Glossary

An application fee is the amount a software platform takes on a payment that also pays a connected merchant or seller. The platform specifies that fee on the charge or transfer. The licensed processor still prices the underlying card or bank rail. This is how many platforms take a rate without owning the acquiring license.

Banking-as-a-service is a model where a software company embeds deposit accounts, money movement, and often cards inside its product by using a chartered sponsor bank and middleware or bank APIs. The platform is not the bank. Customers get accounts through the bank's program. The software company takes a rate or a product fee on those balances and rails.

A BIN sponsor is the party that holds a card-network Bank Identification Number so a software company can issue debit, credit, or prepaid cards without owning that BIN. The sponsor is usually a bank. The platform embeds issuing through that program. Holding a BIN is not the same as holding a deposit charter.

Card issuing is creating virtual or physical payment cards for users of a software product, usually on a partner bank's BIN through an issuer processor. The software company brands the card and sets spend controls. It is typically not the licensed issuer. This is not card acquiring.

A destination charge is a multiparty payment created on the platform account that immediately transfers some or all of the funds to a connected merchant or seller. The platform typically takes an application fee. Refunds, chargebacks, and processor fees usually hit the platform, not the connected account, unless the program says otherwise.

Embedded lending is the distribution of business or consumer credit inside software the borrower already uses, rather than sending them to a standalone lender website. The software company is usually not the lender. A bank or licensed originator underwrites and funds. The product can be a loan, a cash advance, or installment credit.

Interchange-plus is a card-pricing model that passes through network interchange and assessment, then adds a disclosed processor markup (the plus). The software company or merchant sees the cost stack instead of a single blended rate. On platform payments, the plus is often the buy rate you mark up to a merchant sell price.

Know Your Business (KYB) is the process of verifying a legal entity, its formation, and the people who own or control it before you board that business onto payments, banking, or lending. KYB is not the same as KYC, which verifies a person. Platforms use KYB so a bank or PayFac can underwrite a company, not only a consumer.

Know Your Customer (KYC) is the process of verifying a natural person before you open an account or board them onto payments, banking, or lending. Typical checks include identity data, government ID or database match, and watchlist screening. KYC is not KYB, which verifies a legal entity.

A merchant cash advance is working capital sold against a share of a business's future sales or receivables, usually repaid as a cut of card or bank deposits. Providers often structure it as a receivables purchase, not a term loan. Legal treatment and true cost vary by contract and state. It is not consumer installment credit.

PayFac-as-a-service is a commercial model where a software company embeds card acceptance, sets merchant pricing, and keeps the merchant relationship while another registered payment facilitator underwrites sub-merchants, holds the acquiring program, and stays on the processing terms. The software company takes a rate without becoming the PayFac on day one.

A payment facilitator is a registered party that onboards sub-merchants under its own master acquiring relationship instead of sending each business out for a standalone merchant account. The PayFac typically underwrites those businesses, settles funds to them, and takes more residual economics and more liability than a software company that only refers volume.

Residuals are the leftover processing economics after interchange, network assessments, and the processor or PayFac take. In platform payments, residuals are the spread you keep over time on merchant volume, not a one-time integration fee. Owning residuals is not the same as taking an application fee on someone else's rate card.

A sponsor bank is the chartered bank that a software company or fintech uses to offer deposits, cards, or acquiring without holding the charter itself. The bank owns the regulatory relationship. The platform embeds accounts or payments through that bank's program. The software company is not the bank.

Vertical fintech is the infrastructure a vertical software company embeds to take a rate on money movement: card acceptance, deposit accounts, spend cards, and credit inside the product merchants already use. It is not the industry software itself. The platform stays the product. A bank, PayFac, issuer, or licensed lender usually holds the license.