ABA Routing Number:
This 9-digit number is assigned by the American Banker’s Association and is used to identify individual banks. When performing an ACH transfer from one
bank account to another, this number is used to assist the electronic routing of funds.
Access Number:
An access number is a telephone number used by the modem in a computer to communicate with an Internet Service Provider allowing for online access.
ACH (Automated Clearing House):
A processing organization networked with others to exchange (clear and settle) electronic debit/credit transactions (no physical checks).
Acquiring Bank:
This is the status of a Visa/Master Card member bank that establishes and maintains the merchant relationship and processes all merchant transactions.
Address Verification Service (AVS):
AVS is a tool for merchants to reduce the risk associated with card not present transactions, such as mail order, telephone order or Internet transactions.
The billing address given by the customer is passed in the transaction and it is checked against the billing address on file at the customer’s card issuing
bank.
Annual Fee:
A fee charged to Merchants, which can be used to lower the discount rate.
Application Fee:
This is a fee for processing the paperwork and setting up the account.
Arbitration:
The procedure a member can use to resolve a chargeback-related dispute between two members. MasterCard or Visa resolves the dispute between members and
decides responsibility for the fines that may be assessed to the participating members.
Authorization:
This is a process where an issuing bank or authorized agent approves a transaction for the specified amount. This process takes place by the merchant via
telephone or terminal before the transaction is completed.
Authorization Code:
This code is given by the credit card issuer and authorizes a specific transaction. This number should be saved for future reference.
Authorization Fee:
A communication charge for each transaction (Sale, Credit, Void), and each time a merchant closes a batch of transactions.
Authorize.net:
Authorize.Net is a payment gateway service provider allowing merchants to accept credit card and electronic checks payments through their Web site and over
an IP connection. With a userbase of over 160,000 merchants Authorize.Net is the largest payment gateway service provider. Every major and virtually every
minor shopping cart supports Authorize.net’s Advanced Integration Method by default.
Automated Response Unit (ARU):
An ARU allows the manual keyed entry and subsequent authorization of a credit card over a cellular or land-line telephone. A business typically imprints
their customer’s card with an imprinter and then processes the transaction instantaneously over the phone.
Average Ticket Size (AVT):
The average Visa/MasterCard dollar amount of each transaction the merchant anticipates processing or actually processes over time.
^
Top
Bankruptcy Notification Service:
This service is a joint effort between MasterCard and Visa. Bankruptcy filings and cases are gathered from all the bankruptcy courts and sent to the credit
bureau for account numbers. Bankruptcy information is routed daily to appropriate members.
Basis Points:
1/00th of a percentage point is a basis point. In merchant processing terms there are three distinct categories: Qualified, Mid-Qualified, and
Non-Qualified. Concerning the discount rate, there is an increase of basis points from Qualified to Mid-Qualified and an increase from Mid-Qualified to
Non-Qualified.
Batch Processing:
The credit card transactions remaining on a merchant’s terminal are stored in an “open” batch. They will remain there unless the merchant “batches out”.
Once the merchant batches out, the daily sales are submitted for processing, and the batch is now “closed” or “settled”.
Business Financials:
Business Financials are a set of reports including a: Profit and Loss Statement, Balance Statement, and Statement of Cash Flow.
^
Top
Card Issuer:
The financial institution or company that has provided a card to a cardholder.
Card Present:
A transaction evidenced by the action of swiping a card through a terminal or by an imprinted and signed credit card draft.
Cardholder:
The person who the credit card is issued to and whose name is embossed upon the face of the card.
Cash Advance:
A transaction in which only a bank or financial institution can submit, for cash to a cardholder. The transaction is posted against the cardholder’s
bankcard account. Interest fees for cash advances are charged from the day of the transaction.
Charge-Off:
The situation in which the issuer is faced with a delinquent loan of such severity that it must absorb the amount of the debt, at least temporarily, in
order to clear the amount from its ledgers. The issuer may still attempt to collect some or all of the amount owed through the recovery process.
Chargeback:
A chargeback is the result of an action taken by a cardholder who disputes a credit card transaction through their credit card issuer. The card issuer
initiates a chargeback against the merchant’s account. The sale amount of the disputed transaction is immediately debited from the merchant’s bank account.
Merchants have 10 days in which to dispute the chargeback. This may be accomplished by providing the card issuing bank with a proof of purchase by the
cardholder. This could be a signature or proof of delivery. A chargeback fee is generally assessed to the merchant account by the merchant bank for the handling of this process.
Checklister:
A system that acts as the gatekeeper of merchant processing. Applications are entered into the system, checked for completeness, and are summarized to
quickly determine the status of a file.
Contingent Liability:
Contingent Liability refers to a situation created when a merchants processes transactions before the date a cardholder receives the goods or services
purchased. Travel agencies and mail order / telephone order merchants pose contingent liability risks to the bank.
Corporate Resolution:
A document used by a corporation that designates individuals to allow them to act as signers on behalf of the company.
Credit Card:
A plastic card having a magnetic strip, issued by a bank or business authorizing the holder to buy goods or services on credit. Also called charge card.
Credit card fraud:
Credit card fraud is a kind of fraud where a merchant (business, service provider, seller, etc.) is “tricked” into releasing merchandise or rendering
services, believing that a credit card account will provide payment for goods/services. The merchant later learns that they will not be paid, or the
payment they received will be reclaimed by the card’s issuing bank.
Credit Card Processing:
Obtaining immediate authorization of a credit card purchase when ordering online. The card processing company notifies the merchant, and the merchant
confirms or denies the order with the customer.
Credit card processors:
Merchant services
providers that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Web site
operators usually must first establish their own merchant account before contracting for credit card
processing services.
Credit card terminal:
A credit card terminal is a stand-alone piece of electronic equipment that allows a merchant to swipe or key-enter a credit card’s information as well as
additional information required to process a credit card transaction. A credit card terminal is a dedicated piece of equipment that only processes credit
cards although it is common for related transactions including gift cards and check verification to also be performed. A credit card terminal typically
must be plugged in to a power supply and connected to a telephone line.
Credit Report:
A credit report is run on every signing principal on the merchant account application and is used to make
approval decisions.
Customer Satisfaction:
Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and
product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with
satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and
other products against which the customer can compare the organization’s products.
CVV2:
(Card Verification Value2) A three digit security code that is printed on the back of most credit cards and is sometimes asked by the merchant along with
the card information. This code helps aid in reducing fraud in a card-no-present environment and helps validate a genuine Visa / MasterCard credit card.
^
Top
Data Capture:
The collection, formatting and storage of information in computer memory. Some point-of-sale terminals perform data capture functions. See EDC terminal.
Debit Networks:
A multitude of companies that honor card transactions by debiting the cardholder’s checking account for the purchase amount. Debit Networks are smaller
than their credit based counterparts and are more numerous.
Deposit Account:
An account used by a customer to make deposits and withdrawals at a financial institution. Includes checking, savings and NOW accounts, etc.
Direct Mail Merchant:
Indicates merchants that submit actual sales drafts for payment (paper merchant) through the mail for payment
Direct Marketing:
Direct Marketing is a scenario where a merchant solicits business to people who did not ask to be solicited, otherwise know as “junk mail”. Direct
Marketing is often confused with “Mail Order / Telephone Order”. A merchant that sends catalogs or brochures to their prior customers or current
subscribers is not a direct marketer. A merchant that sends catalogs or brochures to everyone is a targeted area IS considered a direct marketer.
Discount Rate:
A percentage of each transaction that the merchant is charged by the Merchant Service Provider for
facilitating a credit card transaction.
Doing Business As (DBA):
The DBA is the name the public sees, whether on a physical storefront or on the web. If the merchant has another business, then we would need a separate
application for both.
Downgrades:
A downgrade occurs when the merchant does not meet the Visa/MasterCard requirements for a transaction and as a result the transaction is moved to a lower
level of interchange. The merchant pays a higher rate for downgrades.
^
Top
e-Commerce:
e-Commerce stands for Electronic Commerce. E-Commerce is the process of buying or selling goods or services via the internet. This is most commonly done
though a merchant’s or service provider’s website and usually involves an online catalog and shopping cart. Payments are processed with an online gateway
such as Authorize.Net. eBay is another form of e-Commerce.
EDC Terminal:
Also referred to as Electronic Data Capture terminal. A point-of-sale device that reads information encoded in the bankcard’s magnetic stripe, performs
authorization functions, stores transaction data and batches and transmits that data to the acquirer for processing.
EFTS:
Electronic Funds Transfer System-An electronically-based system that eliminates the need for paper (such as a check) in the movement of funds, e.g., ATM
withdrawal or a pay-by-phone transaction.
Electronic Ticket Capture (ETC):
An ETC system reaches out and “grabs” sales ticket information electronically. Buyer information is contained on the magnetic strip on the back of the
credit card. The merchant “swipes” the card through a terminal, and the buyer information is “read” by the computer system and merged with the sales
information. It then processes the ticket just as if the merchant was making a manual deposit at a bank. This action is normally done in “batches” of
tickets, such as at the end of the day.
Electronic Transactions Association (ETA):
ETA is the association for the electronic payments industry and serves the needs of organizations who offer transaction processing products and services.
ETA is an international association with over 400 member companies spanning 7 different countries. The ETA holds an annual meeting and expo.
Embossing:
The process of printing data, in the form of raised characters, on the bankcard. Provides identification of the card and allows the imprinting of sales
drafts.
Encryption:
The method used to scramble financial information for security purposes. For example, all Personal Identification Numbers (PIN’s) are encrypted when
transmitted for authorization.
^
Top
Face-To-Face:
In a face-to-face environment, transactions take place with the cardholder and merchant face-to-face. The cardholder either swipes the terminal or signs an
imprinted sales draft. This type of transaction has the lowest discount rate as it is considered low risk.
Factoring:
The purchase of debts owed, or “accounts receivable,” in exchange for immediate payment at a discount. In e-commerce, the term is often applied to ISOs
that offer to process credit card transactions through their own merchant account rather than through an account established by the merchant, in exchange
for a percentage of the transaction or other fee. Factoring of credit card debt is illegal.
Federal Tax ID Number:
This is a 9-digit number assigned by the IRS and is used to track business taxes. All applications are required to specify their Federal Tax ID number.
Some smaller merchants who are sole-proprietors may use their personal Social Security Number in place of a Federal Tax ID number.
First Data Corporation (FDC):
This company processes a portion of our merchant’s credit card transactions. First Data is based in Omaha, Nebraska. They are formally known as First Data
Resources (FDR). The two names are mistakenly used interchangeably.
Full Business Name:
The full name of a business, which directly corresponds to a Federal Tax ID Number. When submitting an application to Ballistic Merchant Services a merchant must use their full business name.
^
Top
Gateway:
This is a service which connects the shopping cart with the card processor. Essentially, the gateway accepts the data in the shopping cart’s format,
translates it to the card processor’s format and sends it to the card processor. It then does approximately the same thing, but in reverse, when it returns
the authorization and other codes to the shopping cart.
Global Payment Systems:
The primary data transport communications facility that links all MasterCard customers and MasterCard data processing centers into a single on-line
financial network (also called a packet-switching network.) Global Payment Systems separates communications processing from financial applications to
transmit messages over a single communications network. Used to be referred to as Banknet.
Guarantor:
A personal guarantor is somewhat like a co-signer. The guarantor agrees to personally guarantee any processing losses Ballistic Merchant Services incurs as a result of doing business with the merchant. A personal credit report may be
ordered for review by our underwriters.
^
Top
Highly Suspect Merchant:
The primary data transport communications facility that links all MasterCard customers and MasterCard data processing centers into a single on-line
financial network (also called a packet-switching network.) Global Payment Systems separates communications processing from financial applications to
transmit messages over a single communications network. Used to be referred to as Banknet.
Holdback:
A portion of the revenue from a merchant’s credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges,
chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note: Merchant account providers almost never
pay interest on holdbacks.
Hypercom ICE 5500:
The Hypercom ICE 5500 is an affordable and flexible Web-enabled credit card terminal. The Hypercom 5500 also features a large, user-friendly LCD display,
and provides all traditional credit card processing and transaction functions.
Hypercom Optimum T4100:
The Hypercom Optimum T4100 is a great machine to use with either an AMS retail merchant account or mail order merchant account. The Optimum T4100 is truly
unique for our industry – the first terminal that cost-effectively combines performance, security, reliability, and ease of use. These elements are the
cornerstone of our Optimum family.
Hypercom T7 Plus:
The Hypercom T7Plus is one of the most popular credit card terminals ever made. The T7 Plus is both compact and highly advanced. Merchant Warehouse offers
the Hypercom T7Plus at the Guaranteed Lowest Price anywhere. The Hypercom T7 Plus is designed for merchants requiring a small countertop POS terminal. The
terminal delivers a set of powerful features in an attractive, compact design. The Hypercom T7Plus is capable of accepting all magnetic stripe cards and
provides fast transaction authorizations.
Hypercom T77:
The Hypercom T77 is a compact, high-performance terminal that supports a wide range of applications including credit, debit and stored-value cards, as well
as check and proprietary card processing. Benefits of the T77 include savings on user training, reduced telephone line costs, and shorter processing and
settlement times.
^
Top
IC Verify:
This an ETC type 7 software that is marketed by CyberCash. It is widely used.
Imprinter:
A slide-type device used to create an embossed image of the credit cards characters on to a transcription slip. It is a necessity for all merchants to have
a manual imprinter for special case where a physical imprint may be needed.
Independent Contractor/Independent Sales Organization (IC/ISO):
This is an acronym for a registered sales representative, people that have been contracted by a company to sell its merchant processing services throughout
the nation.
Integrated Point of Sale (IPOS):
This acronym refers to conventional terminals that are “smarter” and more sophisticated in that they may be set-up to communicate with like terminals owned
by the same merchant -even if they are located at different locations and with different merchant numbers.
Interchange:
The exchange of transactions between clearing members for Visa and MasterCard transactions, according to the associations operating rules and regulations.
During this process transactions are routed to the appropriate card issuing bank.
Internet Merchant Account:
A Merchant Account is a relationship between a retailing company and a Merchant Bank, which allows the retailer to accept credit card payments from
customers via the Internet.
^
Top
Keyed:
A transaction is “keyed” when the information from a credit card is manually typed into a terminal or computer. A transaction is keyed because either the
card is not present at the time the transaction is entered or the equipment being used to process the transaction can’t read the card.
^
Top
Magnetic Stripe:
A stripe (on the bankcard) of magnetically encoded cardholder account information.
Magnetic Stripe Reading Terminal:
A point-of-sale terminal which reads the encoded information from the magnetic stripe when the bankcard is swiped through the terminal “slot.” The terminal
automatically transmits account and transaction information to the authorizing agent.
Member Alert to Control High-Risk Merchants (MATCH):
As a way to control high-risk Merchants, MATCH is an alert system that uses an electronic bulletin board to track businesses and people when their merchant
account has been reported “terminated” by an acquiring bank.
Merchant account provider:
Merchant account providers give businesses the ability to accept debit and credit cards in payment for goods and services. This can be face-to-face, on the
telephone, or over the internet.
Merchant Accounting System:
The accounting system that transfers electronic funds from the Interchange to the merchant’s bank account via the Automated Clearing House (ACH) and sends
the merchant monthly statements concerning the merchant’s credit card transfers.
Merchant Accounts:
A merchant account allows a business to accept credit cards, debit cards, gift cards and other forms of
payment cards. This is also widely known as payment processing or credit card processing. Or an arrangement with a commercial bank or card issuer that
permits a business to accept credit card payments and deposit those payments, less charges, to its bank account.
Merchant Identification Number (MID):
This is the number that the FDC assigns to a merchant to identify them along with the credit card processors that they use. It is not to be confused with a
merchant processing account number or Terminal Identification Numbers (TIDs).
Monthly Volume (MV):
With Visa and MasterCard transactions, a merchant account is approved to process up to a maximum dollar volume. American Express, Discover, and any other
card processing volumes are not included into the calculated monthly volume. This is a major consideration for the underwriter of the file and can
determine the type of documentation that will be required for the file.
^
Top
Nurit 3010:
The Nurit 3010 wireless credit card machine provides the ultimate flexibility to meet your point-of-sale
needs. Whether dealing with a customer at the register or at a remote location, the Nurit 3010 lets you complete your transactions quickly and efficiently
with a 5- or 9-hour UPS battery for wireless transactions and a speedy 12 lines-per-second printer.
Nurit 3020:
With the Nurit 3020, Lipman Nurit offers a compact, reliable credit card machine, from its family of reliable credit card processing equipment. The Nurit
3020 complies with universal industry standards for connectivity and data transfer.
Nurit 8000:
The Nurit 8000 is the premier wireless credit card processing terminal on the market. The Nurit 8000
operates on the reliable Cingular network allowing coverage throughout the country. With the Nurit 8000, you are always ready to accept credit cards.
^
Top
Off-line:
An operating mode in which terminals are not connected to a central computer. Responses are governed by guidelines, set by the issuer, which are housed in
the terminal or in a supporting device.
Off-Line Transaction Processing:
Capture of order and credit card information for later authorization and transaction processing through a traditional card swipe terminal or through a
computer.
On-line:
An operating mode in which terminals are connected to a central computer and have access to the data base for authorization, questions and file changes.
Over the Counter:
Indicates merchants that submit actual sales drafts for payment (paper merchant) to a local bank for payment.
^
Top
payment gateway:
A payment gateway is an e-commerce ASP service that authorizes payments for e-businesses, online retailers, bricks and clicks, or traditional brick and
mortar. It is the equivalent of a physical POS(Point-of-sale) terminal located in most retail outlets. Payment gateways encrypt sensitive information, such
as credit card numbers, to ensure that information passes securely between the customer and the merchant.
Payment gateway provider:
A company that provides code and/or software for an e-commerce site to enable it to transfer information from its shopping cart to the acquiring bank, and
on through the rest of the credit card transaction. See also payment gateway.
Payment Processor:
A company that provides the processing of credit card transactions. Payment Processors are to be distinguished from issuing banks which act as the
recipient of the transaction proceeds.
Personal Identification Number (PIN):
This is the number that is assigned by the bank to cardholders for identification purposes. It can be used as an electronic signature so that ATM
transactions and debit card transactions may take place without the card holder’s written signature. PIN numbers are also used in online payment
processing.
Pin pads:
This is a small box-type terminal attachment with a 10-key pad. They are used so that a cardholder may enter their PIN number and are commonly used for
debit card transactions.
Point of Sale (POS) terminal:
A small device that allows you to slide the credit card through to make a charge. This is what most retail stores have. It is fast, easy and accurate to
make a charge on a customer’s credit card within seconds. It is also known as a terminal machine.
Purchase Cards:
Government agencies or corporations may issue their employees Purchase Cards. A Purchase Card is a credit card, but unlike a regular credit card it can
only be used at certain types of merchant locations.
^
Top
Qualified Discount Rate:
When conditions are optimum a Qualified Discount Rate is given to the merchant. This means that retail transactions are card-swiped and the merchant does
an electronic batch settlement (batches-out) at the end of everyday. For Keyed or Internet merchants to receive a Qualified Discount Rate they can obtain
an AVS response and an order number. They also need to batch-out.
Questionable Merchant:
A merchant location at which an excessive number of confirmed fraud transactions have occurred within a specified period.
^
Top
Refund Policy:
Refund Policies depend on the merchant. The merchant decides how and to what extent they can guarantee their products or services to cardholders. Refund or
return policies that are very liberal can do a lot to reduce the number of charge-backs that a merchant receives.
Recurring Transaction:
A transaction charged to the cardholder (with prior permission) on a periodic basis for recurring goods and services, i.e., health club membership,
book-of-the-month clubs, etc.
Retrieval Request:
A request by the issuer to the acquirer for a copy of the actual ticket of a transaction. The initial step that the issuer takes in the event that either
the issuer or the cardholder disputes a transaction.
^
Top
Setup Fee:
An initial fee paid to the Merchant Service Provider for establishment of an account and for processing and
reporting tools.
Shopping Cart:
When used for internet shopping, a customer can use a shopping cart as they would in a grocery store by placing items inside for eventual purchase. A
shopping cart groups the chosen items so that only one online credit card transaction is needed to complete their purchases.
Standard Industry Code/Merchant Category Code (SIC/MCC Code):
These are four-digit, numeric codes that identify merchant business types. There are thousands of SIC codes and all of them are defined by VISA
International in the Visa USA Merchant Data Manual.
Statement fee:
The statement fee is a monthly fee associated with the monthly statement that is sent to the merchant at the end of each monthly processing cycle. This
statement shows how much processing was done by the merchant during the month and what fees were incurred as a result.
Swipe:
This is physical act of sliding a card through the credit credit card processing. The machine then reads
the magnetic strip on the back of the credit or debit card. An alternative way to accept the credit card, or debit card would be to manually key in the
information. However, swiping a card is far more beneficial because it documents the physical presence of the card at the point of sale. All swiped
transactions are face-to-face which lessons the chances of credit card fraud.
^
Top
Tellan Software:
This is software that works using land phone lines rather the internet. It works like any regular credit card terminal in how it processes. The program
works with any PC or Macintosh computer via PCAuthorize and MacAuthorize.
Terminal Provider:
A terminal provider supplies the software on which a terminal operates.
Terminal Identification (TID) Number:
The unique number assigned to each point of sale terminal that tells the Host which merchant a transaction came from and where an authorization is to be
sent.
Thales Talento EFT:
The Thales Talento EFT is a flexible and secure solution for the retail and restaurant industry. The Thales Talento EFT Credit card terminal offers fast
transactions and user friendly features.
Trade Reference:
Trade references are the businesses that extend credit or have business relationships with an applicant. These are needed to see if an applicant makes bill
payments in a timely manner and also purchases goods and services from outside sources. Ballistic Merchant Services requests Trade References from all of
our MOTO merchant accounts.
^
Top
Unique Transactions:
A transaction that cannot be categorized as a retail sale or a cash advance, and for which there are special merchant classification codes. An acquirer
with such merchant activity must have written approval from MasterCard and/or Visa for a bankcard relationship with the merchant.
Unsecured Credit:
Credit extended without collateral, i.e. without the ability to attach specific borrowed assets in the event of default.
^
Top
VeriFone:
VeriFone is a company that manufactures electronic payment equipment. Some of their well known processing terminals include the Tranz 380, Tranz 330, Tranz
460, also the P250 Printer and the PinPad 1000.
VeriFone Omni 3200:
The Omni 3200 terminal has a user interface with screen addressable buttons, and can display up to 8 lines of text! It has a high-speed silent printer that
silently prints 12.5 lines per second. The Omni 3200 terminal has a totally upgradeable operating system, so you never have to buy another terminal. It
also has a three-track reader for driver licenses.
Verifone Omni 3750:
The VeriFone Omni 3750 Credit Card Terminal offers everything one would need in a credit card machine
including optional IP bases processing for faster transactions. The VeriFone 3750 covers your credit card processing needs for today and tomorrow.
VeriFone Tranz 460:
The VeriFone Tranz 460 is a compact credit card terminal and printer combo, perfect if your counter space is limited. The VeriFone 460 offers great value
by giving you a terminal and printer in one. The VeriFone Tranz 460 combines a VeriFone terminal with a 2 3/4″ wide impact printer. It features a small
footprint that saves valuable counter space and eliminates messy printer cables and clutter. With only one power cord the VeriFone Tranz 460 frees up
outlets and reduces the number of cords under the counter.
Vital Processing Services:
Formerly known as Total Systems. A joint venture of VISA USA and Total Systems Services, Inc. that combines the TSYS merchant accounting system with the
Visanet terminal product line.
^
Top
White Plastic Fraud:
Merchant fraud committed when legitimate account numbers (such as obtained from discarded sales draft carbons) are embossed on blank or altered cards.
Fraudulent sales drafts are then imprinted from the cards and deposited to the merchant’s account.
Credit card processing glossary of terms
Acceptor:
A business that has qualified to accept credit or debit cards as payment.
Acquirer:
An acquirer is an organization licensed as a member of Visa / MasterCard as an affiliated bank or bank/processor alliance that is in the business of
processing credit card transactions for businesses (acceptors) and is always acquiring new merchants.
Acquiring Financial Institution
:
An acquiring financial institution (or “acquirer”) contracts with the bank and merchants to enable credit card transactions. The acquirer deposits the
daily credit card totals and debits the end-of-month processing fees from the merchants’ accounts.
Address Verification Service (AVS)
:
The process of validating a cardholder’s given address against the issuer’s records, to determine accuracy and deter fraud. This service is provided as
part of a credit card authorization for mail order/telephone order transactions. A code is returned with the authorization result that indicates the level
of accuracy of the address match and helps secure the most favorable interchange rates.
Adjustment
:
An adjustment is initiated by the acquirer to correct a processing error. The error could be a duplication of a transaction or the result of a cardholder
dispute. The acquirer debits or credits the merchant DDA account for the dollar amount of the adjustment.
Associations
:
Any entity formed to administer and promote credit and cards. The best known examples of Associations are MasterCard and Visa.
Audio Response Unit (ARU)
:
This is an electronic authorization and capture product where the merchant uses a touch-tone telephone to process transactions.
Authorization
:
The process of verifying the credit card has sufficient funds (credit) available to cover the amount of the transaction. An authorization is obtained for
every sale. An approval response in the form of a code sent to a merchant’s POS equipment (usually a terminal) from a card issuing financial institution
that verifies availability of credit or funds in the cardholder account to make the purchase. Also see Point-Of-Sale.
Authorization Response
:
An issuing financial institution’s electronic message reply to an authorization request, which may include:
Approval — transaction was approved
Decline — transaction was not approved
Call Center — response pending more information, merchant must call the toll-free authorization phone number.
Authorization Code
:
A code that a credit card issuing bank returns in an electronic message to the merchant’s POS equipment that indicates approval of the transaction. The
code serves as proof of authorization.
Auto Close
:
A terminal feature that allows an end-of-day batch closing to occur automatically at a specified time, without having to be initiated by the merchant.
Automated Clearing House (ACH) File
:
A file with instructions for the exchange and settlement of electronic payments passed between financial institutions. It represents debits and credits to
be deducted from an account automatically as they occur.
Average Ticket (Average Sale)
:
The average dollar amount of a merchant’s typical sale. The average ticket amount is calculated by dividing the total sales volume by the total number of
sales for the specified time period.
Bankcard
:
A credit card issued by a Visa or MasterCard-sponsored financial institution. (American Express, Discover, Diners Club, JCB, etc., are issued directly from
their respective operations, rather than through banks.)
Batch
:
The accumulation of captured credit card transactions in the merchant’s terminal or POS awaiting settlement.
Capture
:
The submission of an electronic credit card transaction for financial settlement. Authorized credit card sales must be captured and settled in order for a
merchant to receive funds for those sales. Also see Settlement.
Cardholder
:
Any person who holds a payment card account (bankcard or otherwise). Person that uses a credit card to purchase goods and services.
Card Issuing Bank:
An EFT Network Member-Bank that runs a credit card or debit card “purchasing service” for their account holders. An example is CitiBank and the CitiBank
Visa Card that they issue.
Card Not Present
:
A transaction where the card is not present at the time of the transaction (such as mail order or telephone order). Credit card data is manually entered
into the terminal, as opposed to swiping a card’s magnetic stripe through the terminal.
Chargeback
:
A credit card transaction that is billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on behalf of
the cardholder. Typical cardholder disputes involve product delivery failure or product/service dissatisfaction. Cardholders are urged to try to obtain
satisfaction from the merchant before disputing the bill with the credit card issuer.
Close Batch
:
The process of sending the batch for settlement.
Code 10 Authorization
:
If you suspect a card is fraudulent at the time of the transaction, the merchant can call their voice authorization phone number and ask for a code 10. The
voice operator will instruct the merchant on how to proceed.
Commercial Cards
:
Credit or charge cards issued to businesses to cover expenses such as travel and entertainment and procurement. Includes the multiple payment card brands
of purchasing cards, business cards, corporate cards and multi-utility fleet cards. Visa and MasterCard now have special procedures for passing billing
information back to the card issuing bank so that it can be displayed on card holder statements; this is a program for promoting the use of credit cards
for business purchases by providing purchase tracking to business users. New regulations require that this billing information be passed back with the
transactions, otherwise a higher pass through fee will be incurred.
Corporate Card
:
Charge card designed for business-related expenses, such as travel and entertainment. Please see Commercial Card.
Credit (Reversal)
:
Nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately “undo” an
authorization and return it to the open-to-buy balance on a cardholder’s account. Some card issuers do not support reversals.
DDA Account:
This is the merchants Demand Deposit Account, otherwise known as the merchant’s home town bank account.
Debit Card
:
Payment card whose funds are withdrawn directly from the cardholder’s checking account at the time of sale (online debit on a Debit Network) or after batch
settlement (off-line debit on a Credit Card Network).
Deposit Correction Notice (DCN)
:
Adjustments (debits or credits) made for an out-of-balance condition due to various problems in the transmittal. The correction is made by the merchant’s
acquirer at the time of capture prior to being sent out for interchange.
Discount Rate
:
The percentage of sales amounts that the bankcard acquirer or T&E card issuer charges the merchant for the settlement of the transactions.
Edit Rejects
:
The rejection of a sales draft by Visa or MasterCard before a transaction processes through interchange, but after it has been paid by the acquirer.
Electronic Cash Register (ECR)
:
A device used for cash sales. Can also be integrated to accept credit cards.
Electronic Date Capture (EDC)
:
Process of electronically authorizing, capturing and settling a credit card transaction.
Fleet cards
:
Private label credit cards designed mainly for repairs, maintenance and fueling of business vehicles.
Footer
:
Text printed at the bottom of a sales draft. A merchant can customize the footer (i.e., Have a Nice Day, No Refunds, Thank You for Shopping With Us, etc.).
Independent Sales Organization (ISO)
:
An ISO is an Independent Sales Organization that represents a Bank or Bank/Processor alliance. The ISO has an agreement to sell the services of the Bank
or Bank/Processor alliance, and is allowed to mark up the Fees and sign up merchants.
-These entities are classic Middle Men, as they are typically not performing the services sold. They typically match the banking services they sell with
Front End solutions for accepting transactions in order to offer merchants a working system.
-Their Front End Systems can be anything from Verifone or Hypercom POS Terminals to PC based Dial-Out Credit Card Processing Software, to Shopping Carts
paired with a Secure Payment Gateway. (In all cases, the Front End solution must be compatible with the Processor in order to function.)
Interchange
:
The standardized electronic exchange of financial and non-financial data associated with sale and credit data between merchant acquirers and card issuers
on various types of MasterCard and Visa transactions.
Interchange Fee
:
A fee paid by an acquirer to an issuer for transactions entered into interchange. The interchange fee is a percentage applied, according to Visa/MasterCard
regulations, to the dollar value of each transaction. There are multiple categories of interchange, and Visa and MasterCard each have their own criteria
for their own categories. A transaction must meet the specified criteria for a category in order for that category’s rate to be applied. Each transaction
is evaluated individually, so various interchange rates may apply within one batch of merchant transactions.
Internet Service Provider (ISP)
:
Internet Service Providers (ISPs) are the Web Site Hosting companies that provide a home for merchant’s web sites.
-They typically resell and/or support the services of a Secure Gateway Provider and/or ISO or Agent or Bank.
Issuing Financial Institution
:
The bank or other financial institution that extends credit to a cardholder through bankcard accounts. The financial institution issues a credit card and
bills the cardholder for purchases against the bankcard account. Also referred to as the cardholder’s financial institution. Simply put the Issuer is a
bank or other institution that issues a credit card or debit card to an individual.
Manual Close
:
A batch close that must be initiated by the merchant on a daily basis, as opposed to an auto close at a pre-set time.
Merchant:
Customer of a processor/acquirer.
Merchant Identification Number (MID)
:
This number is generated by a processor/acquirer and is specific to each individual merchant location. This number is used to identify the merchant during
processing of daily transactions, rejects, adjustments, chargebacks, end-of-month processing fees, etc.
Magnetic Stripe
:
A strip of magnetic tape affixed to the back of credit cards containing identifying data, such as account number and cardholder name.
Mail Order/Telephone Order (MOTO)
:
Credit card transactions initiated via mail, email or telephone. Also known as card-not-present transactions.
Network:
Company and system used to authorize and capture credit card transactions.
Non-Qualified Transaction Fees (NON-Qual)
:
Bankcard sales transactions that do not meet set Visa/MasterCard criteria for that particular merchant and are processed at a higher interchange rate. An
example of this is a merchant that is retail (card present) that processes a card-not-present transaction (or manually enters card data rather than swiping
the magnetic stripe through the terminal). The merchant will pay the difference between what they should have paid on retail and what they actually
qualified for (card not present). This difference is called non-qualified interchange fees.
PC Software
:
A software program that is designed to perform a specific function on a computer system. Examples would be accounting systems, manufacturing systems, order
entry and fulfillment, ticketing, reservations, etc. The application is either purchased or built by the merchant, and must be interfaced with a credit
card authorization system in order to provide on-line transaction processing.
Private Label Cards
:
Credit, debit or stored-value cards that can be used only within a specific merchant’s store. Also referred to as proprietary cards.
Point Of Sale (POS)
:
A location where credit card transactions are performed with the cardholder present, such as a retail store. The card is read magnetically, and the
cardholder’s signature is obtained as insurance against the transaction. This is the most secure form of credit card commerce.
POS Terminal:
Equipment used to capture, transmit and store credit card transactions at the point of sale. Examples are Verifone terminals.
Processor
:
A Processor is the company that actually routes an Authorization Request from a Point of Sale device (such as a Verifone credit card terminal) to Visa or
MasterCard, and then arranges for Fund Settlement to the merchant. Such processors are traditionally accessed via direct dial out modems connecting to
their system.
-Processors need to have a Sponsoring Bank in order to gain access to the Visa and MasterCard networks. When a Processor or other entity has made such an
arrangement with a Sponsoring Bank to resell their services, they are called an Agent of that bank.
-Any entity that sells Visa or MasterCard must disclose themselves as an Agent of their Sponsoring Bank. Such sales entities may be a Processor, or an
ISO/Agent of the Processor or Processor/Bank alliance.
-Many banks are also their own processors, while other banks will use a Third Party Processor to handle this processing for them (in their own brand name
in some cases).
Processing Network (Vendor)
:
The medium of data transport between the merchant application and the processor. This company authorizes and captures credit card transactions. Some
examples of processing networks are FDR, MAPP and Envoy.
Procurement/Purchasing Cards
:
Charge cards used by businesses to cover purchasing expenses, such as raw materials or office supplies.
Real-Time Processing
Real-Time Processing means that when a web site’s customer conducts an online purchase, that the check or credit card information is conveyed to the
Processor at that exact time so that an authorization can be requested and received at that moment. Real-Time Processing always implies that a Secure
Payment Gateway is being utilized, whether proprietary or third party. Please see Secure Payment Gateways and Real Versus Non-Real Time Processing.
Reserve Account
One method that ACH Processor’s use to mitigate risk, is to require that merchants maintain a Reserve Account at the Processor’s Sponsoring Bank. This
allows the Processor to issue a Hold on funds in this account when fraud has been detected or an excessively large number of returns is received. Merchants
with good credit and history can usually meet the expectations of ACH Processors for covering returns and so are not always required to keep a reserve
account. In cases where a reserve is required, the minimum-reserve-balance in the account is set at about 20% of the anticipated processing volume. New
merchants are usually allowed to build up their reserve by sending in transactions which are not withdrawn until the minimum reserve balance is achieved;
after that, the merchant is allowed to withdraw the excess funds for transfer to their home town bank.Â
Sales Draft (Ticket)
:
A form showing an obligation on the cardholder’s part to pay money (i.e., the sales amount) to the card issuer. This is the piece of paper that is signed
when making the purchase. Sales draft data can be captured electronically and sent to be processed over the phone lines. Also see Electronic Data Capture.
Secure Payment Gateway:
Secure Payment Gateway companies help other Processors conduct secure business on the internet using Secure Socket Layer (SSL) technology.
-They provide a system that passes credit card data, authorization requests, and authorization responses over the internet using encryption technology.
-The transaction information is sent by the Payment Gateway secure server via leased line to the credit card network where the validity of the card is
checked and the availability of funds on that account is verified. An authorization code is returned via leased line to the Payment Gateway; the
authorization is encrypted by the Payment Gateway and transmitted in encrypted form to the web server of the merchant, which triggers fulfillment of the
order.
-Rather than try and create their own Secure Web System, many Banks and Bank/Processor alliances will use a Secure Payment Gateway Provider to perform this
task for them.
Secure Payment Software/Software Module/Payment Module
:
-In order to conduct secure business on the web, the Secure Gateway Provider runs a Secure Host System, and sells/licenses software modules that allow
Shopping Carts and other applications to request and receive Credit Card Authorizations via their system using encrypted communications. (This is called
Real Time Authorization.)
-The other features of this licensed software are the functions provided to merchants online when they connect to the Secure Payment Gateway host; merchant
can access their own account information, use a Virtual Terminal to conduct transactions, handle administrative tasks, etc. (These features all live on the
provider’s Host computer system.)
Settlement
:
The process of sending a merchant’s batch to the network for processing and payment. For non-bankcards, the issuer pays the merchant directly (less
applicable fees) and then bills the cardholder. For bankcards, the acquirer pays the merchant (less applicable fees) with funds from Visa/MasterCard. The
bankcard issuer then bills the cardholder for the amount of the sale. Also see Capture.
Shopping Cart Software:
-These applications typically provide a means of capturing a client’s Credit Card information, but they rely on the Software Module of the Secure Gateway
Provider, in conjunction with the Secure Payment Gateway, in order to conduct secure Credit Card transactions online.
-Any given shopping cart can work with any given Secure Gateway Provider, the only requirement being that some computer code be written or provided to
communicate with the Secure Gateway of choice, and that this code be integrated into the Shopping Cart Application.
Shopping Cart Software Providers:
Shopping Cart Software Providers are software companies that either produce, utilize or resell Shopping Cart Applications (programs) that display
merchandise and/or services, and take orders for merchants.
Smart card:
A credit-type card that electronically stores account information in the card itself.
Terminal:
Equipment used to capture, transmit and store credit card transactions.
Terminal Software
:
Programming that determines the characteristics and features of the terminal.
Software:
A POS Terminal Application or PC or Internet Application that runs transactions and associated administration.
Sponsoring Bank:
A Sponsoring Bank is a Chartered Bank or S & L that has obtained membership in Visa or MasterCard in order to allow a Processor access to the Visa and
MasterCard networks ( in order to process these types of transactions).
-Since only a Bank may join Visa or MasterCard, many Processors make deals with a Sponsoring Bank in order to gain access to the Visa and MasterCard
networks.
-Because these Sponsoring agreements are usually like a partnership, the line between the Sponsoring Banks and their Processors is not always clear;
sometimes the partnership is referred to by the name of the bank, while other times they are referred to by the name of the Processor.
T & E cards
:
Credit or charge card used by businesses for travel and entertainment expenses. Examples of these cards are American Express, Diners Club, Carte Blanche
and JCB. Also see Corporate Cards.
Terminal Identification Number (TID)
:
A unique number assigned to each POS terminal.
Third-Party Processor
:
A Third Party Processor is an independent processor that is contracted with by a Bank or Processor to conduct some part of the transaction processing
process.
-Some of these Third Party Processors specialize in running and hosting networks of Point Of Sale (POS) terminals connected to their Host via dial out
modem; they produce the software in the POS terminals as well as in their host, and route authorization requests to Visa or MasterCard as needed (MAPP,
MDI, FDR, for example).
-Other Third Party Processors specialize in the Settlement of credit card transactions with Visa and MasterCard so that merchants can be paid (FDR for
example).
-In the world of Internet Credit Card Processing, the Secure Payment Gateway Provider is another type of Third Party Processor.
Third Party
Secure Payment Gateway:
In this model, the Third Party Secure Payment Gateway’s server-computers have to provide a connection between the merchant’s web site and the Visa/MC (or
Check) Merchant Processor. This is done via telephone (or leased land line). The Merchant Processor will receive the transaction through it’s non-internet
modem bank, and then send the transaction through it’s direct connection to the Card Network (like Visa) for approval., The Merchant Processor returns a
response via land line to the Secure Payment Gateway, which encrypts the message and transmits it over the web back to the originating secure web site
host. The Third Party Secure Payment Gateway is a different company than the Merchant Processor, and has it’s own fees that are
separate from any Merchant Processing fees. Examples of these are Cybercash and Authorize.net.
-Rather than try and create their own Secure Web System, many Banks and Bank/Processor alliances will use a Secure Payment Gateway Provider to perform this
task for them.
Value Added Reseller (VAR)
:
Third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer.
