Acquirer:
An Acquirer is a Visa / Master Card Affiliated
Bank or Bank/Processor alliance that is in the
business of processing credit card transactions
for businesses and is always Acquiring new merchants.
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.
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.
An issuing financial institution's electronic
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.
Corporate Card:
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 Master Card 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.
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).
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.
Electronic Date Capture (EDC):
Process of electronically authorizing, capturing
and settling a credit card transaction.
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.).
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 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.
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:
A business that accepts credit cards. Also a
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 Verfone credit card terminal)
to Visa or Master Card, and then arranges for
Fund Settlement to the merchant. Such processors
are traditionally accessed via direct dial out
modems connecting to their system.
Processing Network (Vendor):
The medium of data transport between the merchant
application and the processor. This company authorizes
and captures credit card transactions.
Procurement/Purchasing Cards:
Charge cards used by businesses to cover purchasing
expenses, such as raw materials or office supplies.
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.
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.
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.
Smart card:
A credit-type card that electronically stores
account information in the card itself. Software:
A POS Terminal Application or PC or Internet Application
that runs transactions and associated administration.
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:
Equipment used to capture, transmit and store
credit card transactions.
Terminal Identification Number (TID):
A unique number assigned to each POS terminal.
Credit
Card Processing Glossary