Online payments glossary
Defining key terms across South Africa's online payments ecosystem.
A2A (Account-to-Account) payments
Account-to-Account (A2A) payments are digital payments made directly from one bank to another, bypassing payment processing services such as card networks. The direct nature of A2A payments means they typically charge lower transaction fees compared to traditional card-based businesses, and settle faster. Pay by bank is an example of an A2A payment.
Acquirer/acquiring bank
Acquiring banks process payments on behalf of a merchant, as well as provide the merchant account, which allows merchants to process credit and debit card transactions.
During a card transaction, the acquiring bank communicates with the customer’s bank (known as the ‘issuing bank’) to verify the transaction amount and place a hold over the funds, to be settled later.
Bank Account Verification Service (BAVS)
The Bank Account Verification Service (BAVS) allows a person to verify the ownership of a particular bank account without requiring them to connect to the account.
BAVS is useful when you already have a person’s bank account details, but require confirmation. For example, this might be used to ensure there are no mistakes on an invoice before paying or to perform KYC.
BankServ Africa
BankServ is Africa’s leading Automated Clearing House (ACH), responsible for acting as a payment system operator and clearing partner for South Africa’s banking sector. It sits alongside the South African Multiple Settlement System (SAMOS) within the National Payments System (NPS) and acts as a clearing participant for payments between different banking customers.
Batch payments
Batch payment processing (also known as batch payments) describes an instance in which multiple payments are sent to different recipients, all through the same transaction. Commonly used for payroll or vendor payments, batch payments can be much more efficient than paying each person individually.
Batch processing can also be used to settle a large number of transactions all at once. For example, a payment gateway might use batch payments to process all verified transactions at the end of the day. Some payment processors offer lower fees for batch processing, so settling transactions in this way can save money.
Capitec Pay
Capitec Pay is a popular form of bay-to-bank payment in South Africa, which allows users to make payments through their Capitec app, using their phone number or ID number as verification, rather than signing in using their banking details.
As with other bank-to-bank payments, Capitec Pay offers merchants lower fees compared to card payments, as well as reduced processing times and a lower risk of fraudulent payments.
Card Not Present (CNP) transaction
A card not present (CNP) transaction is a payment that takes place with neither the card nor the cardholder present. For example, this might take place when a customer makes a purchase online, over the phone or using card details stored on file. The opposite of CNP is card present transactions, in which customers physically present their card in-person to make a purchase.
CNP transactions are typically associated with a higher risk of fraud, as the lack of a physical card makes it more difficult to verify the cardholder’s identity. To mitigate this, additional verification methods such as CVV numbers or two-factor authentication are often used.
Chargeback
A chargeback is a situation where a customer successfully disputes a transaction that has occurred, often via credit card, requiring the charge to be refunded to the payment card from the merchant.
Chargebacks are a consumer protection mechanism mandated by the credit card companies and provided by the card issuer. Issuers offer resources for customers to dispute transactions, allowing the issuer to conduct an investigation and, if successful, return the payment.
Clearing house
A clearing house is a financial institution that facilitates the exchange of payments and other transactions (such as stocks or derivatives). The clearing house stands between the two parties in a transaction and acts as a counterparty to both, reducing the risk of financial loss.
Clearing houses carry out a number of crucial functions such as confirming the details of a transaction (trade matching), ensuring transfer (settlement) and risk management.
DebiCheck
DebiCheck is a form of authorised debit order that requires the payer to authorise the mandate electronically via their bank before the first collection.
Once set up, funds are automatically transferred to the payee on the agreed date. If there is a problem, debit orders can be reversed if disputed within 40 days.
By requiring verification from the payer, DebiCheck results in significantly lower levels of fraudulent debit orders. DebiCheck payments are also considered preferential on debit date vs other Debit Orders.
Debit
A debit is a charge on a person or business’s account, resulting in a decrease in their balance. For example, when a person pays with a debit card, the agreed amount is charged directly to their bank account. Similarly, a debit order is a recurring charge on a person’s account, often for a subscription or membership.
Debit Order
A debit order is a financial agreement in which an individual authorises a third party to collect a pre-agreed amount of money from their bank account on a regular basis. For example, they might set up a debit order with their utility company to automatically charge their energy bill every month.
Debit orders can be changed or cancelled at any time.Debit orders can be a convenient option for individuals, removing the need to manually approve payments every month, though they do require that individuals ensure they have enough funds to cover their upcoming charges.
Digital wallet
A digital wallet is a software-based wallet that can securely store a user’s payment information such as debit or credit card details, and can be used to make digital purchases. Using a digital wallet allows users to carry out transactions conveniently through digital devices such as smartphones or smart watches.
Digital wallets have seen enormous growth in popularity in recent years, due in part to the rise of smartphone-based contactless payment methods such as Apple Pay, Google Pay and Samsung Pay.
Disbursement
A disbursement is simply the payment of money. Disbursements can take place as individual payments or in bulk. Businesses track disbursements to help manage cash flow and budgeting.
In a business context, common forms of disbursements are the payment of salaries to employees, paying suppliers for purchases, or the release of loan funds to a borrower.
Embedded payments
Embedded payments refers to the practice of inserting payment processing capabilities directly into other existing services, removing the need to redirect potential customers to third-party websites or re-enter payment details every time. This creates a more seamless customer experience and improves satisfaction and conversion rates.
For example, many ride hailing and food delivery services enable users to save their card details within the app, automatically charging them once an order has been placed and confirmed. Or, apps and sites offering Stitch Pay by bank can choose to offer one-click payments for returning customers making a repeat purchase or deposit. The low-friction process makes customers more likely to purchase.
Instant EFT
Instant EFT stands for Instant Electronic Funds Transfer. It is a popular form of bank-to-bank payment in South Africa. An instant EFT is a type of automated bank transfer that takes advantage of the high security and low cost of bank transfers. Businesses using Instant EFT can save upwards of 80% on fees compared to card payments.
Merchants are notified when an Instant EFT has been initiated instantly, removing the need to wait for proof-of-payment as they do with manual bank transfers.
Insufficient funds
An insufficient funds error indicates that the bank account a customer is attempting to pay from does not have enough money to complete an agreed transaction. When an account with insufficient funds attempts a payment, the transaction is either rejected or enters an overdraft to be repaid later.
Interchange
Interchange is the fee an acquirer pays to the issuing bank for a payment that uses the card networks. Interchange fees are set by the card networks and vary based on factors such as whether a credit or debit card is used and whether the transaction took place in-person or online.
Interchange fees cover the costs associated with processing card transactions, such as maintaining the payment infrastructure, handling chargebacks and fraud prevention.
Manual EFT / direct deposit
Manual EFT (also known as direct deposit or manual transfer) is a payment made from an online banking portal or app to a business bank account. This differs from a Pay by bank payment, as it requires that the customer leave the website/app to open their online banking portal and enter recipient details manually, to initiate the payment.
Typically, manual EFTs take 1-3 days to clear.
Merchant Identification Number (MID)
The Merchant Identification Number (also called a Merchant ID or MID) is the unique code a payment processor provides to merchants when they open a merchant account.
The MID identifies the merchant in all of their transactions and is used to route payments, as well as for tracking and reconciliation. It also plays an important role in preventing fraud, helping to ensure transactions are legitimate.
Network tokens
A network token is a unique digital identifier used to add extra security to a digital payment. Network tokens are created by payment networks and can be used as a proxy for the customer’s account number during a transaction.
When a transaction is initiated, the card number is substituted for a network token specific to that transaction, merchant or device. This is used to verify the transaction without transmitting card details, enabling fast transactions while ensuring privacy and security.
Pay by bank
Pay by bank is a payment method where users make a payment directly from their bank account into the account of the payee, bypassing the traditional card networks and payments infrastructure.
As a direct bank-to-bank transfer, pay by bank is more secure than payment methods that require payers to share their bank details. Payments are also processed in real time, so payees receive their funds without the delay of hours or days that can happen with other methods.
Pay by bank is currently the fastest-growing payment method in South Africa, and it encompasses both Instant EFT and direct bank APIs such as Capitec Pay.
Payment authorisation
Payment authorisation might also refer to the process through which an agreed payment amount is authorised to be debited from a customer’s bank account.
In the context of card payments, this also refers to the point at which a card issuer verifies a transaction, confirming that the payer has sufficient funds, and receives approval from the customer’s bank, placing a hold on the amount so that the transaction can be completed.
Payment facilitator
A payment facilitator is a type of payment service provider that allows merchants to collect payments from customers, without needing to set up a dedicated merchant account to do so. A payment facilitator is often an attractive option for smaller merchants who do not qualify for their own merchant accounts, or for those who want their payment provider to manage risk and compliance.
Payment gateway
Payment gateway technology allows companies to accept digital payments securely through platforms such as websites or mobile apps. A payment gateway can be thought of as the front-end of a transaction, and it is the main party that the customer interacts with while making a purchase online.
Payment links
Payment links are URLs, QR codes or other web links that direct customers to a payment gateway to complete a transaction. Payment links are a quick and easy way for businesses to request payments from customers without having to provide account details or use a POS device.
Payment orchestration
Payment orchestration is the process by which companies integrate, manage and monitor multiple payment methods, providers, banks and more - often across markets.
Increasingly, companies choose to do this through a Payments Orchestration Platform, which sits between the payment gateways, payment processors and the rest of the payment ecosystem, coordinating the different players on behalf of the company. Orchestration platforms allow businesses to set rules re: which payment methods are displayed to which customers at which time, and access streamlined reporting.
Robust payment orchestration makes it easier for companies to integrate new payment methods and optimise their performance.
Payment processor
Also sometimes referred to as an “acquirer”, “payment service provider” (PSP) or “Third Party Payment Processor” (TPPP), a payment processor manages the card transaction process. It facilitates the transmission of card information between the customer, the merchant, the card network and their respective banks.
Payment reconciliation
Payment reconciliation is the process by which a company matches its bank statements with its accounting records, verifying bank balances and transaction records are accurate and up to date.
Companies are required to complete payment reconciliation in line with the relevant accounting standards. Many choose to work with specialised reconciliation tools or accounting software to automate parts of the process, reducing the work required and improving overall accuracy.
Payment switch
A payment switch is an intermediary system that facilitates the routing of transaction data between the different parties involved in a payment process.
When a transaction is attempted, the switch determines the destination of the transaction data - whether a bank, credit card network or payment processor - and routes it accordingly, validating the transaction details and funds in the process.
PCI DSS
PCI DSS stands for Payment Card Industry Data Security Standard. It refers to the security standards all companies that accept, process, transmit or store card information must adhere to in order to protect cardholders information and mitigate the risk of fraud and misuse of funds.
PCI DSS compliance requires that companies adhere to rules around data, consumer protection, Know Your Customer (KYC), Anti Money Laundering (AML) and more. It is a global standard, though frameworks do vary in different geographies.
PCI DSS has four levels of requirements companies must meet based on the number of transactions they process annually. Level 4 is the lowest level, applying to companies that process the lowest number of transactions each year, while Level 1 is the highest level and applies to those that process millions of transactions annually.
Recurring payment
A recurring payment is a transaction that is debited from an authorised account regularly, according to a set schedule - for example once per month. Common forms of recurring payments are subscriptions, utility bills and loan repayments. They provide convenience to customers and help to prevent penalties for missed payments. Examples include Debit Order or DebiCheck payments, or recurring card payments.
Customers need to authorise recurring payments before the initial payment.
RTC
RTC stands for “Real-Time Clearing”, and refers to the immediate (or near-immediate) processing of payments or transactions.
Unlike batch payments, which are settled in bulk in set intervals, Real-Time Clearing payments immediately transfer funds between bank accounts.
RTP / PayShap
PayShap is a Rapid Payments Programme (RPP) launched by the South African Reserve Bank in March 2023. PayShap was developed by the SARB as part of its Vision 2025 initiative to be South Africa’s first instant interbank digital payment offering for low-value payments.
PayShap is a form of instant account-based payment, similar to electronic funds transfer (such as Instant EFT) or real-time clearance (RTC), focused on lower-value payments.
PayShap payments are initiated by the payee and processed through a central clearing house (Bankserv Africa). Payments are designed to take less than 10 seconds to complete, clearing faster than existing account-based schemes.
Settlement
Settlement is the point at which the transfer of funds in a transaction takes place, moving them from one bank account to another. This can happen at the same time as the transaction is initiated, as with Real-Time Clearing (RTC), or at set intervals, as with batch payments.
Smart routing
Smart routing is a tool employed by payment orchestration platforms to optimise payment methods and maximise approval rates.
Smart routing systems automatically select different payment processors or methods based on the size, geography, currency and more to ensure the payment is handled by the processor with the highest chance of approving the transaction, or the method that works best for a particular scenario. It may also involve automatic retries in the event of failure.
Smart routing payments leads to higher payment approval rates overall, which in turn helps enterprises to improve their conversion rates.
Split payment
A split payment refers to a transaction where a payer uses more than one payment method to settle a single transaction. For example, diners at a restaurant may choose to pay part of their bill on card and settle the rest in cash.
A split payment may refer to a single person using more than one payment method for a transaction or a number of people each using different payment methods to settle a single amount, as in the restaurant example.
Split payments can present a more complicated picture for merchants when it comes to reconciliation and record keeping, but it also offers greater flexibility to customers and can lead to higher conversion and spending rates.
TPPP
A TPPP is a Third Party Payment Processor, or a company that is licensed to manage digital transaction processes. Sitting between the bank and the merchant, it facilitates the transmission of customer information between the merchant and their banks.
In South Africa, a TPPP is typically enabled by a Service Operator, or SO. A TPPP may hold funds for payments in its own bank account for a limited period of time.
TPPPs are sometimes also referred to as the “Acquirer” or “Payment Service Provider”, as well as the “Payment Processor”.