Glossary

This page gives explanations and definitions of terms used both on the Shopfitter website and in e-commerce generally.

It will be added to as and constantly growing resource so if there's something you want us to cover thats missing please contact us and we'll add it.

 

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Chargeback

A chargeback occurs when a merchant is required to issue credit to a cardholder's account. The merchant is billed by the credit card issuer resulting in the money being removed from the merchant's account. This may happen for a number of reasons, but most often a chargeback is triggered by a cardholder disputing a transaction.

Reasons for a chargeback occurring

There are a number of reasons that a credit card issuing bank may chargeback a merchant. Most are initiated by the cardholder, who may contact his/her bank regarding an inconsistency in the monthly credit card statement. This begins the dispute process that may eventually lead to a chargeback, or a reinstatement of credit to the cardholder's account.

One of the most common reasons for a chargeback is a fraudulent transaction. A credit card is used without the consent or proper authorization of the cardholder. In most cases, a merchant is responsible for charges it fraudulently imposes on a customer.

Another reason for chargebacks is when a customer does not receive the item they paid for. In this case, a chargeback is initiated and the payment to the merchant is revoked.

 

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Payment Gateway

A Payment Gateway is an e-commerce service that authorises payments for e-businesses and online retailers. It is the internet equivalent of a physical Point-of-sale chip and PIN terminal located in most shop. Payment gateways encrypt sensitive information, such as credit card numbers, to ensure that information passes securely between the customer and the merchant.

How a payment gateway works:

  • The website encrypts the transaction information and sends it via a secure connection to the payment gateway.
  • The payment gateway receives the transaction information from the website, encrypts it, and submits an authorisation to the card issuing bank.
  • The card issuing bank receives the authorisation request, and replies to the payment gateway with an approved, declined, or error response.
  • The payment gateway receives the response then sends a reply back to the website, based on the response. The website updates to show the customer that their purchase was approved, declined or had an error.
  • At the end of the business day the payment gateway sends a settlement request to the business' merchant account provider (bank). The bank then issues separate requests to the card issuing banks and deposits the funds into the businesses bank account when they become available for transfer.

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