Payments and Fraud Glossary of Terms

To help you keep up with the trends, we’ve compiled a list of payments and fraud-related terms and definitions that are worth knowing. We continually update this glossary as new trends and terms emerge, and we invite you to occasionally browse through the listed terms to stay up-to-date.

Account Holder 

A person who owns the account attached to a credit or debit card. 

Address Verification System (AVS) 

A payment processing system comparison of the numerical portions of billing and shipping addresses with the addresses on file at the credit card-issuing bank.  

Artificial Intelligence (AI) 

Computer systems used to perform complex tasks in a way that is similar to how humans solve problems. 

Authorized Transaction

A debit or credit card transaction for which a merchant receives authorization from the bank that issued the card. Also called card authorization, preauthorization, or preauth. 

Card Holder

See “Account holder” 

Card Not Present (CNP)

A type of transaction in which neither the cardholder nor the credit card is physically present. It’s most common for remote orders taken over the phone, by internet, or mail. These make up the bulk of eCommerce orders. 

Card Verification Values (CVVs) 

The three- to four-digit security number found on the back of credit cards that can help reduce the risk of credit card fraud. These numbers are printed on the card, rather than embossed or stored in the magnetic strip.  

Chargebacks

Credit card chargebacks occur when a customer disputes a transaction and asks the credit card issuer to reverse the charge. 

Chargeback Ratio

The number of chargebacks compared to the overall transactions for a given month. As the number of chargebacks against a retailer rises, so does the ratio. 

Credit Card Fraud 

A form of identity theft that involves an unauthorized taking of another's credit card information for the purpose of charging purchases to the account or removing funds from it. 

Dark Web

A part of the World Wide Web not accessed by traditional search engines like Google. Dark websites use a layered network structure to encrypt web traffic. 

Data Breach

An incident in which sensitive, protected or confidential data (including financial information, health data, passwords, or credit card information) is accessed through unauthorized means. 

Deep Learning

A type of machine learning technique that uses a multilayered approach to learning that lets human analysts feed data and a learning algorithm to a computer to allow the computer to teach itself to make decisions about that data. 

Digital Wallet

Smartphone-based payment tools like PayPal, Google Wallet, Amazon Wallet, and Apple Pay that make it easier and faster for customers to make purchases online and at brick-and-mortar locations. Digital wallets use advanced encryption technology and passwords to protect against fraudulent use.

Dispute

Established through The Fair Credit Billing Act of 1975, a dispute is the act of a customer formally questioning and contesting transactions on their statements.  

eCommerce

Electronic commerce transactions that occur through an electronic medium between businesses and consumers. 

First-Party Misuse

See “Friendly fraud” 

Fraud 

Wrongful or criminal deception intended to result in financial or personal gain. 

Friendly Fraud

When a cardholder disputes a transaction for reasons not intended to be deceitful, like forgetting they made the purchase, not recognizing the merchant's name on their statement, or not knowing another family member authorized a purchase. 

Fraud Prevention

The implementation of a strategy to detect fraudulent transactions and prevent these actions from causing financial and reputational damage to a merchant or customer. 

Fraud Rate

Normally measured by chargebacks, fraud rate is a combination of gross chargebacks that the merchant receives, while net chargeback is everything the merchant receives minus every chargeback they dispute.  

Identity Theft

When fraudsters use personal data such as an individual’s name, driver’s license number, date of birth and address, to pose as that person to open new accounts and make purchases. 

Machine Learning (ML)

A subfield of artificial intelligence, ML is the capability of a machine to imitate intelligent human behavior. ML is frequently used with fraud software and human analysts to find fraud patterns in purchase data, make predictions, flag fraud, and make fast transactional decisions while minimizing risk exposure. 

Merchant Account

A type of business bank account that allows a business to accept and process electronic payment card transactions.  

Payment Authorization Rate

How many people are being approved when they attempt to purchase your product, and how many are being rejected. This metric is directly linked to revenue coming into a merchant’s business. 

Payment Card Industry (PCI)

PCI compliance is the set of technical and operational standards that businesses follow to secure and protect credit card data provided by cardholders and transmitted through card processing transactions. 

Phishing

A form of social engineering and identity theft in which an e-mail user is tricked into revealing personal or confidential information which the scammer can use illicitly. Phishers may also install malicious software on computers, infect computers with viruses or even steal personal information off computers. 

Point-to-Point Encryption

The PCI Security Standards Council established P2PE standards to improve the security of credit card transactions. During a P2PE process, transactional data is securely encrypted from point-of-sale entry to the final credit card processing point. 

Ransomware

Malware used by cyber attackers to encrypt information and deny a user access to files on their own device until a ransom is paid for a decryption key to regain access to their files. 

Risk Management

The process of identifying, assessing, and controlling threats to an organization's capital and earnings. Risks stem from a variety of sources including financial uncertainties, fraudulent behavior, legal liabilities, technology breaches, accidents, and natural disasters. 

Risk Rejects

How many times is a merchant’s risk service rejecting a customer because they suspect they are a fraudster. It is important to know if rejections are people committing fraud or if they are false positives (good customers being blocked), and how to measure and balance between the two. 

Skimming

The act of using hidden electronic devices or card readers at point-of-sale systems to capture and copy electronically transmitted account information from a valid credit or debit card 

Transaction Optimization

To improve the performance of the synchronization point processing between transaction branches on the client side and the server side.  

True Fraud

A malicious act in which a customer’s identity or card is stolen and used for a purchase without their knowledge.