What Exactly Is a Payment? Unpacking the Core Concepts and Terminology

What Is Payment?

Payment is the transfer of money between the payer and the payee that enables the completion of an economic transaction. For example, when you buy a bottle of water you use a bank card (payment tool) on a POS terminal (acquisition tool); the electronic money moves from your bank settlement account to the merchant’s settlement account.

Key Payment Concepts (General)

Payment Applications

Payment applications are web or client software that allow users to initiate payments, such as WeChat App, Alipay App, and UnionPay QuickPass App.

Payment Scenarios

Online scenarios: online shopping, mobile top‑up, utility bill payment, membership purchases, etc.

Offline scenarios: QR‑code scanning, POS card payment, etc.

Transaction Types

Payment – paying for goods or services.

Refund – returning the original receipt.

Recharge – moving funds from a bank settlement account to a platform account balance.

Withdrawal – moving funds from a platform account back to a bank settlement account.

Transfer – moving money between bank accounts.

Allocation, Collection, etc.

Payment Types (By Channel)

Quick Pay – bind a bank card once, subsequent payments need no re‑binding.

Gateway Pay – redirect to the bank’s online banking for payment.

Withholding – the payee initiates periodic deductions from the user’s account.

Authenticated Pay – cardholder submits card details, a third‑party platform or the issuing bank verifies via SMS or other methods.

Payment Types (By Business Party)

B2C – payment between an individual (buyer) and a business (seller).

B2B – payment between two enterprises.

Cross‑border – payment involving parties in different countries or regions.

Payment Methods

Bank Card Pay – payment via a bound bank card (e.g., quick pay).

Balance Pay – payment using a virtual account balance provided by the merchant platform.

Credit Pay – payment using a credit line granted by the platform.

Payment Products

Payment products are services launched by payment institutions according to industry or merchant characteristics, such as Quick Pay, Gateway Pay, Wallets, Aggregated Pay, etc.

Cross‑Border Payment Terms

VA Account (Virtual Account) – an independent virtual quota under a parent account, used for cross‑border collection.

OSA Account – an offshore account opened in an offshore financial centre, not subject to domestic foreign‑exchange control.

FTN Account – a non‑resident account in Shanghai Free‑Trade Zone, subject to domestic FX control.

NRA Account – a domestic foreign‑exchange account opened by a bank for an overseas institution, still subject to FX control.

Credit‑Related Terms

Borrower – the entity applying for a loan.

Financial Platform – an online platform that connects borrowers and capital providers.

Capital Provider – the institution or individual supplying funds.

Various loan products (enterprise loan, supply‑chain financing, commercial real‑estate loan, trade financing, personal loan, credit card, mortgage, auto loan, installment products, etc.).

Settlement and Accounting Terms

Clearing – collection, sorting and allocation of transaction data.

Settlement – transferring cleared funds to the appropriate accounts.

Account Types – settlement account, payment account, operating account, marketing account, income account, etc.

Account Balance – the amount of funds in an account.

Netting (轧差) – offsetting opposite‑direction amounts to obtain a net balance.

Closing – finalizing account balances for a period.

POS Business Terms

POS Machine – a multifunction terminal used at merchants for consumption, pre‑authorization, balance inquiry, and transfer.

Acquiring Business – settlement service provided by a bank to merchants.

MCC Code – merchant category code used to identify industry and fee standards.

Acquiring Institution – the payment institution that processes settlement for merchants.

Card Types – debit card (no overdraft) and credit card (with credit line).

One‑Clear Machine – funds are settled directly to the merchant’s bound bank card.

Two‑Clear Machine – funds first settle to an intermediary account before reaching the merchant.

Rate – transaction fee rate charged to merchants.

Adjustment – random checks (调单) requiring merchants to provide transaction receipts and invoices.

Regulatory and Operational Concepts

Foreign‑exchange control, international balance‑of‑payments reporting, collection and payment (收结汇/购付汇), intermediary and proxy banks, SWIFT, CIPS, CHIPS, and related compliance measures.

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