ABA Routing Number (aka Transit Routing Number):

Is a sequence of nine numeric characters used by banks to identify specific financial institutions.

ACH (Automated Clearing House):

The paperless funds transfer system maintained by the Federal Reserve or other entities that have networks to exchange electronic funds transfer items.

Acquirer or Acquiring Bank:

Any bank, financial institution, and public or private company that maintains a Seller’s credit card processing relationship and receives all transactions from the Seller to be distributed to the credit card issuing banks.

Address Verification Service (AVS):

A service provided in which the Seller verifies the Cardholder’s address with the Issuing Bank. Address verification is not a guarantee that a transaction is valid.

Adjustment:

A debit or credit to a Cardholder or Seller account to correct a transaction error.

Arbitration:

The process followed by the Card Associations to determine whether an Issuer or an Acquirer has ultimate responsibility for a chargeback. Either member initiates this process after the re-presentment process is completed.

Associations/Payment Brands/Networks:

Any entity formed to administer and promote credit cards, including but not limited to MasterCard International®, VISA®, U.S.A., or VISA International®, that are licensing and regulatory agencies for credit card activities.

ATM Debit Card:

An ATM (Automated Teller Machine) debit card is a card similar in size and shape to a credit card with an account number and magnetic stripe on one side. When swiped through a point-of-sale terminal, the card holder is prompted to enter a PIN number via a pinpad.

Authorization:

Approval of a bankcard transaction by the card-issuing banks or approved independent service providers, for a specified dollar amount.

Authorization response:

The reply to a request for approval on a transaction. 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. This occurs if there is a problem with the card holders card.

Authorization response code:

A code returned in the authorization response to indicate approval of a transaction. The code is recorded on the transition receipt as proof of Authorization.

Average Ticket Size

Average ticket size is referring to the average dollar amount of each credit card transaction.

AVS/Address Verification Service

AVS is a service that is required to be used on all card-not-present (keyed) credit card transactions. AVS works by the merchant entering the street address and ZIP code at the time of transaction, along with the card number, expiration date and amount. When a transaction is submitted for authorization, the address and ZIP code entered are checked against the actual billing address and ZIP code for the card holder. The AVS response is actually provided by the issuing bank.

Bank Card:

A payment card issued to a consumer by a financial institution or bank; a credit or debit card.

Bank Card Association:

A group of financial institutions or banks that have formed an association for issuing bank cards. Usually a bank card association will work together along with other payments entities to provide certain bank card offers.

Basis Point:

Basis points are the percentage that you are charged on a credit card transaction. One basis point is equal to 1/100th of 1 percent. Thus a rate of 2.33% is equivalent to 233 basis points. Often times in merchant processing you will hear the term basis points in regards to rates. You may hear this in terms of surcharge rates, also called mid qualified and non qualified. For example, the mid qualified surcharge rate may be 75 basis points. This is the same as saying 0.75%.

Back-end Processor:

A data processing company that contracts with Acquirers to provide communication and processing systems that connect with the interchange systems for clearing and settlement services on behalf of those Acquirers. (In some cases the Acquirer may act as its own back-end processor.)

Batch or Batch Processing:

A batch is a collection of transactions, usually a single day’s worth. Batch processing refers to closing or settling the entire batch of transactions at one time.

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).

Business Type:

The business type is another question that is typically asked on a new merchant application. Your business type should fit into one of the following categories: Retail, Restaurant, Hotel, Mail Order / Telephone Order, Internet. A description of each follows:

  • Retail – This business type refers to merchants in a face-to-face environment that sell tangible goods, where card is present, and where the card is swiped through a point-of-sale terminal or similar card reader device. Retail merchants may also take a manual imprint of the transaction since they are face to face with the customer.
  • Restaurant – A business that serves food, is in a face-to-face environment, and use point-of-sale terminals to swipe credit cards. The key difference with straight retail, however, is that the product is consumable (less risk for chargebacks) and tips are usually entered as part of the transaction.
  • Hotel – This refers to merchants in a face-to-face environment that sell lodging and hospitality services. These merchants also usually use conventional point-of-sale terminals swipe the transactions.
  • Mail Order/Telephone Order (MOTO) – This refers to any business that is not face-to-face with the customer, and the transactions are keyed into the terminal and are not swiped. The term mail order/telephone order comes from the fact that the credit card number is received either over the phone or through the mail, but it encompasses all transactions that are keyed no matter how they are received.
  • Internet – A business type is Internet if credit card information is collected over the Internet via a web page. The transaction may or may not be processed in real time, but if the customer is entering their credit card information on a website, the business is considered an Internet business. Note that a business may have a web page but might not be an Internet business type. Only businesses that actually that gather the credit card order over the Internet are considered this business type.

Capture:

The process of acquiring account information from a payment card required for processing. This occurs at the point of sale either by swiping the card through a card reader or by manually entering the information.

Card Association:

Any entity whose members issue credit or debit cards or acquire card payment transactions on behalf of their customers.

Card Not Present Transactions:

Transactions that are processed without the card or the cardholder being present, e.g., phone or Internet orders.

Card Present Transactions:

Transactions in which the cardholder and the card are present.

Cardholder:

A person or entity that is issued a credit or debit account that is accessed through the use of a card.

Card Reader:

A hardware device that facilitates the reading and transmission of payment information stored in the magnetic stripe on a credit, debit or stored-value card. Also known as a “Magnetic Stripe Reader”.

Check 21:

Refers to the Check Truncation Act of the 21st Century, a Federal Reserve Bank law that allows merchants to submit customers’ check, or bank account, information for payment electronically instead of processing paper checks.

Check Verification:

A risk management process that verifies the trustworthiness of an electronic check transaction against an extensive high risk or bad check database.

CISP:

See the entry for “Visa Cardholder Information Security Program (CISP)”

Chargeback:

When a credit card transaction is disputed (either at the request of the Cardholder or by a card Issuer), the dispute is handled through a chargeback. A chargeback will cause the amount of the original sale and a chargeback fee to be deducted from the checking or savings account you provided.

Clearing:

The transfer of data between Issuers and Acquirers.

Compliance:

Merchants that accept credit card transactions must meet or exceed regulations set by the local government, federal government, the card associations, and the Payment Card Industry Security Standards Council (PCI SSC). Also see Payment Card Industry Security Standards Council (PCI SSC).

Control Number:

Number that uniquely identifies a retrieval request or chargeback.

Credit/Pending Settlement:

Transactions of this status have been entered as credits, but have not yet been submitted for settlement. These transactions will remain in this unsettled state until they are submitted for settlement. Once a credit has been settled, its status changes to Credited.

Credit Slip:

A paper or electronic representation of credit that is issued to a Cardholder on a prior credit card sale.

CVV2/CVC2:

CVV2/CVC2 is the three-digit value printed on the signature panel on the bank of cards immediately following the card account number. The 3-digit value helps validate that the cardholder has a card in his/her possession, and the card account is legitimate. A paper or electronic representation of credit that is issued to a Cardholder on a prior credit card sale.

Discount Rate:

A discount rate is a fee associated with collecting, assessing, approving, processing, and settling credit card transactions. This fees is often a percentage of the transaction value.

Digital Certificate:

An electronic file containing unique information that is used to verify the trustworthiness of an organization or individual. Digital Certificates are issued by a Certificate Authority, and are used with the Secure Sockets Layer (SSL) protocol. Also see “Digital Fingerprint”, and “Secure Sockets Layer (SSL)”.

Digital Fingerprint or Transaction Fingerprint:

A value, also called a “hash”, generated by combining several input values and applying a highly complex mathematical function. Digital fingerprints are used to authenticate that electronic communications were sent and received via the Internet without being intercepted or modified during transmission. Authentication is performed by using the same input values and mathematical function to recreate the digital fingerprint. If the recreated fingerprint matches the fingerprint submitted with the communication, its authenticity is verified. Because of the complex nature of the mathematical function, the individual input values used to create the digital fingerprint cannot be determined through analysis of the fingerprint.

Discount Fee:

The percent of each credit card or eCheck.Net® transaction and batch settlement processed that is billed to the merchant by the payment gateway. The transaction types for which the discount fee is charged are: charges, refunds, voids and declines.

EBT:

Electronic Benefits Transfer, an electronic system in the U.S. used by state governments to provide financial and material benefits (including unemployment and food benefits) via a plastic debit card.

Electronic Funds Transfer (EFT):

An automated transfer of funds using an electronic medium.

Electronic Wallet:

Also known as an e-wallet, it allows the user to charge payment for goods and services to their card without using the card. Software on the user’s mobile device securely stores credit card account and payment information and works in conjunction with complimentary software on the merchant’s end.

EMV:

EMV is a smart chip technology that offers an additional step for authentication beyond the traditional magnetic stripe card payment for card-present transactions (commonly called Chip and PIN or smart cards). In addition to the security chip, which is placed inside of a reader during a transaction, EMV also verifies the cardholder’s identity with the use of a PIN or signature. The original EMV standard was created by card-granting organizations Europay, MasterCard, and Visa in 1999, and has been in standard use for credit cards in Europe and Canada. EMV technology is now becoming a global standard, with EMV compliance required of merchants and processors in the United States by October 2015. However, EMV cards still pose a security risk and will not protect merchants or their customers with the level of security offered by the use of point-to-point encryption (P2PE), nor will EMV protect purchases made through websites. Also see 4tify, NFC, point-to-point encryption (P2PE), and tokenization.

Encryption:

The process of translating data into secret code (encoding) to ensure secure transmission. An effective way to help ensure data security, it is also referred to as end-to-end encryption (E2EE).

Expiration Date:

The date on which the validity of a credit card expires. Transactions will only be approved for credit cards that are not yet expired.

Fees:

Fees for screening and processing online payments may include, but are not limited to, costs for the following:
  • Monthly Account
  • Discount rate
  • Per item charges for credit card and electronic check transactions.

Fraud:

Any illicit method used to access or use another person’s cardholder data.

Grace Period:

The time during which a cardholder is allowed to pay his credit card bill without any interest or late fees assessed.

Hard Credit Pull:

A hard credit pull usually occurs when a consumer has applied for or is seeking some form of credit or loan (e.g., a credit card application).

Hardware-Based Point-to-Point Encryption (P2PE):

A hardware/hardware solution for P2PE, requiring encryption hardware within the point of sale at the merchant location and a hardware-based key management and decryption tool, known as a hardware security module (HSM). This solution for encryption is more cost-prohibitive than hardware/software (or “hybrid”) P2PE standards that require hardware encryption, but allow software decryption, as long as keys are still managed by an HSM.

Hold:

A hold is placed on a portion of the customer’s credit limit or debit balance if the final transaction balance is unavailable or unknown, such as during a hotel stay. For example, at a hotel, after calculating how many drinks the customer took from the mini bar or room service charges, the merchant can finalize the transaction for the total amount.

Imprint:

When a credit card cannot swiped through a terminal, it is necessary to obtain an emboss of the card by using a manual imprinter.

Independent Sales Organization (ISO):

An organization that sells business products or services to merchants and/or acquires merchants on behalf of various types of merchant service providers.

Interchange Network:

An electronic network maintained by Discover®, MasterCard®, American Express, or VISA® that exchanges data relating to the value of card sales and credits among Issuers and Acquirers.

Interchange Fees:

Fees generally collected from Acquirers on the value of their card sales and paid to Issuers.

Issuer:

Any Discover®, MasterCard® American Express or VISA® member, or a commercial organization that establishes and maintains customer credit lines that are accessed through the use of a card. (Public and private companies and financial institutions that offer card-accessed lines of credit to consumers and businesses.)

Joint Credit:

An instance in which two or more people share credit. For example, the credit of two individuals may be required to make a big purchase, such as a house.

Key:

The generic term for a password or table needed to decipher encoded data. It’s usually used in the data storage and encryption process that takes place during credit card authorization.

Knuckle-Buster:

A machine that makes an impression of a credit card on a carbon receipt. Not often used today, many merchants still have them as a backup. Those who have been in the payments industry for a long time may refer to these devices as “zip-zap machines.”

Level 2 Data:

Additional information that may be submitted with the minimum required information for a payment transaction. Examples include shipping and tax information.

Level 3 Data:

Extensive information that may be submitted with the minimum required information and level 2 data for a payment transaction. Examples include product codes and other merchant-specific order information.

Magnetic Stripe Reading:

When the credit card is swiped through the terminal to record the card information. Obtaining a magnetic strip reading proves the card’s presence at the time of a transaction.

MasterCard®:

A registered mark for MasterCard International, Inc.

MATCH:

A shared database maintained by the Card Associations that lists all Sellers terminated for cause by Acquirers.

MCC or MCC Codes:

Special numbers assigned by the Card Associations to Seller types for identification and tracking purposes. MasterCard® uses MCC (Seller Category Code), while VISA® uses SIC (Standard Industry Codes).

MOTO:

Abbreviation for mail order/telephone order.

NFC:

Formally known as near field communication, NFC is a set of close-range wireless technologies that enable a connection for processing mobile payments.

Over-Limit Fee:

A fee charged by the processor when a merchant exceeds their pre-determined processing volume.

Payment Cards:

A collective term for credit, debit, prepaid and EBT cards.

Payment Gateway:

An Internet-based service that transports credit card information from a computer terminal or Web site to a credit card processor, where it can be verified.

PCI DSS:

Stands for Payment Card Industry Data Security Standards, a set of requirements established by the credit card networks to protect cardholder information and reduce data theft. The standards apply to merchants, merchant account providers, issuing banks and the networks. Meeting these requirements is known as being PCI compliant.

PCI Non-Validation Fee:

A fee charged to merchants who do not return a PCI Compliance Validation Certificate, which can be obtained by completing and passing on an annual basis a Self-Assessment Questionnaire (SAQ) and/or Quarterly Network Scan (for merchants that electronically store cardholder information or whose application systems are connected to the Internet) according to the applicable business level as defined by PCI Security Standards Council.

PIN:

The Personal Identification Number is the digital code that PIN-based debit cardholders enter at the terminal when making a purchase.

PIN Pad:

Hardware a PIN debit cardholder uses to enter their PIN at the POS. Also called a keypad.

POS:

Abbreviation for point of sale, this is the place where a customer makes payment. While POS once referred specifically to credit card terminals at the cash register, technology has expanded its application to include mobile, wireless and virtual terminals.

POS Terminal:

The electronic equipment used to capture, transmit and receive the information necessary for electronic payment card transactions.

Processor:

An entity in the credit card processing network that handles the posting of transactions for authorization, clearing and settlement to consumer credit card accounts at the card associations, and the settlement of funds to merchant bank accounts. Processors may also provide merchants with billing and reporting services.

Quasi-Cash Purchase:

A transaction representing sale of items that are directly convertible to cash such as money orders and travelers cheques.

Qualifying Ratio:

Lenders use ratios to gauge a credit applicant’s ability to meet the requested debt responsibilities.

Recurring Billing:

A transaction charged to a cardholder by a merchant or service provider on a designated periodic basis (weekly, monthly, annually) in payment for products or services. Two examples of recurring billing are club memberships and subscriptions.

Real-Time Processing:

The ability to approve or decline a payment card transaction in seconds while the customer waits.

Retrieval:

The first step in the chargeback process. In a disputed transaction, the issuing bank requests a copy of the physical sales ticket of the transaction in question from the merchant.

Re-presentment:

The re-submission by an Acquirer of a previously charged back sale in an attempt to re-charge the Cardholder. Chargebacks requires some form of additional documentation confirming the validity of the charge and disputing the chargeback reason.

Reloadable Card:

A prepaid card on which a customer is able to load additional credits multiple times.

Retrieval Request:

A retrieval request occurs when your customer requests more information about a transaction that appears on his or her credit card statement.

Return Policy:

The merchant’s limitations and/or requirements on accepting returned merchandise.

Sales Draft:

The paper or electronic evidence of a purchase.

Secure Payment Page:

A secure payment page assures customers that their payment information is encrypted for privacy and data integrity before it’s sent over the Internet. This page is typically identified by the “s” in https:// (instead of http://). Payment gateway providers make this necessary e-commerce link possible by hosting the payment gateway software and individual secure payment pages on their own servers.

Securecode:

A fraud prevention tool, MasterCard Issuers confirm consumers’ identities in real time during transactions at participating merchant sites. When the consumer clicks “buy” at checkout, software installed on the merchant server recognizes registered MasterCards and an authentication screen appears in the consumer’s browser. The consumer enters his/her password and the password is verified.

Seller or Online Seller:

An individual or business that sells products or services and is capable of accepting payment for products and services via a Seller account.

Seller Account or Online Seller Account:

The bank account a Seller identifies as the sole account from which monthly and/or transaction fees are debited.

Seller Bank:

(Acquirer or Processor) The financial institution with which a Seller contracts to accept credit cards for payment of goods and services.

Seller Fees or Fees:

Sellers are charged several types of fees for screening and processing online payments. Fees for products and services include, but are not limited to costs for the following:

  • Monthly Online Seller Account
  • Discount rate
  • Per item charges for credit card and electronic check transactions
  • Chargebacks

Settlement:

The process of transferring funds for sales and credits between Acquirers and Issuers, including the final debiting of a Cardholder’s account and crediting a Seller’s account.

SIC or Standard Industry Codes:

Special numbers assigned by the Card Associations to Seller types for identification and tracking purposes. MasterCard® uses MCC (Seller Category Code), while VISA® uses SIC (Standard Industry Codes).

SSL:

Secure Socket Layer, a system for encrypting payment card data sent over the Internet.

Terminated Merchant File:

Also called MATCH, this database is maintained by all third-party processors, banks and other financial institutions. It lists the names of merchants whose privileges to process credit cards and other electronic transactions have been terminated by an acquirer for violation of a merchant processing agreement.

Token:

A unique ID to reference the actual data associated with a card number or specific transaction.

Tokenization:

A payments industry term, first coined by Shift4, describing the concept of using a non-decryptable piece of data to represent, by reference, sensitive or secret data.

Transaction:

An act between a Seller and a Cardholder that results in either a paper or an electronic representation of the Cardholder’s promise to pay for goods or services received from the act.

Unauthorized Transaction:

Any sale for which a Cardholder does not provide his/her specific authorization (This should not be confused with the failure to receive an authorization response from the Issuer.)

Underwriting:

The process of evaluating a service applicant’s financial history and credit trustworthiness to determine whether to grant a service account. In some cases, underwriting may also determine an applicant’s financial obligations, such as services pricing.

User Authentication:

The process during which the identity of an authorized credit card user is validated.

Value-Add Reseller (VAR):

An independent or other sales organization that provides merchants with various services and/or solutions for enhancing their business practices or transaction management.

VISA:

A registered mark for Visa U.S.A., Inc and Visa International, Inc.

Virtual Shopping Cart:

A program that is integrated into a website and makes it possible for shoppers to keep a running tally of products and services they plan to purchase. At checkout, the shopping cart connects to a secure payment page where they can complete their purchase with a payment card.

Voice Authorization:

A low-tech processing solution typically used by low-volume merchants that requires them to phone an authorization center to process a transaction and receive authorization.