A

ACH Payment (Automated Clearing House Payment): In the UK, this is equivalent to BACS (Bankers’ Automated Clearing System), which facilitates electronic bank-to-bank payments for payroll, direct debits, and supplier invoices. BACS is widely used for recurring payments, offering a cost-effective alternative to card transactions.

Advance Amount: The lump sum provided to a UK business as part of a merchant cash advance. This funding is based on future credit or debit card sales, making it a flexible option for businesses such as restaurants, retail stores, or salons.

Approval Rate: The percentage of applications approved for merchant services or funding. In the UK, approval rates are affected by factors such as the business’s financial health and credit history but tend to be more lenient for MCAs compared to traditional loans.

Authorization: A process where UK-acquiring banks (e.g., Barclaycard or Worldpay) confirm a cardholder’s ability to make a payment. This step checks the validity of the card and ensures the cardholder has sufficient funds.

Automated Teller Machine (ATM): In the UK, ATMs allow cash withdrawals, balance inquiries, and other banking services. Some ATMs now accept contactless card payments for withdrawals.

B

BACS Payment (Bankers’ Automated Clearing System): The UK’s primary system for low-cost electronic bank transfers, used for payroll, supplier payments, and direct debits. Unlike Faster Payments, BACS transfers can take up to three business days.

Bank Identification Number (BIN): The first six digits of a UK-issued debit or credit card number, used to identify the issuing bank (e.g., HSBC, Lloyds, or NatWest).

Batch Processing: In the UK, card payments processed during the day are grouped together (batched) by the acquiring bank and settled as a single transaction, reducing processing costs for merchants.

British Retail Consortium (BRC): A trade association representing UK retailers. The BRC provides industry insights, including trends in payment methods such as the increasing use of contactless cards.

Business Credit Score: A measure of a UK business’s creditworthiness, used by MCA providers and banks to evaluate funding eligibility. Companies like Experian and Equifax provide business credit scores in the UK.

C

Card Not Present (CNP): Transactions where the customer’s card isn’t physically presented, such as online or telephone payments. In the UK, CNP transactions require additional security, often involving 3D Secure authentication (e.g., Verified by Visa or Mastercard SecureCode).

Chip-and-PIN: A secure payment method used widely in the UK, requiring customers to insert their card into a terminal and enter their PIN. This system complies with EMV (Europay, Mastercard, and Visa) standards.

Contactless Payment: Popular in the UK, this method allows customers to tap their debit/credit cards or mobile devices on a reader to complete payments. As of 2023, the UK contactless payment limit is £100 per transaction.

Credit Card Processing: The service provided by UK acquiring banks or processors, enabling businesses to accept card payments. This involves authorising, clearing, and settling transactions while ensuring compliance with PCI DSS standards.

Chargeback: A reversal of a transaction initiated by the cardholder through their bank. In the UK, chargebacks are governed by Visa, Mastercard, and American Express rules, often used to dispute unauthorised or faulty transactions.

D

Daily Sales Volume: The total revenue generated by a UK business’s card transactions in a single day. This figure is key for calculating MCA repayments, which are often based on a percentage of daily takings.

Data Encryption: A security measure required by UK businesses to protect customer payment details. This is mandated under PCI DSS and UK GDPR (General Data Protection Regulation).

Debit Card: A payment card linked directly to a UK customer’s bank account. Debit cards, like those from Visa Debit or Mastercard Debit, are among the most popular payment methods in the UK.

Discount Rate: The percentage fee charged to UK merchants for processing card payments. This rate includes interchange fees, acquirer fees, and other charges.

Direct Debit: A UK-specific method of automatic payment where funds are withdrawn from a customer’s bank account for recurring bills. Governed by BACS and the Direct Debit Guarantee Scheme.

E

EMV (Europay, Mastercard, Visa): The global standard for chip-based card transactions, widely implemented across the UK to enhance payment security.

E-Wallet: A digital wallet that allows UK consumers to store card details for online or mobile payments. Popular options include Apple Pay, Google Pay, and PayPal.

Ecommerce Transaction: Any online card payment processed through a UK payment gateway. These transactions often involve additional authentication like 3D Secure to reduce fraud.

Encryption: The process of converting sensitive payment data into a secure format to prevent unauthorised access. In the UK, encryption is mandatory under PCI DSS standards.

Early Termination Fee (ETF): A penalty charged by UK payment providers for ending a service contract early, commonly found in payment processor agreements.

F

Factor Rate: A fixed multiplier used in the UK to calculate the total repayment of a merchant cash advance. For example, a £10,000 advance with a factor rate of 1.2 requires £12,000 repayment.

Faster Payments: A UK banking system that processes near-instant bank transfers, often used for same-day supplier payments or refunds.

Fraud Detection: Tools used by UK payment processors to identify suspicious activity. Services like 3D Secure, AI fraud monitoring, and CVV matching help reduce fraudulent transactions.

Funding Time: The period between approval and disbursement of funds in the UK. For MCAs, funding can be available within 24–48 hours.

Future Receivables: A UK business’s projected credit and debit card revenue, pledged as collateral for an MCA.

G

Gateway Fee: A charge for using a payment gateway, such as Stripe or Worldpay, to process online transactions in the UK. This fee may include a monthly subscription cost and a per-transaction fee, helping facilitate secure data transfer between the merchant, card networks, and banks.

Gross Sales: The total revenue a UK business earns from all card transactions before deducting any refunds, chargebacks, or discounts. It is often used to determine eligibility for merchant cash advances.

Guarantor: In the UK, a guarantor is an individual or business entity that promises to repay a merchant cash advance if the primary borrower cannot. Guarantors are commonly required for businesses with limited trading history or poor credit ratings.

H

High-Risk Merchant: A UK business deemed high-risk by payment processors due to factors such as high chargeback rates, operating in regulated industries (e.g., CBD or gaming), or having poor credit history. High-risk merchants often face higher processing fees or stricter contract terms.

Holdback Percentage: The proportion of daily credit and debit card sales that MCA providers retain to repay the advance. In the UK, this percentage typically ranges from 5% to 20%, depending on the business’s cash flow.

Hybrid Terminal: A card payment terminal widely used in the UK that supports multiple payment methods, including chip-and-PIN, contactless, and mobile payments, making it suitable for businesses catering to diverse customer preferences.

I

Interchange Fee: A fee charged by card-issuing banks in the UK for processing card payments. This fee, regulated under UK Payment Services Regulations, is typically capped at 0.2% for debit cards and 0.3% for credit cards.

Integrated Payments: Payment solutions that seamlessly connect with a UK business’s point-of-sale (POS) or accounting systems, such as those offered by iZettle or SumUp. This integration simplifies transaction management and reporting.

Invoice Payments: Payments made in response to an invoice, often used in UK B2B transactions. These payments can be processed via bank transfers, direct debits, or card payments through platforms like GoCardless.

J

Justification Letter: A document provided by UK businesses applying for a merchant cash advance, detailing how the funds will be used (e.g., purchasing inventory, expanding operations). It supports the application by explaining the business’s financial goals.

J-Terminals: A term sometimes used in the UK to describe card terminals compatible with JCB Cards, which are accepted by businesses catering to Japanese customers.

K

Keyed Transaction: A card payment manually entered into a terminal or payment gateway, common in phone orders. In the UK, keyed transactions are considered higher risk and may attract higher processing fees.

Know Your Customer (KYC): A UK-mandated process where financial institutions verify the identity of customers to comply with anti-money laundering (AML) regulations. KYC checks are required for setting up merchant accounts.

L

Lump Sum Payment: The upfront funding provided in a merchant cash advance agreement. In the UK, businesses often use these funds for inventory restocking, marketing, or seasonal cash flow needs.

Late Payment Fee: A penalty charged to UK businesses for failing to meet repayment deadlines on a funding or card processing contract. Late fees are commonly specified in merchant cash advance or processor agreements.

Loyalty Program Integration: Combining a payment system with a rewards scheme to increase customer retention. UK providers like Square offer integrated loyalty features for small businesses.

M

Merchant Account: A type of UK bank account enabling businesses to accept and process card payments. Providers such as Barclaycard or Worldpay manage merchant accounts, which hold transaction funds temporarily before transferring them to the business’s main account.

Merchant Cash Advance (MCA): A form of financing where UK businesses receive upfront funding based on future card sales. MCAs are popular among small businesses with variable revenue streams, like cafes or retail stores.

Mobile Payments: Transactions made via mobile devices using apps like Apple Pay or Google Pay. In the UK, mobile payments are widely accepted, especially for contactless transactions.

N

NFC (Near Field Communication): A technology enabling contactless payments via cards or mobile devices. In the UK, NFC technology supports tap-to-pay transactions with a limit of £100 as of 2023.

Net Revenue: The total income of a UK business after deducting transaction fees, refunds, and chargebacks. Net revenue is a key metric for assessing business performance and funding eligibility.

Non-Dilutive Funding: Financing options, such as merchant cash advances, that do not require UK businesses to give up ownership or equity.

O

Online Gateway: A virtual terminal enabling UK businesses to accept online payments securely. Popular UK providers include Opayo (formerly Sage Pay) and PayPal Payments Pro.

Over-the-Counter Payment: Transactions completed in-person at retail locations in the UK, often using chip-and-PIN or contactless methods.

P

PCI Compliance (Payment Card Industry): The requirement for UK businesses to adhere to global security standards to protect cardholder data. Non-compliance can result in fines or higher transaction fees.

Payment Gateway: A service enabling UK businesses to process online card transactions securely. It connects the merchant’s website to the card networks and acquiring banks.

Payment Processor: A company like Worldpay or Barclaycard that handles the technical side of accepting card payments for UK businesses.

Payment Tokenization: A security measure that replaces card details with a secure token, making transactions safer. Tokenization is widely used in the UK for ecommerce and mobile payments.

Point-of-Sale (POS): The location or system where UK businesses process card payments. POS systems often integrate with accounting software and inventory management tools.

Q

QR Code Payments: A payment method growing in popularity in the UK, where customers scan a QR code using a smartphone to complete a transaction. Businesses can generate unique QR codes for invoices, orders, or in-store payments.

Qualified Discount Rate: A reduced processing fee applied to certain card transactions in the UK that meet specific criteria, such as being chip-and-PIN or contactless.

R

Recurring Payments: Automatic transactions set up by UK businesses to charge customers regularly for services or subscriptions, often facilitated through direct debit or payment gateways like GoCardless.

Refund Policy: A UK business’s terms and conditions for issuing refunds. For card transactions, refunds are processed back to the original payment method through the acquiring bank.

Rolling Reserve: A security measure where UK payment processors hold back a portion of a merchant’s transaction funds to protect against chargebacks or fraud. The reserve is typically released after a set period, such as 90 days.

S

Settlement Time: The duration it takes for card transaction funds to transfer from the acquiring bank to a UK merchant’s business account. Settlement times typically range from 1 to 3 working days.

Split Funding: A repayment model for merchant cash advances where a percentage of every card sale is automatically deducted and sent to the MCA provider. This method is common among UK businesses with fluctuating revenue.

Surcharge: A fee added to a customer’s bill to offset payment processing costs. In the UK, surcharges for card payments were banned in 2018 under The Consumer Rights (Payment Surcharges) Regulations.

Strong Customer Authentication (SCA): A UK regulation under PSD2 (Payment Services Directive 2) requiring additional verification for online card payments, such as entering a one-time passcode sent to the customer’s phone.

T

Terminal Rental Fee: A monthly charge for leasing a card payment terminal from a UK provider like Ingenico or SumUp. This fee often includes maintenance and software updates.

Transaction Fee: The cost incurred by UK businesses for each card transaction processed. This fee includes interchange, acquirer, and gateway charges, typically expressed as a percentage of the transaction amount plus a fixed fee.

Trustpilot Reviews: An important aspect of online reputation for UK businesses, where customer feedback about payment services or products can influence sales and credibility.

U

Unsecured Funding: Financing options like merchant cash advances available to UK businesses without requiring collateral. The approval is based on projected card sales rather than fixed assets.

UK Finance: The trade association representing payment providers, banks, and financial institutions in the UK. It provides insights and sets standards for payment processing and merchant services.

V

Virtual Terminal: A secure online tool that allows UK businesses to manually process card payments without a physical terminal, often used for phone orders or remote transactions.

Verified by Visa: A fraud prevention system used in the UK for online transactions. Customers must authenticate their identity with a one-time passcode or biometric verification during checkout.

W

Working Capital: The funds available for day-to-day operations in a UK business. Merchant cash advances are often used as a quick solution to boost working capital.

Worldpay: One of the largest UK-based payment processors, providing card acceptance solutions for both in-store and online transactions.

X

XML (Extensible Markup Language): A format used for transmitting data between payment systems and UK businesses, such as integrating payment gateways with ecommerce platforms.

Exchange Rates: For businesses in the UK accepting foreign currency payments, the exchange rate determines the conversion value to GBP. Payment processors may apply a margin to these rates.

Y

Yield on Sales: A metric UK businesses use to evaluate profitability by dividing net profits by gross sales. It is a critical factor for MCA providers assessing repayment capacity.

Year-End Reconciliation: A financial process for UK businesses to ensure all card transactions and fees are accurately recorded, typically for tax filing or annual accounting purposes.

Z

Zero Floor Limit: A UK-specific payment processing rule where all card transactions, regardless of amount, must be authorised by the issuing bank. This helps prevent unauthorised or fraudulent transactions.

Zero-Rated Transactions: Transactions in the UK exempt from VAT, such as certain exports or sales to VAT-registered businesses in other countries. These rules can affect how payments are processed and reported.

Elephant Funding Common Terms

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