5 essential terms about online payments that you should know

By Pernille Christine Larsen
On 20 February 2017

You’ve got the perfect idea.

You’ve got the ambitions and the energy. You’ve taken care of your website, bank agreements, and registering your company.

But as you’re ready to launch the dream of your lifetime, you run headfirst into a number of technical, trade specific words.

Words that are confusing.

Especially if you’re not a tech-savvy developer with years of experience with online payment solutions.

Many people run out of steam here. And in our opinion, that’s a shame!

In this post I’ll try to give you a quick overview of the most common terms within online payments, so you can launch your ecommerce adventure.

Because even though online payments is a relatively complex subject, it’s possible to explain it in a simple and plain manner that everyone can understand.

#1 Payment gateway

Let’s start with payment gateway.

When a customer visits your webstore, puts an item in the basket and is ready for checking out, that’s when the payment gateway enters the show.

A payment gateway (or a Payment Service Provider – often abbreviated as PSP) provides the window in which your customers choose how to pay, enter their payment card details, and complete their purchase.

Exactly like a payment terminal in a brick and mortar business.

When the customers have entered their credit card details and pressed the ‘complete order’ button, the payment gateway sends the card details to the acquirer.

#2 Acquirer

And what’s an acquirer, you might (rightfully) ask?

Well, an acquirer is a bank – with an odd name.

The acquirer verifies the credit card details, the validity of the card, and the availability of the order amount.

If everything is OK, the acquirer reserves the amount on the card and later transfers the money from the customer’s payment card to your bank account – when you’ve captured the amount, of course.

#3 Capture

When you’ve packed the purchase articles and are ready to ship them, you have to capture the payment.

When you capture the payment, basically, you tell the payment gateway to notify the acquirer that they can transfer the money.

You can capture the money from the backend of your payment gateway or your ecommerce platform – depending on your set-up.

It’s all quite complicated, but the important thing is this:

You won’t get your money till you’ve captured the payment.

Usually it takes a few days for the money to arrive on your bank account, and it might take as long as 28 banking days. How long it takes depends in your merchant agreement (see below) and which payment card the customer used.

#4 Instant capture

Instant capture means that the payment is captured automatically when the customer completes the purchase.

Which means you don’t have to do it manually every single time.


However, notice the legislation on the subject.

In some countries, you’re not allowed to capture the money until the customer receives the goods.

This is a bit tricky when you sell physical products, and the common interpretation is that you can capture the payment when you’ve shipped the items.

If you sell digital products that the customers receive right away (such as ebooks)? No worries, you can use instant capture.

#5 Merchant agreement

In order to accept payments on your website an acquirer has to approve your business. This approval is called a merchant agreement.

There are a number of requirements you have to meet to be approved.

For instance, you have to put information about your business on the website, such as company name, registration number, address, etc.

Moreover, it’s a requirement that your customers enter their Card Verification Code (CVC or CVV – usually a 3 digit code found on the backside of the payment card) when paying for an order.

Note that the requirements may vary from one acquirer to the other. Hence, it might be a good idea to investigate the specific requirements from the acquirer that you’re considering before you apply, since it will prolong the application process if you don’t meet the requirements.

Your merchant agreement also determines which payment cards you accept. Typically, a merchant agreement covers international payment cards such as Visa, MasterCard, Maestro, Diners Club, and American Express.

However, merchant agreements from different acquirers might differ on a number of parameters, the two most important being settlement dates (how fast you get your money) and, of course, prices. 


There’s a lot of other things to consider when choosing a payment solution for your ecommerce business.

I hope that this short introduction to some of the technical terms in this business will help you on your way. Even though your payment solution is just a small part of your business, it’s an important part.

Any comments or questions? Let us know on Twitter or Facebook.

Pernille Christine Larsen

Social media and digital content at Bambora. If i’m not on the internet lurking, I’m probably busy kicking butt at the gym, satisfying my coffee fix or out hunting for new experiences.

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