In the world of payment processing, transactions are broadly classified by how they originate and who initiates them. Two major categories are Customer-Initiated Transactions (CIT) and Merchant-Initiated Transactions (MIT). A third concept, referred to as TeleMoto (or MOTO: Mail Order/Telephone Order), is also used by merchants who collect payment details via telephone or mail rather than through an online or in-person interface. Each type has unique rules and implications set forth by the card networks—most notably Visa and Mastercard—and offers certain advantages regarding authorization success, chargeback mitigation, and processing rates.
A text-to-pay solution is more secure and effectively shifts what might otherwise be a merchant-initiated charge into a customer-initiated transaction because the customer is prompted to actively confirm or complete the payment. Instead of the merchant billing the customer’s card on file without direct customer involvement, the text message provides a link or prompt that the customer must interact with. By clicking that link and entering or confirming payment details, the customer is now driving the transaction, making it a CIT. This distinction is crucial because customer-initiated transactions generally have higher authorization success rates, reduce the likelihood of disputes, and offer clearer evidence of the cardholder’s explicit consent, all of which ultimately benefit both the merchant and the customer.
A Customer-Initiated Transaction occurs when the cardholder directly provides payment information for a purchase in real time. This might be a transaction at a physical point-of-sale terminal, an online checkout process, or even a phone call where the cardholder verbally authorizes the charge during a single interaction. In all such scenarios, the customer is present in some capacity—physically or remotely—to confirm the transaction. Because CIT involves the cardholder’s immediate participation, the authorization process happens at once. The customer’s card details are sent to the issuing bank, which determines whether to approve or decline based on factors such as available credit, fraud checks, and the customer’s account status. This immediate, cardholder-driven context typically makes CIT more straightforward in terms of compliance, since the cardholder’s consent and active input are clearly documented at the time of purchase.
A Merchant-Initiated Transaction differs from CIT in that the business triggers the charge without the cardholder being actively involved at that moment. These charges are based on a previously established relationship or agreement that includes explicit consent from the customer. Common examples are subscription payments for digital services, installment plans for large purchases, or charges for fees that arise during a hotel stay once the guest has departed. For an MIT to occur, the merchant needs to have valid credentials on file, typically collected during an earlier transaction that was initiated by the customer. Following that initial purchase, the merchant stores the payment details securely (in compliance with PCI DSS standards) and charges the card as agreed—either on a set schedule or under specified conditions. Visa and Mastercard require that MITs reference the original Customer-Initiated Transaction, ensuring there is a clear, documented path showing the customer’s consent and prior approval.
TeleMoto, often abbreviated MOTO (Mail Order/Telephone Order), represents transactions where the customer shares card details by phone, mail, or even fax. Because the card and customer are not physically present at the point of sale, these payments are categorized as “card-not-present.” When a customer calls a merchant to place an order, or mails in an order form with credit card information, it typically qualifies as a one-time CIT for that specific purchase. However, if the customer agrees to any subsequent recurring charges based on the same card information, those future transactions would then transition into MIT status. Mail order transactions often rely on written or faxed documentation of the customer’s card details and authorization. Telephone orders rely on verbal confirmation and, in many cases, call recordings to provide proof of consent. These details become critical if there is a dispute or a claim of unauthorized activity in the future.
Visa and Mastercard maintain strict guidelines that merchants must follow when processing different transaction types. One key requirement is the use of correct indicators or transaction data fields that classify each payment as either CIT or MIT. This distinction enables the card networks and issuing banks to track transaction patterns, verify proper consent, and conduct fraud checks more effectively. Cardholder consent is central to MIT rules. Merchants are expected to maintain robust documentation that shows the customer agreed to future charges. Proper identification of the transaction category, accurate authorization procedures, and adherence to stored credential frameworks all ensure compliance and can lower the likelihood of disputes. Furthermore, many merchant categories that handle subscriptions or recurring billing must supply additional data elements or use specific transaction codes to qualify for more favorable interchange rates.
Although CIT, MIT, and TeleMoto (MOTO) can appear similar because they all involve a consumer providing payment details, their fundamental difference lies in how the authorization is triggered. CIT demands real-time customer action, whereas MIT relies on a pre-established consent that allows the merchant to bill the customer’s card later without the customer’s active involvement. TeleMoto transactions generally fall under the CIT umbrella when it comes to a single purchase, but they can pivot to MIT if the customer agrees to ongoing or future charges.
Merchants who accurately classify transactions as CIT or MIT often experience higher authorization rates. When banks see that a transaction is truly customer-initiated, they typically regard it as less risky. Similarly, MITs reference a past, successful customer-initiated payment and documented consent, which reassures the issuer that the cardholder has an established relationship with the merchant. Correct classification and clear transaction history can help reduce decline rates and improve overall approval ratios.
Proper identification and documentation of the transaction type help merchants resolve—or even preempt—disputes. For a CIT, records show that the customer directly participated and authorized the transaction, serving as a clear defense against claims of unauthorized charges. MIT offers robust evidence if a cardholder disputes a recurring or installment payment, because the merchant can prove that the cardholder consented in writing (or electronically) to future charges. TeleMoto transactions require similar diligence in documentation. Call recordings or signed mail-order forms can demonstrate that the cardholder provided explicit instructions to make the purchase. When merchants handle these details correctly, chargeback risk decreases significantly because issuers and card networks see that the transaction aligns with agreed-upon procedures.
Merchants who adhere to Visa and Mastercard rules often enjoy better interchange qualification. Card networks sometimes offer more favorable rates when certain data fields are provided or when transactions fall under recognized categories like recurring billing. By correctly labeling an MIT and ensuring it references the initial CIT, merchants can avoid misclassification penalties or downgrades that may otherwise raise processing costs. Additionally, fewer declines and chargebacks translate into a more stable processing environment, potentially allowing merchants to negotiate more favorable terms with their acquirers.