Payment Orchestration & SaaS Billing Glossary (The A–Z).

3D Secure (3DS)

A security protocol that adds an extra step to online card payments, such as a one-time password, app approval, or biometric check. It is commonly required under regulations like PSD2 in Europe and can shift fraud liability from the merchant to the card issuer, reducing exposure to fraudulent transactions.

Acceptance Rate

The percentage of payment attempts that are approved by banks or card networks. Even small increases in acceptance rate can have a large revenue impact at scale, because more existing customers successfully pay without additional marketing or acquisition effort.

Account Updater

A service that automatically refreshes stored card details when a customer’s card expires, is reissued, or replaced. This prevents payments from failing due to outdated card information and significantly reduces involuntary churn without requiring customer action.

Acquirer (Acquiring Bank)

The financial institution that processes card payments on behalf of a business and settles funds into the merchant’s bank account. Different acquirers perform better in different regions or card types, which is why routing and orchestration matter at scale.

Advance Days

The number of days before a renewal or billing date that an invoice is generated. Advance days give customers time to review upcoming charges and ensure funds are available, reducing payment failures and renewal-related disputes.

Alternative Payment Methods (APMs)

Non-card payment options such as bank transfers, digital wallets, or local payment schemes. Supporting APMs is essential for international SaaS expansion and can dramatically improve conversion and trust in specific regions.

API (Application Programming Interface)

A technical interface that allows software systems to communicate programmatically. In SaaS billing and payments, APIs enable automation of invoicing, retries, entitlements, and payment orchestration without manual intervention.

Authorisation

The step where a customer’s bank approves or declines a payment request. An authorisation reserves funds but does not always mean the money has been captured or transferred yet.

Auto Cancel

An automated action that permanently cancels a subscription when defined conditions are met, usually after prolonged non-payment. Auto cancel prevents revenue leakage and entitlement risk from unpaid accounts remaining active indefinitely.

Auto Cancel Days

The number of days after a failed payment or overdue invoice before a subscription is automatically cancelled. This setting balances revenue recovery attempts against operational and credit risk.

Auto Suspend

An automated action that temporarily restricts access to a service when payment conditions are not met. Suspension protects revenue while still allowing customers to recover without full cancellation.

Auto Suspend Days

The number of days after a failed payment or overdue invoice before service access is suspended. This creates a predictable enforcement point and reduces manual operational effort.

Bank Identification Number (BIN)

The first digits of a card number that identify the issuing bank and card type. BIN data is commonly used to route payments intelligently to optimise fees, performance, and acceptance rates.

Billing

The process of calculating what a customer owes and generating invoices. Billing defines pricing, usage, proration, taxes, and timing, while payments handle how money is collected, and confusing the two often leads to fragile systems.

Billing Cycle

The recurring interval used to invoice customers, such as monthly or annually. Different billing cycles may apply across plans, regions, or customer segments.

Billing in Advance

Charging customers before a service period begins. This approach is common in SaaS because it reduces credit risk and improves cash flow predictability.

Billing in Arrears

Charging customers after usage has occurred. This model is often used for usage-based pricing where costs are only known after the service period ends.

Card-Not-Present (CNP) Transaction

A payment where the physical card is not present, such as online or in-app transactions. Most SaaS payments are CNP and therefore carry higher fraud risk and processing fees.

Capture

The step where authorised funds are actually transferred from the customer’s bank. Some systems authorise first and capture later based on fulfilment or service activation.

Cascading

A routing strategy where a declined transaction is automatically retried with another provider. Cascading acts as a safety net to recover revenue that would otherwise be lost.

Chargeback

A payment reversed by a customer through their bank. Chargebacks are costly, operationally intensive, and can damage relationships with payment providers and networks.

Chargeback Ratio

The percentage of transactions that result in chargebacks. High ratios can trigger fines, monitoring programmes, higher fees, or account termination.

Compliance

Adherence to regulatory and security standards such as PCI DSS, GDPR, or PSD2. Non-compliance can lead to fines, legal exposure, data breaches, or loss of payment processing privileges.

Credit Balance

A prepaid amount held on a customer’s account that can be applied to future invoices or usage. Credit balances are commonly used in prepaid or usage-based billing models.

Credit Note

A document issued to correct an invoice or apply a refund, effectively acting as a negative invoice. Credit notes are essential for accurate accounting and clean audit trails.

Cross-Border Payment

A payment where the customer, bank, or merchant are located in different countries. These payments often have higher fees and lower approval rates than domestic transactions.

Currency Conversion (FX)

The exchange of one currency into another during a transaction. FX costs can significantly impact margins at scale if not optimised or monitored carefully.

Decline Reason Code

A message returned by the bank explaining why a payment failed. These codes inform retry logic, recovery strategies, and whether customer action is required.

Deferred Revenue

Money received for services that have not yet been delivered. In SaaS, deferred revenue is recorded as a liability and recognised over time as the service is provided.

Descriptor

The text shown on a customer’s bank or card statement for a transaction. Clear, recognisable descriptors reduce confusion, disputes, and chargebacks.

Dispute

A formal claim raised by a customer questioning a transaction. Disputes may escalate into chargebacks if not resolved quickly with evidence.

Dunning

The process of retrying failed payments and communicating with customers to recover revenue. Effective dunning balances persistence with customer experience to maximise recovery.

Dynamic Currency Conversion (DCC)

A feature that allows customers to pay in their home currency at checkout. While convenient, exchange rates are often marked up, affecting overall transaction cost.

Entitlements

The products, features, or usage limits a customer is allowed access to based on their subscription and payment status. Billing, payments, and entitlements must remain aligned to prevent revenue leakage.

Evergreen Subscription

A subscription that renews automatically until cancelled. This is the default contract model for most SaaS businesses.

Failover

Automatically retrying payments through another provider during outages or failures. Failover ensures continuity and reduces revenue loss caused by technical downtime.

False Positives

Legitimate transactions incorrectly blocked as fraud. False positives often cost more revenue than actual fraud and damage customer experience.

Fraud Detection

Systems designed to identify high-risk transactions before processing. Effective fraud detection balances security with payment acceptance to avoid blocking good customers.

Grandfathering

The practice of keeping existing customers on old pricing when plans change. This reduces churn and preserves goodwill during price increases.

Hard Decline

A permanent payment failure that requires customer intervention, such as an invalid or closed card. Retrying hard declines is ineffective and sometimes penalised.

Hybrid Pricing

A pricing model that combines a base subscription with usage-based charges. Hybrid pricing provides predictable revenue with upside as customers grow.

Idempotency

A technical property ensuring that repeating the same payment request does not result in duplicate charges. This is critical for reliable payment APIs and customer trust.

Interchange Fee

A fee paid to the issuing bank for processing a card transaction. Interchange is usually the largest and least negotiable component of payment cost.

Involuntary Churn

Customer loss caused by payment failure rather than customer intent. Involuntary churn is one of the largest hidden revenue leaks in SaaS.

Invoice

A formal record of charges owed by a customer. Clear, compliant invoices reduce disputes and accelerate payment collection, especially in B2B contexts.

Know Your Customer (KYC)

The process of verifying customer identity as required by regulators. KYC is essential for platforms, marketplaces, and compliance with anti-money laundering laws.

Local Payment Method

A payment method commonly used in a specific region, such as iDEAL in the Netherlands or PIX in Brazil. Supporting local methods improves conversion and trust.

Mandate

Customer authorisation allowing recurring bank debit payments. Mandates are legally required for pull payments on bank rails.

Merchant of Record (MoR)

The legal entity responsible for payment processing, tax collection, refunds, and compliance. Acting as your own MoR offers control but increases liability.

Metering

The process of measuring customer usage of a service, such as API calls or storage consumption. Accurate metering is the foundation of usage-based billing.

Multi-Currency Pricing

Displaying and charging prices in local currencies based on customer location. This reduces friction and improves international conversion rates.

Net Terms

Payment terms specifying when invoices are due, such as Net 30 or Net 60. Net terms are common in enterprise SaaS and impact cash flow timing.

Network Token

A card token issued directly by card networks like Visa or Mastercard that updates automatically when cards change. Network tokens improve security and acceptance rates.

Observability

Visibility into payment performance, failures, retries, and outcomes across the system. Observability turns payments from a black box into an optimisable function.

Overage

Charges applied when a customer exceeds the usage limits of their plan. Overages allow monetisation of heavy usage without forcing plan upgrades.

Payment Attempt

A single attempt to collect payment from a customer. One invoice may involve multiple attempts before success or write-off.

Payment Gateway

The secure transmission layer between a merchant and a processor. Gateways act as the digital terminal for online transactions.

Payment Method

How a customer pays, such as card, bank transfer, or digital wallet. Offering inappropriate methods for a market reduces conversion.

Payment Orchestration

A system that controls how payments are routed, retried, recovered, and governed across providers. Orchestration centralises logic and reduces vendor lock-in.

Payment Recovery

The process of collecting revenue after an initial payment failure. Recovery includes retries, alternative methods, and customer communication.

Payment Routing

Logic that determines which provider or method processes a transaction. Smart routing improves cost efficiency and success rates.

Payment Service Provider (PSP)

A company that provides gateway, processing, and acquiring services. PSPs simplify access but may limit flexibility at scale.

PCI DSS

The Payment Card Industry Data Security Standard governing how card data is handled. Compliance is mandatory for all card-accepting businesses.

Pre-Authorisation

A temporary hold placed on a customer’s funds without capture. Used to verify availability or validate payment methods.

Proration

Adjusting charges when a subscription changes mid-cycle. Proration ensures customers are billed fairly and accurately.

Pull Payment

A payment initiated automatically by the business using stored credentials. Pull payments are standard for SaaS subscriptions.

Push Payment

A payment initiated by the customer, such as a bank transfer. Common in enterprise invoicing and net-terms arrangements.

Reconciliation

The process of matching invoices, payments, and settlements to ensure financial accuracy. Reconciliation becomes complex when multiple providers are used.

Recurring Billing

Automated billing at regular intervals. Recurring billing is the heartbeat of the SaaS business model.

Renewal Cycle

The interval at which a subscription renews and is billed. Renewal cycles define revenue predictability and customer expectations.

Retry Logic

Rules governing how and when failed payments are retried. Well-designed retry logic improves recovery without increasing costs or friction.

Revenue Recognition

Accounting rules determining when revenue is officially earned, regardless of when cash is received. Critical for SaaS compliance with ASC 606 and IFRS 15.

Risk Scoring

Assigning a risk level to transactions based on behaviour, location, and context. Better scoring allows safe approvals with fewer false declines.

Scheme Fee

Fees charged by card networks such as Visa or Mastercard. These fees are separate from interchange and processor fees.

Settlement

The transfer of funds from the acquirer to the merchant’s bank account. Settlement timing directly affects cash flow management.

Smart Routing

Dynamic payment routing based on real-time performance data, cost, and availability. Smart routing optimises acceptance rates and margins.

Soft Decline

A temporary payment failure likely to succeed on retry, such as insufficient funds or temporary bank issues. Soft declines are the primary target for recovery strategies.

Strong Customer Authentication (SCA)

A regulatory requirement, particularly under PSD2 in Europe, requiring multi-factor authentication. SCA must be applied selectively to minimise checkout friction.

Tax Exclusive

A pricing model where tax is calculated and added on top of the listed price. Common in B2B SaaS where customers reclaim tax.

Tax Inclusive

A pricing model where tax is included in the displayed price. Common in B2C SaaS to simplify checkout.

Tax Handling

The calculation, collection, and reporting of VAT, GST, or sales tax. Digital services are increasingly taxed globally, increasing complexity.

Tiered Pricing

A pricing strategy offering different price levels based on features or limits. Tiered pricing encourages upsell as customers grow.

Tokenisation

Replacing sensitive card data with non-sensitive tokens. Tokenisation reduces security risk and compliance scope.

Transaction Fee

The total cost charged for processing a payment, including interchange, scheme, and provider fees. Transaction fees materially impact margins at scale.

Usage-Based Billing

Charging customers based on how much they consume of a service. Usage-based billing aligns price with value but requires accurate metering.

Vaulting

The secure storage of tokenised payment data. Independent vaulting reduces vendor lock-in and increases flexibility.

Vendor Lock-In

Dependency on a single provider that makes switching costly or risky. Orchestration mitigates vendor lock-in.

Wallet

A digital payment method such as Apple Pay or PayPal. Wallets often improve conversion and reduce fraud.

Webhooks

Automated messages sent between systems when events occur, such as a payment succeeding. Webhooks power real-time billing and access control.

Write-Off

Revenue deemed uncollectable after all recovery attempts fail. Reducing write-offs directly improves profitability.

Zero-Amount Authorisation

A $0 transaction used to validate a card without charging it. Common when saving payment details during free trials.