Glossary
Explore the Localpayment API glossary to understand key payment, transaction, and integration terms for building reliable solutions.
This glossary helps you understand the key payment and API concepts you’ll encounter when working with Localpayment. Whether you're building your first integration or optimizing an existing one, you can use this reference to clarify essential terminology, explore how different payment processes work, and get familiar with the standards that shape the payments industry. By understanding these core definitions, you’ll be better equipped to navigate Localpayment’s platform, interpret transaction data, and build more reliable and efficient payment flows.
Account takeover
Account takeover (ATO) is a type of identity fraud. In this kind of fraud, cybercriminals steal the user's account to take advantage of it.
Acquiring bank
Is a financial institution or bank authorized to execute transactions and coordinate communication between credit associations and businesses.
Card testing
A type of fraud in which a criminal tries to figure out whether card information that has been stolen may be utilized to make purchases.
How does card testing work?
- Acquiring Stolen Card Data: Fraudsters collect stolen card information.
- Testing the Cards: They use automated tools or bots to test the stolen card information by making small transactions on online payment systems.
- Verifying Validity: If the transaction is successful, the fraudster confirms that the card is active and can be used for larger purchases.
- Exploiting the Card: Once the card is authenticated, the fraudsters can utilize the card information to their advantage.
Chargeback
Is a transaction reversal initiated by a cardholder (credit or debit card user) through their bank or credit card issuer. It occurs when the cardholder disputes a charge on their account, typically because of unauthorized transactions, fraud, or dissatisfaction with a product or service. Chargebacks are a consumer protection mechanism designed to resolve disputes between cardholders and merchants.
¿How do chargebacks work?
1. Dispute Initiation:
The cardholder notices an unauthorized or incorrect charge and contacts their card issuer and provides evidence to support their claim.
2. Temporary Refund
The card issuer temporarily credits the disputed amount back to the cardholder's account while investigating the claim.
3. Merchant Notification:
The card issuer notifies the merchant's acquiring bank of the dispute, and the acquiring bank informs the merchant to respond and provide evidence to refute the claim.
4. Investigation:
The card issuer reviews the evidence from both the cardholder and the merchant to determine the validity of the dispute.
5. Resolution:
If the cardholder's claim is valid, the chargeback is finalized, and the temporary refund becomes permanent.
If the merchant's evidence is sufficient, the chargeback is reversed, and the funds are returned to the merchant.
Contactless payments
Contactless payments allow you to make purchases with a payment card, smartphone, wearable device, or other NFC-enabled device without having to swipe or insert a card.
¿How do contactless payments work?
- NFC Technology: Contactless payments use Near Field Communication (NFC), a short-range wireless technology that allows two devices to connect within a few centimeters of each other.
- Tokenization: To ensure security, payment information (such as a credit or debit card number) is replaced with a unique, one-time-use token. This ensures that the actual card information is not communicated during the transaction.
- Tap or Wave: The user approaches the POS machine, tapping or waving their contactless card, smartphone, or wearable device. The terminal reads the payment information and completes the transaction.
- Transaction Completion: Once the payment is authorized, the transaction is completed in seconds.
Credit card
A payment tool issued by a financial institution that allows the cardholder to borrow funds up to a predetermined limit in order to make purchases, pay for services, or withdraw cash.
Credit card schemes
Credit card schemes (also known as card networks or payment networks) are the financial infrastructures that facilitate credit card transactions between merchants, cardholders, and banks. These schemes provide the systems, rules, and standards that enable the processing of credit card payments globally. They act as intermediaries between the issuing bank (the cardholder's bank) and the acquiring bank (the merchant's bank) to ensure secure and efficient transactions.
¿How do Credit Card Schemes work?
1. Authorization:
When a cardholder makes a purchase, the merchant sends the transaction details to the acquiring bank.
The acquiring bank forwards the request to the credit card scheme, which routes it to the issuing bank for approval.
The issuing bank checks the cardholder's account for sufficient funds and fraud risks, then approves or declines the transaction.
2. Clearing:
The credit card scheme facilitates the exchange of transaction details between the acquiring bank and the issuing bank.
3. Settlement:
The credit card scheme ensures that funds are transferred from the issuing bank to the acquiring bank, and the merchant receives payment.
Cross-border payments
Cross-border payments are described as funds paid to or received from other countries; therefore, the merchant's registered location may differ from the country where the customer's card was issued.
Debit card
Debit cards are issued by financial institutions to customers who have checking accounts and are used to access account funds. Debit cards can be used to purchase products or services or to withdraw cash from an ATM.
Deflation
Is a decline in the average level of prices for goods and services. When the inflation rate drops below zero percent (a negative inflation rate), deflation takes place. Over time, deflation raises the value of currency, whereas inflation decreases it.
E-wallets
With digital wallets, you may use your device via Contactless payments to pay while you are shopping, eliminating the need to carry your cards. After entering and saving your bank account, credit card, or debit card details, you can use your device to make transactions.
Electronic Draft Capture (EDC)
EDC is the technology that accesses the customer's banking information and records the draft or amount owed when a customer uses a payment mechanism, such as a card or E-wallets. The money moves to the merchant's account after it has been secured.
Electronic Funds Transfer (EFT)
Often known as direct deposit, it is a digital money movement of funds from one account to another. The accounts could be from the same or different banks.
Fintech
Short for financial technology, refers to the use of technology to innovate and improve financial services and processes. Fintech companies leverage software, algorithms, and digital platforms to offer more efficient, accessible, and user-friendly financial solutions. These innovations are transforming traditional banking, payments, lending, investing, insurance, and other areas of finance.
Foreign Exchange (FX)
Foreign exchange refers to exchanging the currency of one country for another at the current exchange rates.
Fraud prevention
Are strategies, policies, and processes focused on preventing the transactions from fraudsters and providing business protection.
Identity theft
Occurs when a criminal acquires personal or financial information, such as a tax ID, driver's license, or other identifying information, and uses it to open an account, make a purchase, or engage in any other activity without the owner's consent.
Inflation
Inflation is an increase in the cost of goods and services over time. As a result, money's purchasing power declines.
Installments
A popular payment method that divides the total amount of a purchase into monthly payments, allowing customers to buy higher-priced products.
Intelligent payment routing
Intelligent payment routing is the ability to automatically determine which route a payment should take between multiple banks in order to increase approval rates. As a result, the businesses save time and money by not paying unnecessary transaction fees.
PCI DSS
PCI DSS (Payment Card Industry Data Security Standard) is a set of 12 security standards designed to ensure that all the card payments are being processed safely.
Payin
Payin is the solution that allows you via API or Web Checkout to collect from your local customers in Latin America. The Payin is collected in the local currency of a specific country and may or may not include FX depending on the account configuration.
Payment authentication
Payment authentication is a security technique designed to prevent fraud; the procedure involves determining whether the payer is the legitimate cardholder or account holder of the provided information.
Payment gateway
A payment gateway is the technology that secures and facilitates the transfer of payment information (such as card number, CVV, etc.) from the merchant's website to the payment processor.
Payment processing
Is the full process of moving funds from the buyer's account to the merchant's account in an online payment transaction. This process involves multiple parties, including the Payment gateway, payment processor, Acquiring bank, issuer bank, and card networks.
Payment reconciliation
Is the practice of comparing financial records with bank statements to confirm that payments made or received are correct and consistent. The best method to maintain excellent financial standing is to use a payment reconciliation protocol.
Payment Services Directive 2 (PSD2)
PSD2 is a European financial regulation. It requires banks to open up their data in a secure format so that it can be shared with third-party providers. It additionally requires stronger customer authentication.
Payout
A Payout is the solution that allows you via API or manual batch upload to pay your local service providers, suppliers, gig workers, wallet withdrawals, remittances and partners in Latin America. The Payout is executed in the local currency of a specific country and may or may not include FX depending on the account configuration.
Pix
The Brazilian Central Bank developed the Pix system to enable fast payments. All wallets that use QR Codes will be compatible with one another thanks to Pix.
Recall
Recall is the process of recovering a payout when the incorrect beneficiary wire information was provided. We do not guarantee the recovery of the funds, but we will initiate a manual process to recover the funds. Our client must start the recall procedure by email.
Refund
When a customer purchases a product or service and then asks for his money back, the merchant must make a reimbursement.
Remittance
Remittance transactions are a common kind of payment in which one party uses electronic transfer to send money to another individual or organization that frequently resides in a different country.
Return
Return is the flow that occurs after a payout is completed; however, because the ACH domestic network is asynchronous, the beneficiary bank rejects the payment t+x days later. In consequence, the total amount of the transaction plus any applicable taxes and fees will be credited back.
Settlement
For Payin, the Settlement refers to the Wire Out Localpayment that will be executed in order to settle all completed collections in your merchant account, typically by a Swift wire in a hard currency across borders to your international bank account. For Payout, the Settlement refers to the Wire In Localpayment will receive in hard currency via Swift in order to top up your merchant account so that you have a positive balance to execute the local disbursements.
Subscription payment
Subscriptions or recurring payments are used by companies that sell goods or services that can be provided over time to schedule regular collections of funds.
Swift code
The SWIFT(Society of Worldwide Interbank Financial Telecommunication) code, is a standard format for identifying financial institutions around the world. A SWIFT code is a string of 8 or 11 characters that includes the bank's information, country, location, and, if applicable, branch.
Pro Tip
Bookmark this glossary for quick reference during integration. The terminology consistency across Localpayment's documentation will help you navigate our platform more effectively.
Updated 5 months ago