Do you want to join the world of online selling but have difficulties understanding how it works? We know that it is not always easy: Without experience, this world is full of terms that are complicated. We want to simplify things for you, that your company can continue growing and join the online world. This is why we have prepared an article with the basic concepts and key agents of the industry.
An acquirer is a financial institution authorized by banks and companies such as Visa or Mastercard to manage the credit and debit cards that are used in a country. They are responsible for establishing affiliations and commercial relations with businesses that want to sell online or offline and receive payments using credit or debit cards by administering them.
It is a set of codes, functions, commands, and protocols that are used to create and incorporate a software to another, to a program, or to allow app communications. APIs are really useful for programmers because they help them to integrate applications without having to code from scratch.
The Customer Acquisition Cost (CAC) and the Customer Life Cycle (CLC) are two indicators that will help us to know if we are really obtaining profits of a customer. This will show us whether our efforts are generating the results and the profitability that we were expecting. Basically, the CAC represents the expense or economic investment necessary to attract a new customer. On the other hand, the CLC shows the potential revenues derived from a customer during the time that customer remains with us.
It's important to keep in mind these data because if the CLC exceeds the CAC, we will know that the strategies and actions that we are taking are the correct ones to generate profit.
The issuing bank is responsible for issuing credit or debit cards for persons in the name of the big franchises or networks (Visa, MasterCard, etc.). It is an intermediary between consumers and card networks. So, issuers can be banks, financial institutions, savings and credit associations, governmental institutions or retailers.
It is a commission that an acquirer charges to shops for processing the payments that are made using a credit or debit card. Merchant discounts vary according to the volume of transactions at each business, the average amount of those transactions and the type of industry to which each company belongs. The revenues obtained through merchant discounts are distributed entirely among the issuers according to the number and amount of transactions made through the acquirer.
Neobanks are a new generation of financial entities that operate exclusively online. They were created having a young audience (millennials mainly) in mind, conceived for being accessed online. They provide accurate and updated information on expenses and perform money transfers in a quick and simple way by using biometric security and artificial intelligence.
It is also the payment account number; it refers to the number that appears at the front of payment cards (credit, debit, virtual or prepaid). It is usually a 16-digit number that identifies the issuer or the issuing financial entity and their country; the rest of the numbers correspond to an internal code to identify the cardholder.
It is a service that helps businesses to implement a payment system in online stores to facilitate money collection through the internet. A gateway makes information transfer between a store or online service and the processor or acquiring bank simpler, quicker and safer. From the end customer's perspective, this may involve a better experience at the time of making a purchase.
POS are the credit, debit or prepaid card readers that can be found in businesses and through which payments are made. PCI-DSS “Payment Card Industry — Data Security Standard” refers to a security standard that businesses or shops must follow to ensure that the credit card information entered by their customers is protected. This standard was created to keep control over data processing and reduce credit card fraud rates.
It is a bank fraud, in which the fraudster sends an email trying to mislead a person impersonating a bank entity in order to obtain confidential information from the victim. It can be data such as card numbers, usernames, bank account passwords, and any other information that allows fraudsters to withdraw money from an account.
They are institutions that offer information services for routing, authenticating, registering and liquidating transactions made through the internet. It is a system or a tool that allows us to buy and receive payments online. We can differentiate two types of processors that fulfil this role. Acquirer processor: It determines if the POS and the business are enabled to receive payments using a card and send the necessary information to the next processing stage through a switch. Issuer processor: It performs credential validation and determines whether there are enough funds to cover payments at the financial institution associated with the transaction.
An SDK is a set of tools in an installable package used for the creation of applications for a specific technological environment. They can be used for developing hardware platforms, computer systems, video game consoles, operating systems, etc.
It is a set of architectures and applications that supports the operations demand between services customers and the service offerors. Payment switches operate by using security mechanisms for the transferred information, process flows, business rules, etc., which help in the recovery, tracking, and continuity maintenance of transaction services.
In bank jargon, the term cardholder refers to all those people who have one or more cards, either debit, credit or prepaid.
Debit cards operate jointly with the user's bank account and money is debited automatically when a purchase is made in a store or money is withdrawn from a cash machine. They can only work with checking accounts, demand deposit accounts and sight deposit accounts, so they can only be issued by banks.
Credit cards are physical identification methods, issued by financial (banks and savings and credit cooperative societies), or non-financial institutions (businesses, supermarkets, and insurance companies), that operate as funding mechanisms. By using a credit card, users can purchase items at shops, “borrowing” money up to a certain limit determined by the card issuer. Then, the user has the choice of paying the debt monthly or in installments.
It is the percentage of users who cancel a subscription to a service or a product, or drop out from an activity that they were doing (for example, abandoning the shopping cart in an online store without completing the purchase). It is related to customers' loyalty, and it is used as an indicator to know if the actions implemented are providing positive results, or if it is necessary to rethink the strategy.
Conversion Rate (CR) is one of the most important metrics for e-commerce retailers, and it is used to measure results of the plans implemented. It is calculated by dividing the number of actions taken by users (this could be downloading a material, signing up to a service, requesting a budget, subscribing to a newsletter, etc.) between the number of visitors to the website and multiplying that figure by 100. For example: (145 enrollments / 500 visitors) × 100 = 29%.
Interchange fees are a payment from acquirers to issuers, normally defined as a percentage of the transaction amount. It is a compensation for the value and the benefits received by merchants for the right to opt for a credit or debit card payment.
It is the process of converting a card number (PAN) in a code of random characters (token) to protect a customer's sensitive data and prevent computer pirates from stealing their information to commit fraud. At Kushki, in addition to making online payment integration easier through gateways, we offer useful tools for online commerce, such as administration panels and innovative payment modalities that banks cannot offer.
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