ABA (American Bankers Association): The national trade association of American banks.
ABA Routing Number: Unique 9-digit number assigned to each bank that is used to identify the bank. The ABA routing number is usually found at the bottom of a personal or bank check.
ACH (Automated Clearing House): The inter-bank system used to electronically process payments by check. Most U.S. banks participate; they will honor checks drawn on other banks and deposit payments electronically.
Acquirer/Acquiring Bank/Merchant Bank: A financial institution that provides accounts for merchants. Your merchant account at the acquiring bank receives funds when a transaction is complete. Acquirers are so named because they acquire a merchant’s sales tickets and credit the order value to the merchant’s account.
Altered Card: A payment card that has had the account number or encoded information changed for fraudulent purposes.
Approval: A positive reply from a transaction authorization request.
Arbitration: Process used by acquirers to resolve a chargeback related dispute with an issuer.
Association: MasterCard International, Visa USA or Visa International who are the licensing and regulatory agencies for bankcards.
Authorization: The approval or guarantee of funds given by the card issuer to the acquirer.
Auto-close: A process associated with host-based terminals in which the system automatically initiates and operates an end-of-day process for capturing and submitting items for clearing and settlement. This process forces the daily submission of items.
Auto-Representment: Automatically sending information to resolve a chargeback on a merchant’s behalf without the merchant’s intervention.
Average Ticket: Average dollar amount of sales for card transactions.
AVS (Address Verification Service): A service provided by Visa and MasterCard that checks to match the street number and zip code of the cardholder’s address. It provides a level of fraud protection that helps to prevent fraud and chargebacks.
Back-end Network: Settlement provider responsible for finalizing transactions, routing payments and generating reports for a merchant.
Balance Sheet: Financial statement that includes assets, liabilities and net worth for a particular time period.
Bank card: Card issued by a bank with a MasterCard or Visa logo that complies with Association requirements.
Bank Identification Number (BIN): The six-digit number assigned by Visa and MasterCard to identify a member (Issuer or Acquirer) or processor for authorization, clearing or settlement processing. The Issuer assigns the six digits as the first six digits of the card number. The Acquirer assigns the six digits as the first six digits of the merchant number. A Visa number always begins with “4”, MasterCard numbers with a “5”.
Batch: A collection of transactions that are processed as a group. You can batch orders for authorization or for capture. Your processing requests may in turn be batched for settlement by banks.
B2B (Business to Business): The exchange of goods or services between one business and another business.
B2C (Business to Consumer): The exchange of goods and services between a business and a consumer.
Business Card: Payment card typically used by a small business. May also be referred to as a commercial card or a purchasing card.
Business Day: A calendar day other than Saturday, Sunday or a federal holiday.
Card Issuer: Financial institution that issues the payment card to the cardholder. The card issuer remains unchanged throughout a transaction.
Card Number Generator: A fraudulent mathematical program that is used to generate valid credit card numbers. Generally used to purchase goods through Internet sites of MO/TO merchants. These can be recognized by large batches of cards with similar account numbers and negative AVS responses.
Card Present: Card is present at the POS and swiped through an electronic device that reads the magnetic stripe on the card.
Card Not Present: Type of transaction where the card is not presented at the POS and no magnetic stripe is read. These are usually considered higher risk transactions.
Card Reader: Input device on a card terminal that reads the information stored on the magnetic stripe. May also be referred to as a magnetic stripe reader.
Cardholder: Customer associated with the primary account number (or an additional authorized user) that requests a transaction from a merchant.
Cardholder-Initiated Chargeback: Cardholder contacts the Issuer with-in 90 days of a transaction and refuses to accept the charge.
Cardholder Information Security Program (CISP): Visa’s security program designed to enforce protection of cardholder information.
Cash Advance: The only approved method of receiving cash from a credit card. Can be done in person at a bank or at an ATM.
CDPD (Cellular Digital Packet Data): The transfer of data via unused bandwidth normally used by mobile phones between 800 and 900 MHZ. Speeds of up to 19.2 kbits/sec are possible.
Chargeback: A payment dispute initiated by the cardholder with their credit card issuing bank. The amount of the disputed transaction is partially or completely reversed and immediately withdrawn from the merchant’s bank account. The merchant can dispute the chargeback with proof of purchase, signature, proof of delivery, etc.
Chargeback Fee: Amount charged to a merchant, by an acquirer, for processing a chargeback.
Chargeback Reason Code: A numerical code that identifies the specific reason for the chargeback. MasterCard and Visa each have unique codes.
Check Card: Bankcard that works with a PIN at an ATM and without a PIN at POS. Also known as an offline debit card. Funds are debited from the cardholder’s bank account.
Check Digit Verification (mod-10 check): The last number in a card number that is generated by an algorithm that validates the credit card number.
Check Guarantee: A service that guarantees payment on each check presented provided that the merchant follows correct procedures in accepting the check. The guarantee service collects any returned item and the merchant typically follows a strict set of procedures. See also, Check Verification.
Check Imaging: The conversion of the paper check to a digitized image eliminating the need for paper hand-offs.
Check Reader: A hardware device that can be integrated in a POS terminal or used as a stand-alone device. The device reads the MICR line on a check for authentication, negative file comparison or truncation.
Check Verification: An online authorization service that allows merchants to query a database to determine if customers have a history of returned checks. Merchants may also add checks that have been returned for non-sufficient funds (NSF). For large national retailers, the service provider may load a checklist into the merchant’s system. Check verification service can be combined with a check guarantee service. See also Check Guarantee.
CIP (Customer Identification Program): Main requirement of Section 326 of the USA Patriot Act that requires financial institutions to develop programs that establish the identity of customers opening new accounts. The financial institution must collect identifying information, verify that information, maintain records for at least 5 years after an account is closed and determine whether the customer appears on any suspected terrorist lists. This must be done for all customers.
Close Batch: The end-of-day or end-of-shift process in which the merchant balances and submits transactions for clearing and settlement. This process occurs on a terminal-based capture system. This process is automatic on host-based capture systems at a predetermined time of day. The automatic process is an optional setting.
Code 10 Authorization: An alert code generated by a merchant during a voice authorization process when a suspected stolen or fraudulent card is being used or if the consumer is acting suspiciously.
Commercial Card: A credit or debit card issued to businesses and corporations for travel and entertainment, business expenses and procurement. Commonly called corporate cards, purchasing cards and business cards. May also be referred to as a business card or a puchasing card.
Counterfeit Card: Plastic card that was fraudulently created or altered to appear genuine but was not issues by a MasterCard or Visa Issuer.
Credit or Return: The return of a purchased item that results in the adding of the amount back to the cardholder’s line of credit. In a debit card environment, the credit or return transaction is a deposit to the debit cardholder’s bank account. The merchant is debited the amount of the return or credit.
Credit Card: Payment card tied to a credit line for the purchase of goods and services. The Issuer bills the cardholder.
CVC2 (Card Validation Code): MasterCard term for 3-digit code on signature panel used to verify that the card is in the cardholder’s possession.
CVV2 (Card Verification Value): Visa term for 3-digit code in signature panel to verify that the card is in the cardholder’s possession.
DBA (Doing Business As): The street name a business operates under.
DDA (Demand Deposit Account): A checking account.
Debit Card: A form of payment card that draws funds from a bank account. There are two kinds of debit cards – offline (which uses a signature) and online (which requires a personal identification number (PIN) to complete the transaction. Online debit cards are sometimes called check cards or ATM cards.
Debit Transaction: An approval by the cardholder of the debit to his account. At the same time it provides a claim of funds made by the acquirer (and/or the merchant) against the card holder’s bank account.
Decline: Negative issuer response to an authorization request on card payment. Merchant must request a different form of payment.
Dial-up Terminal: POS terminal that uses a telephone line for communications.
Discount Rate: Fees charged by an Acquirer to the merchant for processing payment card transactions.
Downgrade: An interchange downgrade occurs when a transaction does not meet all of the criteria set forth by the associations to qualify for the best possible interchange rate. Visa and MasterCard examine each transaction as submitted and qualify or downgrade it based on the set of established criteria.
Duality: Financial institutions that are members of both MasterCard and Visa Associations.
EBT (Electronic Benefit Transfer): The delivery of annuity and public assistance benefits via plastic card technology.
E-Commerce/Electronic Commerce: A way of doing real-time business transactions via the Internet using any combination of technologies designed to exchange data (such as EDI or e-mail), access data (such as shared databases or electronic bulletin boards) and capture date (through bar coding and magnetic or optical character readers).
ECR (Electronic Cash Register): A cash register that also processes payment card transactions.
EDC (Electronic Draft Capture): POS device that authorizes and settles credit card transactions.
EFT (Electronic Funds Transfer): A method of transferring money from one bank account to another using a variety of electronic methods such as bank wire transfer, federal wire transfer and international wire transfer.
EIN (Employer Identification Number): An identification number that the Internal Revenue Service assigns to employers that serves as the tax identification number.
EIRF (Electronic Interchange Reimbursement Fee): A Visa classification level that is charged to the merchant when a credit card is not present, swipe not read and the card number is manually key-entered.
Electronic Check Imaging: The process by which the merchant or financial institution can scan, capture and store a duplicate image of a check. The check then can be cleared using the ACH format and process.
Encryption: Way of scrambling data to protect personal information.
Expiration Date: Embossed date on a payment card. Card is invalid after that date and must be replaced.
Factoring: This term refers to the practice of allowing more than one merchant to process transactions through a single merchant account. Factoring is not permitted under Visa, MasterCard and American Express regulations.
FDIC (Federal Deposit Insurance Corporation): The federal program that protects consumers by providing insurance for bank deposits in the event that a bank becomes insolvent. All funds from PPI merchant accounts, including credit, debit (ATM) and EFT transactions are FDIC insured throughout the entire transaction process from authorization and settlement through ACH deposit into the merchant’s bank account.
Financial Institution: Any organization that supplies financial services such as commercial banks, thrifts, savings banks and credit unions.
Financial Transaction: A transaction from the Acquirer to the Issuer containing all the necessary data elements for authorization, posting and reconciliation.
Fleet Card: Payment cards used to manage fueling, maintenance and repairs of commercial motor vehicles.
Folio: Number assigned by a lodging merchant to track customer’s charges.
Fraud Investigation: Process of identifying suspicious cardholder or merchant activity.
Front-end Network: A provider that authorizes and captures transactions and sends information to a back-end network.
FTP (File Transfer Protocol): Used to transfer files over TCP/IP network (Internet).
Gateway: Electronic connection between a Merchant and Acquirer that transmits payment data.
Gift Card: Stored value card used as an alternative to gift certificates.
Hard Decline: Declined authorization that cannot be represented (i.e. lost/stolen cards).
HCS (Host Capture System): Transaction is transmitted with an authorization request to a host computer at the front-end. Information is captured and sent back to POS device. Merchant does not need to perform settlement. Auto-settlement process is optional.
Hologram: Laser created 3-dimensional image that is used as an anti-counterfeiting measure on payment cards.
Imprinter: Used to imprint embossed information onto a sales draft when the card is present and the POS device cannot read the card.
Interchange: Exchange of transaction data between Acquirer and Issuer.
Interchange Fees: Set by MasterCard and Visa and paid by Acquirer to Issuer on transactions.
Internet Service Provider (ISP): A firm that provides access to the Internet and owns the actual computers (servers) where web sites and e-mail addresses reside. Virtual ISPs lease space from a true ISP and resell that space providing much of the same services as true ISPs.
ISDN (Integrated Services Digital Network): Digital phone service link that can support multiple communication devices simultaneously.
ISO (Independent Sales Organization): An organization or individual that is not a direct member of Visa and/or MasterCard but is registered and sponsored by a member to perform sales, solicitation, service, merchant transaction processing solicitation cardholder solicitation or card application processing services. MasterCard classifies ISOs as Member Service Providers (MSP). Also called MLS (Merchant Level Salesperson), MSP (Merchant Service Provider), MSP (Merchant Sales Person), and MSP (Merchant Sales Provider).
Issuer/Issuing Bank: Member of MasterCard and/or Visa that issues payment cards.
Leased Line: Dedicated telecommunications connection.
Line of Credit: Amount of credit extended to a borrower or cardholder.
Lockbox: Service that processes check payments on behalf of merchants and banks.
Mag Stripe (Magnetic Stripe): Panel on back of payment card that contains magnetically encoded cardholder account information.
Magnetic Stripe Reader: POS device that reads the information on the magnetic stripe. May also be referred to as a card reader.
MCC (Merchant Category Code): Universal 4-digit classification code that identifies a merchant by processing, authorization and settlement characteristics.
Member: Financial institution that joins either the MasterCard or Visa Association and agrees to follow Association regulations. A member may issue cards (Issuer) or acquire merchant transactions (Acquirer).
Merchant: Seller of products or services.
Merchant Agreement: Contract between a Merchant and Acquirer that outlines payment processing rights and responsibilities.
Merchant Bank: See Acquirer.
Merchant Discount: Fees charged by an Acquirer to the merchant for processing payment card transactions.
MID (Merchant Identification Number): Unique number assigned by an Acquirer to identify a specific merchant.
MO/TO: Mail order, telephone order. A classification of merchant account with a specific set of rules that is more restrictive than for retail merchants but enables a merchant to accept a credit card payment without a cardholder’s signature. The merchant and the cardholder do not need to be in the same physical location. MOTO accounts are also known as Card Not Present or CNP accounts.
Merchant Service Provider (MSP): A firm that is directly certified by an acquiring bank to provide payment card accounts for merchants.
Non-Qualified transaction (non-qual): The default level of interchange for those transactions not meeting the criteria for the best rate per segment. Typically, the transaction was manually entered or not settled within the allowable time frame, usually three days. Non-qualified transactions default to the higher rate interchange.
No Show: A charge to a cardholder by a lodging merchant when the cardholder fails to check-in or cancel a guaranteed reservation.
Notification: A message where the sender notifies the receiver of an activity taken, requiring no approval or response.
Offline: A term relating to one of the following conditions: The merchant is not able to connect to its processor; the processor is not able to connect to the card association; the association cannot connect to the card issuer in a debit card transaction; or the account balance was not available for authorization.
Offline Debit: Visa or MasterCard check card that is authorized via the credit card system, requires a signature and the amount debited from the cardholder’s DDA.
Online: A method of requesting an authorization through a communications network other than voice, to one of the following; an issuer, an authorizing processor or a stand-in processor. The ability in the case of debit cards to access the cardholder’s available balance, validate the PIN and post the transaction for settlement.
Payment Cards: A broad term that encompasses all types of plastic cards used to make payments including credit, debit, stored value and prepaid.
Personal Identification Number (PIN): A cardholder’s secret identification number that completes an online debit transaction.
Phishing: Method of using fraudulent emails and sites that mimic legitimate business web sites to commit identity theft. Cardholders are requested to enter personal data that is then used by criminals for fraudulent activities.
Point of Interaction: Applies to wherever a transaction takes place (in-person, Internet, phone, mail order) and there is an transaction between the cardholder and merchant.
Point of Sale (POS): Usually associated with retail points-of-sale, but also applies to any initial point where the customer presents payment to the merchant, such as by telephone or Internet.
Point of Service: Merchant location where the cardholder agrees the transaction takes place.
Posting: Process of recording debits and credits to an account.
Private Label Card: Card issued by a merchant that can only be used at that business.
Processing Fees: Fees associated with processing of payment card transactions.
Processor: Company that processes interchange transactions. A processor can be an Acquirer or an organization that works in conjunction with an Acquirer.
Purchasing Card: Payment card used by businesses to track expenses and replace paper invoices. May also be referred to as a business card or a commercial card.
Qualified: A transaction that meets all of the qualifications for an interchange category.
Real-Time Authorization: Merchant requests and receives an authorization/decline for a credit card purchase as the customer makes their purchase. Typically take 2-3 seconds.
Reason Code: 2-digit number identifying why a chargeback was initiated.
Reconciliation: An exchange of messages between two institutions (Acquirer, Issuer or their agents) to reach agreement on their financial totals.
Recurring Payment: A pre-authorized recurring transaction charged to a cardholder’s account (i.e. phone bill, memberships).
Replacement Authorization: An authorization used when a previous authorization was approved and a subsequent authorization is required because the amount of the transaction is now different from the originally approved amount.
Representment: A financial transaction originated by an Acquirer to partially or wholly recover funds charged back to the Acquirer by an Issuer in the original presentment of a chargeback.
Request: A message where the sender informs the receiver that a transaction is in progress and a response is required to complete the activity.
Retrieval Request: Request by an Issuer for a copy of the original sales ticket from the Acquirer.
Reversal: A transaction from the Acquirer to the Issuer informing the card issuer that the previously initiated transaction cannot be processed as instructed (i.e. is undeliverable, unprocessed or cancelled by the receiver).
SDK (Software Development Kit): A kit that helps a developer integrate software into another program.
SIC (Standard Industrial Code): Universal 4-digit code that designates a merchant by processing, authorization and settlement characteristics.
Site Data Protection (SDP): MasterCard’s Site Data Protection Program provides additional data protection for card programs. Like Visa’s Cardholder Information Security Program (CISP), it targets Internet users.
Secure Socket Layer (SSL): An Internet standard for encrypting data. SSL allows a secure connection between your shopper’s browser and your Web store’s server. SSL encrypts incoming and outgoing data transfers so that hackers can’t steal sensitive data (like credit card information) from you or your customer.
Settlement: A transfer of funds to complete one or more prior transactions made, subject to final accounting.
Skimming Device: A mag stripe reader used to record the information from the magnetic stripe of a credit card usually without the cardholder’s knowledge. The information can be replicated onto counterfeit cards and used to commit fraudulent purchases.
Smart Card: A payment card with a built in chip to store information.
Stored Value Card: Card that represents a specific value. Often known as gift or pre-paid cards.
T1 Telephone Line: A permanent high-speed data connection between two points that is faster than a “dial-up” phone line.
T3 Telephone Line: A permanent high-speed data connection that is thirty times faster than a T1.
T&E Merchant: Airline, car rental or lodging merchant.
T&E Cards: Payment cards developed to track expenses related to travel.
Ticket Size: The monetary value of a purchase placed on a payment card.
TID (Terminal Identification Number): Number that identifies a merchant to the front-end network. A unique number is assigned to each POS terminal.
Track One Data: Data stored on the first track of the mag stripe includes cardholder name, account number and expiration date.
Track Two Data: Information stored on the second track of the mag stripe includes account number and expiration date.
Transaction: Transfer of goods or services between a customer and merchant that results in payment.
Transaction Date: Actual date transaction was made.
Transaction Fee: Amount merchant pays per transaction for processing.
USA Patriot Act of 2001: Federal law enacted to deter and punish terrorist acts in the United States and around the world and to enhance law enforcement investigatory tools. For the payment processing industry, compliance includes the development of a Customer Identification Program (CIP) that aids in the collection of information about customers opening an account; verifies that customers are who they say they are; maintains records of the information used to verify their identity; and determines whether the customer appears on any list of suspected terrorist organizations.
Valid Date: First date a payment card may be used. Sometimes embossed on the payment card.
VAR (Value Added Reseller): Third party that certifies that their software can be used on a processor’s system.
Voice Authorization: The process of obtaining an authorization by phone, which is typically a back-up procedure when the authorization cannot be completed online. An authorization code identifies the transaction as voice-authorized.
Zero Floor Limit: For some higher risk businesses, all transactions must be authorized.