Loose vocabulary is expensive in this industry
Payments has an unusual property: the words are technical, nobody owns the definitions, and the gap between two meanings of the same word is frequently a line on an invoice. A merchant who believes interchange is negotiable will spend a procurement cycle negotiating the one component that is fixed. A software company that believes becoming a payment facilitator and using PayFac-as-a-service are the same decision will underestimate its liability by an order of magnitude. A business that believes a merchant of record is a kind of processor will not realize it has stopped being the legal seller of its own product.
These guides exist to close those gaps precisely. Each defines a term, explains the mechanism behind it, works through the commercial consequence, and names the mistakes that the definition alone does not prevent. They are written for someone who has to make a decision or sign something, not for someone browsing.
Every company profile on this site links its first mention of these terms into the relevant guide, which means the guides carry the site's explanatory weight. A profile can say that a provider prices on interchange plus a disclosed markup and rely on the reader being able to find out exactly what that implies.
The money words: interchange, markup, and pricing models
Card cost has three components and they behave differently, which is why a single quoted percentage tells a merchant almost nothing.
Above interchange sit network assessments, charged by Visa and Mastercard for use of their rails, also fixed. Above that sits the processor markup, which is the only component anyone can negotiate and the only one that differs between competing quotes for the same business.
Three pricing models package those components differently. Interchange-plus passes interchange and assessments through at cost and states the markup explicitly, so the merchant can see all three. Flat-rate blends everything into one number, trading visibility and volume efficiency for simplicity. Tiered pricing sorts transactions into qualified, mid-qualified and non-qualified buckets whose contents the processor defines and can revise, which makes the effective cost unauditable. Tiered pricing is a bad deal for almost every merchant, and the guide on pricing models explains the mechanism by which it becomes one.
The structure words: PayFac, ISO, merchant of record, orchestration
This group of terms describes who holds the merchant account, who carries the risk, and who is legally selling the product. They are routinely used as synonyms and they are not close to synonymous.
- Payment facilitator. Holds a master merchant account, boards businesses beneath it as sub-merchants, underwrites them, and is liable for their losses. Registration with the networks and real capital are required.
- Independent sales organization. Sells and services merchant accounts for an acquirer without holding the account or the risk. The merchant gets an account in its own name.
- Aggregator. Commonly used as a loose synonym for facilitator, and usually harmless, but it describes the account structure rather than the registration status.
- Merchant of record. Becomes the legal seller of the product, assuming the transaction, the tax obligation and the chargeback liability. This is a transfer of the sale itself, not a payment arrangement.
- Payment orchestration. A routing layer above multiple processors, used to manage authorization rates, cost and redundancy. It adds no acceptance capability and pays for itself only above a certain scale.
- Embedded payments. A software platform monetizing payments for its own customers, with several models available at very different levels of retained liability.
The commercial stakes here are the largest on this page. Choosing between these structures decides who absorbs a loss, who owns the customer relationship, whose tax registration applies, and how hard it is to change providers later.
The rails words: ACH, RTP, FedNow, wire and card
Card is one rail among several, and it is often the wrong one. The rails differ on four dimensions that matter operationally, and the differences are structural rather than a matter of vendor choice.
| Dimension | Why it decides the rail |
|---|---|
| Cost basis | Cards are priced as a percentage of value; bank rails are largely priced per transfer. Large tickets favor bank rails decisively. |
| Speed and finality | ACH settles in batches with a return window; RTP and FedNow settle in seconds and are irrevocable once sent. |
| Reversibility | Card payments can be disputed months later; instant rails effectively cannot be recalled, which shifts fraud risk to the sender. |
| Limits and reach | Instant rails depend on the receiving institution participating; card acceptance is close to universal. |
The mistake most businesses make is choosing a rail by cost alone and discovering that irrevocability, not price, was the variable that mattered. A business that moves large payments to an instant rail to save fees has also removed its own ability to claw a mistaken payment back.
The risk words: chargeback, representment, monitoring
A chargeback is a forced reversal initiated by the cardholder's issuing bank, not a refund and not a customer service outcome. The merchant's funds are removed first and the merchant argues afterwards, through a process called representment, in which specific evidence is submitted against a specific reason code within a specific window.
Two things about that process cost merchants money. Representment is evidentiary and mechanical: the case is won by supplying the exact artifacts the reason code calls for, not by explaining that the customer is wrong. And dispute volume is measured against network thresholds that trigger monitoring programs assessed at acquirer level, so a merchant's dispute performance is a matter between the network and its bank before it is ever a conversation with the merchant.
Level 2 and Level 3 data belong in this group as well, because they are the clearest example of a term whose neglect is quietly expensive. Commercial and purchasing card transactions can qualify for reduced interchange when submitted with enhanced line-item detail, and most merchants that could capture it never do.
The eleven guides and what each one answers
Each guide is written to stand alone, but the first is the foundation the others assume.
- How Payment Processing Works — merchant, acquirer, processor, network and issuer: who does what in a card transaction, and where the money actually goes.
- Payment Processing Fees Explained — interchange, assessments and processor markup, and which of the three anyone can actually negotiate.
- Interchange-Plus vs Flat-Rate vs Tiered Pricing — the three models, what each one hides, and how to work out which costs your business less.
- What Is a Payment Facilitator? — PayFac, ISO, merchant of record and aggregator are four different things, and the difference decides who carries the risk.
- Embedded Payments for SaaS and ISVs — how software companies monetize payments, what the revenue looks like, and the obligations that come with it.
- Payment Orchestration Explained — routing across multiple processors: what it fixes, what it costs, and the scale at which it starts to pay for itself.
- Level 2 and Level 3 Data for B2B Card Payments — the enhanced line-item detail that qualifies commercial card transactions for lower interchange, and why most merchants never capture it.
- US Payment Rails Compared — ACH, RTP, FedNow, wire and card on speed, cost, reversibility and limits, side by side.
- Chargebacks, Representment and Dispute Management — how a dispute proceeds, what evidence wins, and the thresholds that put a merchant into a monitoring program.
- How to Start a Payment Processing Company — ISO, PayFac and processor are three different businesses with three different capital and licensing requirements.
- Agentic Payments — how AI agents are being given the ability to pay, the authorization models emerging around it, and what remains unresolved.
If you are starting cold, read how payment processing works, then the fees guide, then the pricing models guide. Those three cover the vocabulary that appears in every processing agreement, and they are the three that most often change what a business decides to sign.
Frequently asked questions
How does payment processing work?
When a customer pays by card, the merchant's gateway sends an authorization request to a processor, which routes it through the card network to the cardholder's issuing bank; the issuer approves or declines and the answer returns in about a second. Settlement happens separately, usually in a batch at the end of the day, when the acquiring bank pays the merchant the transaction value less interchange, network assessments and the processor's markup. The acquirer holds the merchant account and carries the financial liability if the merchant takes money and fails to deliver.
What is interchange and can it be negotiated?
Interchange is the portion of a card fee paid to the cardholder's issuing bank, set by the card network in published tables that are revised on a recurring schedule. It cannot be negotiated by the merchant, the processor or the acquiring bank. What a merchant can influence is which line of the table its transactions qualify for, through card-present acceptance, correct merchant category coding and submitting enhanced Level 2 and Level 3 data on commercial card transactions.
What is the difference between a payment facilitator and a merchant of record?
A payment facilitator boards businesses as sub-merchants under its own master merchant account and takes on their payment risk, but the underlying business remains the seller of its own product. A merchant of record goes further and becomes the legal seller, assuming the sales contract, the tax obligation and the chargeback liability. The distinction matters most for tax registration and for who the customer's contract is with, which are not payment questions at all.
Which payment rail should a business use?
Cards are priced as a percentage of transaction value and are close to universally accepted, which makes them right for consumer transactions and small tickets and expensive for large ones. ACH and other bank rails are priced per transfer, which makes them substantially cheaper at large ticket sizes, at the cost of slower settlement and a return window. Instant rails such as RTP and FedNow settle in seconds but are effectively irrevocable, so the sender carries the fraud risk that a card payment would leave with the issuer.
Are these guides written for merchants or for people working in payments?
Both, but they are written from the merchant's side of the table. Each guide defines the term precisely, explains the mechanism behind it, and states the commercial consequence of getting it wrong, including where a common industry practice is a bad deal for the buyer. No current rates or fee percentages are published as fact, because interchange tables and processor pricing both change on their own schedules and a number stated today would be quoted long after it stopped being true.