for the purpose of data protection. Apple Pay and other mobile payment services use tokenized cards to allow contactless transactions without the need of a plastic card.
Virtual card A card that can be used for online transactions and doesn’t have a physical plastic card. Any type of card can be a virtual card: credit cards, debit cards, prepaid card etc. Payhawk issues virtual debit cards.

Card terms

Authorization Request from the acquirer to the issuer that the card has enough funds to cover a specific amount. The approval is sent from the processor of the acquirer to the processor of the issuer. An authorization must complete in 9000 milliseconds before it times out.
Automated reconciliation The process of matching card transactions and outstanding documents for consistent, accurate and complete accounting.
BIN Bank Identification Number is the four or six initial digits of a credit card that uniquely identifies the issuer of the card.
Card Not Present Card not present (CNP) is the description of a transaction during which the card wasn’t physically presented such as in the case of online transactions.
Card Verification Value Card verification value (CVV) is a 3 digit number used for additional security of online transactions often found at the back of the card. From 2019, Visa and Mastercard allow printing of the 3 digit number on the same side as the PAN. Payhawk Visa debit cards use this approach.
Chargeback The processor of disputing a fraudulent transaction with the issuing bank.
Clearing The process of turning an authorization promise into actual movement of money until the transaction is settled.
Domestic payment Payments made within the geographical region of the issuer. It’s often the country, but some fintech companies define it more broadly on a currency level.
Foreign exchange rate Foreign exchange FX rate is the percentage markup issuers charge on top of the scheme exchange rates. Products like Revolut and Payhawk charge as low as 0.40% FX rate. Here is a comparison.
Interchange fee Interchange is a fee paid from the scheme to the issuer to cover the costs of handling the transactions. The interchange fee is a strong revenue stream for card issuers.
International payment Payments made outside the geographical region of the issuer. It’s often the country, but Payhawk defines it more broadly on a currency level.
Discount rate Acquirers charge merchants in the form of a discount rate for handling card payments. Discount rates are charged from the transaction amount, so that card payments can be the same cost as cash payments to the consumers. In this case the interchange fees for the issuers are paid out of the merchant discount rate.
PAN Primary Account Number (PAN) is a 16 digit account number that uniquely identifies the scheme, issuing bank and cardholder.
Reconciliation The process of matching card transactions with receipts and invoices for consistent, accurate and complete accounting.
Refund Return of funds for transactions that were already settled.
Revert Withdraw of an authorization request. Often used with test authorization to ensure the card is valid and has a positive balance.
Scheme exchange rate The spot exchange rate charged by the schemes for a given transaction, currency, and date.
Settlement The actual movement of funds as part of the clearing process from an issuer to an acquirer.
Strong customer authentication To improve the security of online transactions, schemes enforce a strong customer authentication (SCA) method that uses 2 of the following 3 things: something the user has (credit card), something the user knows (password), something the customer is (biometrics).
Velocity limits Velocity limits or card limits are scheme enforced limits on cards to prevent frauds, and are configured by the issuer when a card program is set up. Some modern processors like Marqeta, Wirecard, Paynetics, GPS, and others allow dynamically controlling the card limits.



Hristo Borisov - Chief Executive Officer at Payhawk corporate spend management solution.
Hristo Borisov
Chief Executive Officer
LinkedIn

Hristo is the compass guiding Payhawk's journey. With a rich background in engineering аnd product management he is a stalwart advocate for our products and customers, bringing a mix of innovation and user-centricity to everything we do. Outside the office, you'll catch him enjoying camper and sailing trips, shredding slopes on his snowboard, or simply soaking up precious moments with his family.

See all articles by Hristo →

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