Resources · 56 terms

Payment terms, in plain language

The words you'll meet in contracts, dashboards and RBI directions, explained in a sentence or two. Where a guide on this site covers a term in depth, it's linked.

A

Acquirer: The bank or authorised payment aggregator that signs up a merchant to accept card or other payments and settles the money to it. Read more about Acquirer
Additional factor of authentication (AFA): The second check, such as an OTP or PIN, that most digital payments in India need on top of the card or device. Some small or special payments are exempt under RBI's rules. Read more about Additional factor of authentication (AFA)
API Banking: Accessing banking functions — balance checks, transfers, statements — programmatically via API instead of a web-based net banking portal. Read more about API Banking
APR: Annual percentage rate: the yearly cost of a loan including interest and fees, shown in a lender's Key Fact Statement. The number to compare loans on. Read more about APR
Authorisation: The card issuer's approval of a payment at the moment it's made. Money moves later, at settlement. Read more about Authorisation

B

BBPS: Bharat Bill Payment System — an interoperable network that lets customers pay recurring bills (utilities, telecom, insurance) through any participating bank or app. Read more about BBPS
Beneficial owner: The individual who ultimately owns or controls a business, even through other companies. Regulated entities identify them during KYC of a business. Read more about Beneficial owner
Business correspondent (BC): A person or organisation a bank engages to provide banking services on its behalf outside its branches, with the bank responsible for the BC's acts. Read more about Business correspondent (BC)

C

Capture: Taking the money for a card payment that was earlier only authorised, for example when an order ships. Read more about Capture
Cash conversion cycle: The days between paying for what you sell and being paid for it: stock days plus days to be paid, minus supplier days. Read more about Cash conversion cycle
Chargeback: A transaction reversal initiated by a customer's card issuer, typically due to a dispute, fraud claim, or non-delivery of goods/services. Read more about Chargeback
Closed-system PPI: Store credit or a card usable only for the issuer's own goods or services. RBI doesn't regulate these as payment systems. Read more about Closed-system PPI
Co-branded card: A card issued by a bank or permitted NBFC with a partner brand. RBI requires the issuer's branding to appear prominently and limits the partner's role. Read more about Co-branded card
Cooling-off period: For digital loans, at least one day in which the borrower can exit by repaying principal and proportionate APR without a penalty, under RBI's Digital Lending Directions. Read more about Cooling-off period
Cross-border payment aggregator (PA-CB): An entity RBI authorises to facilitate cross-border e-commerce payments for goods and services, inward or outward, up to ₹25 lakh per transaction. Read more about Cross-border payment aggregator (PA-CB)

D

Dynamic QR: A UPI QR code generated for one payment, with the amount and reference built in, so the payment matches the sale automatically. Read more about Dynamic QR

E

e-mandate: A customer's authorisation, registered with authentication, for recurring debits on a card, UPI or prepaid instrument, with a notice before each debit. Read more about e-mandate
EDPMS: Export Data Processing and Monitoring System: how banks track exports and the payments received against them. Read more about EDPMS
eNACH: The electronic version of NACH — an online, paperless mandate that authorizes recurring debits from a bank account. Read more about eNACH
Escrow: A neutral, third-party-held account that holds funds until agreed conditions are met, then releases them to the appropriate party. Read more about Escrow

F

FASTag: An RFID-based tag affixed to a vehicle that enables automatic toll payment deduction without stopping at a toll booth. Read more about FASTag
Full-KYC PPI: A prepaid card or wallet issued after full KYC, able to hold up to ₹2,00,000 and, within limits, transfer funds and withdraw cash. Read more about Full-KYC PPI

I

Idempotency key: A unique value sent with a request so that retrying it can't perform the action twice, such as paying the same payout again. Read more about Idempotency key
IMPS: Immediate Payment Service: an instant, round-the-clock bank transfer system. Read more about IMPS

K

Key Fact Statement (KFS): A standard summary a regulated lender gives before a loan is signed, showing amount, tenor, interest, fees and APR. Read more about Key Fact Statement (KFS)
KYB: Know Your Business — verifying that a legal entity (company, LLP, partnership) is legitimate and validly registered, distinct from verifying an individual. Read more about KYB
KYC: Know Your Customer — the process of verifying the identity of a customer or business before onboarding them, required under RBI's AML/CFT regulations. Read more about KYC

L

Lending service provider (LSP): An agent of a regulated lender that carries out parts of its digital lending, such as customer acquisition or servicing. The lender stays fully responsible for it. Read more about Lending service provider (LSP)
Letter of credit: A bank's undertaking to pay an exporter when documents matching the letter's terms are presented. Read more about Letter of credit

M

Maker-checker: A control where one person prepares a payment and another approves it, so no one can move money alone. Read more about Maker-checker
MDR: Merchant Discount Rate — the fee a merchant pays to accept a digital payment, typically a percentage of the transaction value. Read more about MDR

N

NACH: National Automated Clearing House — a centralized system for processing bulk, recurring debit or credit transactions, such as EMI collections or salary payments. Read more about NACH
NEFT: National Electronic Funds Transfer: a bank transfer system available round the clock on all days, settling in half-hourly batches. Read more about NEFT
NETC: National Electronic Toll Collection: the system behind FASTag toll payments. NETC transactions are exempt from the additional authentication factor. Read more about NETC

P

Payment Aggregator: A regulated business that collects payments from customers on behalf of merchants and settles them. RBI authorises payment aggregators and says a PA business shall not carry out marketplace business. Read more about Payment Aggregator
Payment Gateway: The technology layer that securely captures and transmits a customer's payment details for authorization during an online transaction. Read more about Payment Gateway
Payment orchestration: A layer in front of several payment providers that routes each payment under rules you set, handles retries and failover, and brings results into one view. Read more about Payment orchestration
Payout: An outward transfer of funds from a business to a recipient — such as a refund, vendor payment, or salary disbursement. Read more about Payout
PCI-DSS: Payment Card Industry Data Security Standard — a global security standard for organizations that handle branded card payment data.
Penny drop: Verifying a bank account by sending a very small credit and checking the account holder's name returned by the bank. Read more about Penny drop
Pre-authorisation: Reserving an amount on a card without charging it, then completing it for the final amount later, as hotels do at check-in. Read more about Pre-authorisation
Prepaid payment instrument (PPI): A card or wallet loaded with money in advance. Those usable beyond the issuer's own business are regulated by RBI. Read more about Prepaid payment instrument (PPI)
Purpose code: A code telling the bank why money is coming in or going out of India, such as payment for exported goods. Read more about Purpose code

R

Reconciliation: Matching your own records of orders and invoices to payments, settlements and bank statements, and resolving the differences. Read more about Reconciliation
RTGS: Real Time Gross Settlement — a system for high-value transfers settled individually and in real time, with a minimum of ₹2,00,000 and no upper limit, available 24x7x365. Read more about RTGS

S

Settlement: The process of transferring collected payment funds from a gateway or bank into a merchant's account, typically after fees are deducted. Read more about Settlement
Settlement cycle (T+1): When settled money reaches you, counted from the transaction day (T), usually in working days under your provider agreement. Read more about Settlement cycle (T+1)

T

Tokenisation: Replacing a card number with a token for saved cards, so merchants don't store card numbers. Read more about Tokenisation
TReDS: Trade Receivables Discounting System: RBI-authorised platforms where MSMEs' invoices on larger buyers are financed, without recourse to the MSME. Read more about TReDS
TSP: Technology Service Provider — a company that provides technology connecting businesses with banks and payment providers, under contracts with the regulated entities it serves.

U

UPI: Unified Payments Interface — a real-time payment system in India that allows instant transfer of funds between bank accounts via a mobile app. Read more about UPI
UTR: Unique Transaction Reference: the bank's reference for a transfer. Quote it when tracing a payment. Read more about UTR

V

Virtual Account: A unique account number issued to a specific customer or transaction, mapped to a real bank account, enabling automatic reconciliation of incoming payments. Read more about Virtual Account
Void: Cancelling a card payment before its batch settles, so the money never moves. After settlement, a refund is needed instead. Read more about Void

W

Webhook: A message a provider's server sends to yours when something changes, such as a payment succeeding. Verify its signature before acting on it. Read more about Webhook
Working Capital: The funds a business uses to cover its short-term operational needs — inventory, payroll, and day-to-day expenses. Read more about Working Capital