Payment Processing Glossary
Credit Report
A _____ report is run on every signing principal of a prospective merchant account application. It is used to make approval decisions.
Credit card terminal
A ________ also called an Electronic Data Capture Terminal or EDC Terminal for short, is an electronic device that enables merchants to accept credit cards at the point of sale.
Refund Policy
A ________ policy depends on the merchant but are used to form the circumstances in which a ______ will be given to a customer. Having a generous _______ policy can help prevent a charge-back, but this does not mean _______ should be given out for every complaint.
Agent Bank
A bank that participates in another bank's card issuing program. This bank turns over the merchant applications to the processing bank and acts as a depository for merchants.
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 The card issuer initiates a chargeback against the merchant's account and the funds are withdrawn unless the chargeback is reversed.
Approval Code
A code issued by the card-issuing bank allowing a sale to be charged against the cardholder's account. Approvals are requested via an authorization.
Setup Fee
A fee paid to the Merchant Service Provider for "setting up" and establishing a merchant account. Including providing the merchant with processing and reporting tools.
Magnetic Stripe Reading Terminal
A magnetic stripe reading terminal is a point-of-sale (POS) machine that reads encoded information with a magnetic head, similar to that of a tape recorder, from a magnetic stripe of a credit card or other bankcard when it is swiped into a terminal passage area.
Debit Network
A network often referred to as "online network" - it is the opposite of the signature based "offline network". This network of processors honor cardholder transactions after cardholders enter a four digit pin.
Payment Gateway
A payment gateway is an e-commerce ASP service that authorizes payments for e-businesses, online retailers, 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 payment gateway is an e-commerce ASP service that authorizes payments for e-businesses, online retailers, 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.
Credit Card
A plastic card with a magnetic strip, issued by a bank or business authorizing the holder to buy goods or services on credit. Also called charge card.
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.
ACH (Automated Clearing House)
A processing organization networked with others to exchange (clear and settle) electronic debit/credit transactions (no physical checks).
Magnetic Stripe
A stripe (on the bankcard) of magnetically encoded cardholder account information.
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.
Terminal Provider:
A terminal provider supplies the software on which a terminal operates.
Recurring Transaction
A transaction charged to the cardholder (with prior permission) on a periodic basis for recurring goods and services, most commonly this is use for products with subscriptions i.e. online games, magazines memberships ect.
Auth Only (Pre Auth)
A transaction in which the merchant does not intend to charge the cardholder until a later date. For instance if the merchant is running a bar tab he may want to see if a $100.00 charge is good, so he would obtain a pre auth to verify an open to buy.
Merchant Accounts
A type of bank account that enables merchants to accept credit cards for payment.
Point of Sale terminal
A type of electronic-transaction terminal. Point-of-sale terminals typically include a computer, a cash register and other equipment or software used to sell goods or services. They also transmit sales data to be posted to customer accounts.
Electronic Ticket Capture
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.
Internet Merchant Account
An account issued by an Acquiring Bank that allows a business to accept Credit and debit cards via the internet
Deposit Account
An account used by a customer to make deposits and withdrawals at a financial institution.
Acquiring Bank
An acquiring bank (or acquirer) is a bank or financial institution that processes credit or debit card payments on behalf of a merchant.
Batch Settlement
An electronic bookkeeping procedure that causes all funds from captured transactions to be routed to the merchant's acquiring bank for deposit. Batches are settled from the terminal either manually or on auto-close.
On-line operating mode
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.
Independent Contractor/Independent Sales Organization (IC/ISO):
An organization or individual that is not an Association member (meaning not a Visa or MasterCard member bank), but which has a bank card relationship with an actual Association member. Such a relationship can involve various things, such as acquiring or issuing functions, soliciting new customers, arranging for terminal purchases or leases, providing customer service, soliciting cardholders, etc.
MATCH - Member Alert To Control High-Risk Merchants
As a way to control high-risk Merchants, _______ 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.
Corporate Resolution
Credit CardA document used by a corporation that designates individuals to allow them to act as signers on behalf of the company.
Monthly Statement fee
Credit card processors charge this fixed fee that goes by different names on a monthly basis. It remains the same regardless of the number of transactions you process and helps cover the cost of your statement and any customer support or service you may require.
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.
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.
P Cards (Purchasing Cards)
Government agencies or corporations may issue their employees ___________. A _______ is a credit card, but unlike a regular credit card it can only be used at certain types of merchant locations.
Direct Mail Merchant
Indicates merchants that submit actual sales drafts for payment (paper merchant) through the mail for payment.
Over the Counter (OTC)
Indicates merchants that submit actual sales drafts for payment (paper merchant) to a local bank for payment. (these accounts get lower rates because there is typically a lot less fraud)
Merchant Account Providers
Merchant service companies that provide businesses with the ability to accept debit and credit cards in payment for goods and services, are also called _______________.
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.
Batch ID
Once a batch is settled, it receives a batch ID. Every transaction in the batch shares this ID. If a transaction does not have a batch ID associated with it, the transaction has not been settled.
ACH Associations
Provide rules and guideline for the efficient operation of the ACH Network. There are 36 regional ACH associations whose memberships include financial institutions and affiliates. NACHA, the National Automated Clearing House Association forms the governing foundation for the regional associations.
Charge-Off
Refers to the amount of credit loss incurred by the card issuer after a cardholder fails to pay the owed amount.
Basis Points
Sometimes referred to as 1% of 1%. It is the percentage charged to a company that accepts credit cards by the issuing bank on any credit card transaction. They are commonly denoted as two lower case letters( __ )or in the form of an altered traditional percentage symbol (‱).
Acquirer Payment Gateway
System operated by an acquirer for the purpose of providing electronic commerce services to merchants who interface with the acquirer for authorizing and capturing transactions.
BIN (Bank Identification Number)
The 6-digit range of numbers assigned by the Federal Bureau of Standards and used by card companies to identify their financial transactions. The Discover® range begins with '6' (6xxxxx), the MasterCard® range begins with '5' (5xxxxx), and the Visa® range begins with '4' (4xxxxx).
ACH Network
The ACH network was established in the 1970s to facilitate direct deposit of military payroll and other federal payments. The network is made up of four central clearing facilities. In addition to three private sector facilities, the Federal Reserve became a central clearing house under the Monetary Control Act of 1980. The Monetary Control Act required the Federal Reserve to make its center clearing services available to all financial institutions and required it to price those services. The Federal Reserve now processes 1/3 of all paper checks, and around 80% of all ACH transactions.
Average Ticket Size (AVT)
The average Visa/MasterCard dollar amount of each transaction the merchant anticipates processing or actually processes over time.
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".
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
Card Issuer
The financial institution or company that has provided a card to a cardholder.
Full Business Name
The full name of a business, which directly corresponds to a Federal Tax ID Number. When submitting an application to YMS, the applicant must provide the exact full business name.
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.
Cardholder
The person who the credit card is issued to and whose name is embossed upon the face of the card.
Arbitration
The procedure in which a member can use to resolve a charge-back 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.
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.
Payment Processors
The type of company that provides the processing of credit card transactions. ____________are to be distinguished from issuing banks which act as the recipient of the transaction proceeds.
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.
Credit card processors
Third-party merchant services provider who handles the work associated with processing of credit card transactions between merchants, credit card issuers, and merchant account providers.
ABA Routing Number
This 9-digit number is assigned by the American Bankers 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.
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.
Payment Gateway
This is a service which connects the merchant's shopping cart with the card processor. Essentially, the _______ accepts the data in the shopping carts 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.
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.
MID - Merchant Identification Number
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).
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.
CP Account (Card Present Account)
Type of merchant account set up when the merchant expects the cardholder to be physically present along with the card at the point of purchase.
Electronic Data Capture
Use of point-of-sale terminal (or a specialized software for online transactions) for submitting and validating credit card transactions to a merchant account provider, or some other credit card transaction processor.
Associations
Visa and MasterCard are members of the associations. They establish and administer rule and regulations for the credit card industry.
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.
Off-line Transaction
_________transactions are processed very much like credit card transactions. They are sent over one of the major credit card networks -- Visa, MasterCard, Discover, etc -- depending on which credit card network your bank is associated with as a member bank. The cost of the transaction, called an "interchange fee," is typically 2-3% of the total purchase. The interchange fee is charged to the vendor/merchant, not the bank.
Application Fee
a fee charged to the merchant for processing the initial paperwork and setting up a merchant account.
Credit Card Fraud
a form of identity theft in which an individual uses someone else's credit card information to charge purchases, or to withdraw funds from the account. includes the fraudulent use of a debit card, and may be accomplished by the theft of the actual card, or by illegally obtaining the cardholder's account and personal information, including the card number, the card's security number, and the cardholder's name and address.
Guarantor
a person or business entity that makes a financial promise, sometimes backed with collateral, for another person or business entity that is requesting either a loan, credit or some form of financial responsibility for which he or it is unable to qualify on their own.
Authorization
a process in which an issuing bank or authorized agent approves a transaction for the specified amount. This process takes place by the merchant before the transaction is completed.
Global Payment Systems
a provider of electronic transaction processing services for merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi-national corporations located throughout the United States, Canada, Europe, and the Asia-Pacific region. It offers processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management.
Business/Company Financials
a set of sensitive reports and statements used to leverage a prospective merchants terms of approval. These reports include: Profit and Loss Statement, Balance Statement, and Statement of Cash Flow.
Contingent Liability
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 _______________ risks to the bank.
Pin Pad
a small box-type terminal attachment with a 10-key pad, used so that a cardholder may enter their PIN number (commonly used for debit card transactions).
Bankruptcy Notification Service
a streamlined process that gathers relevant bankruptcy data on a person or entity and distributes it to interested parties.
AVS (Address Verification System)
a system used to verify the address of a person claiming to own a credit card. The system will check the billing address of the credit card provided by the user with the address on file at the credit card company.
Access Number
a telephone number used by the modem in a computer to communicate with an Internet Service Provider allowing for online access.
Face-To-Face Transactions
a term in the credit card processing industry that refers to transactions in which the credit card is swiped through a card reading device at the same physical location as the merchant. Card-present transactions are considered as "face-to-face" where a card's magnetic strip can be scanned and the customer can sign the receipt. This gives the merchant the lowest discount rate a Qualified Rate, because it is the lowest risk.
Direct Marketing
a type of advertising campaign that seeks to elicit an action (such as an order, a visit to a store or Web site, or a request for further information) from a selected group of consumers in response to a communication from the marketer. The communication itself may be in any of a variety of formats including postal mail, telemarketing, direct e-mail marketing, and point-of-sale (POS) interactions. Customer response should be measurable: for example, the marketer should be able to determine whether or not a customer offered a discount for online shopping takes advantage of the offer.
Merchant Cash Advance
a variety of small business financing options characterized by short payment terms (generally under 24 months) and small regular payments (typically paid each business day) as opposed to the larger monthly payments and longer payment terms associated with traditional bank loans. This term may be used to describe purchases of future credit card sales receivables, or short-term business loans.
Automated Response Unit (ARU):
allows merchants to accept credit card payments without actually having the card. The person taking the order enters the credit card details manually, and the Automated Response Unit uses a phone line to contact the bank's system for authorization. The bank's system then either authorizes or denies the charge, and sends this information back to the ARU. This may sound like a long, complicated process, but it actually takes only a second or two.
Annual Fee
amount charged by the processor for a merchant account on an annual basis.
Card Verification Value 2 (CVV2)
an authentication scheme established by credit card companies to further efforts towards reducing fraud for internet transactions. Also referred to as a security code, it consists of requiring a card holder to enter the 3 or 4 numbers in at transaction time to verify that the card is on hand.
EDC Terminal
an electronic device that enables merchants to accept credit cards at the point of sale. Also called an ____ data capture _____.
Authorization Fee
charged each time a merchant authorizes a credit card transaction. It often contributes more to cost than the discount rate.
Standard Industry Code/Merchant Category Code (SIC/MCC Code):
four-digit numeric codes that identify merchant business types. There are thousands of _____ codes and all of them are defined by VISA International in the Visa USA Merchant Data Manual.
Discount Rate
is the fee charged for running a credit card transaction. There are typically multiple discount rates associated with a merchant account. The number of rates depends on the pricing that has been set up on the account.
Front End Processing
processing that handles the capture, authorization and settlement with the acquiring banks; has connectivity to all the card companies; and routes transactions to the appropriate network for authorization.
Ticket Retrieval Request
request made 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.
Aggregators
service providers through which e-commerce merchants can process their payment transactions. ____________ allow merchants to accept credit card and bank transfers without having to setup a merchant account with a bank or card association.
Doing Business As (DBA)
stands for doing business as. It is the name you are doing business as. This only applies when you are a sole proprietor. You must file your DBA with your local court house and the name is used on your merchant application.
Monthly Volume (MV)
the dollar value of Visa and Mastercard sales that are processed by a merchant per month. Additional card brands, such as America Express, generally do not count toward a merchant's _______. These numbers are used when determining the risk factors for new potential merchants.
Processing Platform
the foundation and entire behind the scenes system and capabilities that enables debit and credit transactions to take place.
E-Commerce
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.
Authorization Code
the response code from the issuing bank returned to the merchant at the time of authorization. This code is usually 6 or 7 digit number and is recorded either by the point-of-sale terminal or software, as well as printed on any receipt or sales draft. If doing a phone or voice authorization, the merchant should record the authorization code for reference. The code serves as proof of authorization.
Back End Processing
the type of processing that accepts the settlement from the front-end processor and then moves the money from the issuing bank to the acquiring bank. When it gets settlement batches, it groups them by bank identification number range and submits them to the issuing banks within a scheduled time frame
Keyed Transaction
when the information from a credit card is manually typed into a terminal or computer. 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.
Off-Line Transaction Processing (Signature Transaction)
where a customer uses their debit card to pay for a product or service without entering their personal identification number (PIN) into a PIN pad. Instead, they complete the transaction by signing the sales receipt as if they used a credit card to make the purchase.
