Glossary

Payment Processing Glossary

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

Acquirer/Acquiring Bank: Financial institution that processes payments for a merchant. Transactions are generally credit or debit card transactions. Acquirers provide the link between the merchant and banking networks. Acquirers provide underwriting services and may offer hardware and software to be used by the merchant.

Address Verification System: also known as AVS. Security protocol requiring merchants to provide the cardholder's address for transaction approval. Information is sent to the cardholder's bank for verification during card-not-present (CNP) transactions.

American Express®: also known as AMEX; is an international financial services company with over 110 million cardholders. Provides payment card, financial and travel services for customers.

Arbitration: process where a nuetral party decides whether the merchant, bank or the customer is responsible for the chargeback.

Authentication: process of card-holder identification. This can be performed through AVS or using a Personal Identifcation Number (PIN).

Authorization: The first request from the merchant location to the card issuer's bank. The authorization confirms the card holder's account and available funds for the transaction.

Automated Clearing House: also known as ACH. It's main function is processing credit and debit transactions for consumers, businesses and the government including payroll and bill payments. Regulated by NACHA, the network operators include the FED and the Electronic Payments Network.

Automated Teller Machines: also known as an ATM. An electronic financial device that allows consumers to remove funds from their bank accounts. Many ATM machines today can perform multiple tasks including depositing cash and checks along with account transfers.

B

B2B: also known as Business-to-Business. A transaction between two or more businesses; including manufacturing and services industries. This can include wholesale transactions or commecial services.

B2C: also known as Business-to-Consumer. A transaction between a business and consumers. This generally involves retail sales and services.

Back-end Processor: Organization that works with the front-end processor to receive settlements and send money from the card issuing banks to the merchant acquiring banks.

Bank Identification Number: also known as BIN. The BIN prefix will identify the type of payment card (Visa®, MasterCard®, American Express®, etc) along with the card issuing bank. For a complete list of bank bins visit: Bank Identification Numbers

Bank Card: also known as Payment Card. These include any type of bank-issued card including credit and debit cards. Used to access funds through either a point of sale terminal or ATM machine.

Basis Point: One hundredth of a point (0.01%). Financial term for explain percentage changes in rates, fees or values.

Batch: Array of captured transactions by a merchant pending settlement.

Batch Processing: Process of sending out a finalized payment request for all pending captured authorizations.

Blockchain: List of records used to account for cryptocurrency. Records of transactions are digitally stored in blocks across multiple computers, allowing users to access files to verify and track transactions.

Breach: Unauthorized entry through financial security measures that can result in the theft of cardholder information.

C

Capture: After the payment request is authorized, the transaction will become finalized. Funds are moved from the customer account into the merchant account.

Card Association: Network that maintains and manages all payment card transactions and functions including authorizations and settlements. Such organizations include American Express®, Discover®, MasterCard® and Visa®.

Card Issuer: Bank or financial institution that provides payment cards to consumers. Issuers maintain consumer account approving or declining of transactions, funding of merchants and collection of consumer fees.

Cardholder: Individual or authorized user issued the payment card by the card issuer.

Card-Not-Present: Transactions occurring without the payment card physically provided to the merchant. This includes eCommerce and MOTO transactions.

Card Verification Value Code: also known as CVV, CVC, CVV2 and CV2. For using during card-not-present transactions as an added security measure. The requirement of the CVV demonstrates the purchaser has possession of the card during the time of sale. Visa® and MasterCard® use the last 3 digits on the back of the credit cards while AMEX prints 4 digits on the front of their cards.

Chargeback: A request by the card issuer for a merchant to return funds. Chargebacks typically begin by a customer's disputing a charge or discovery of fraudulent transactions on a cardholder's account.

Check 21: Process where a digital copy of a consumer's check is created and used as a substitute for the original check by a bank or other financial organization.  Also known as check truncation.

Check 22: Similar to Check 21, but allows customer's the ability to create a digital check and send payment.

Check Verification: Database for merchants to confirm the existence of a checking account and help prevent bad checks by verifying the account holder's check-writing history.

Closed Loop: Payment network that is available to a specific organization. Most common example are gift cards that are only functional within their assigned network.

Contactless Payments: Use of NFC (near-field communication) or RFID (radio frequency identification) to securely transfer cardholder account information from an equipped payment card or mobile device to a payment terminal.

Credit: To access funds that are not readily available to one organization. Credit transactions require the promise from the credited organization to return funds in an agreed upon manner.

Credit Card: Payment card that allows cardholders to access funds provided by the card issuer with the agreement that balances will be repaid fully with all agreed fees.

Credit Limit: The maximum balance a card issuer will allow a cardholder to maintain.

Cryptocurrency: A digital currency built on an encrypted platform to ensure security without the use of a centralized banking center.

D

Data Breach: see Breach.

Data Security Standard: also known as DSS. Set of guidelines for the security standards established for the handling of credit card information. These security protocols help protect cardholder account information from theft or other breaches.

Debit: To access stored funds by an organization. Debit transactions do not require any additional agreements or repayments in the future.

Debit Card: Payment card that access a checking or deposit account for transaction funding. Debit cards utitlize the payment card networks in the same manner as a credit card.

Debit Network: Financial network that allows debit cardholders to make payments and access funds from ATM machines.

Declined: When a payment card authorization is not approved. Most declines originate from the credit card issuer because of account concerns including fraud or available funds.

Digital Wallet: also known as eWallet. Software application found in mobile payment systems to allow for fast and simple payments. Digital Wallets are linked to a customer payment card or bank account and are authorized to send payments to merchants.

Discount Rate: Amount charged to a merchant for payment processing fees on debit card, credit card or echeck transactions.

Discover®: Financial services company that provides checking and savings accounts, loan services and credit cards. Founded in 1985, Discover® has roughly 50 million cardholders.

Doing Business As: also known as DBA. A ficitious name used by companies or individiauls to operate under a name different than their legal name.

E

eCheck: A digital version of a paper check.

eCommerce: The electronic purchase and sale of items online or over the internet.

Electronic Benefits Transfer Card: also known as EBT. Payment network that allows cardholders to make payments to retailers from a government benefits account. Available in all 50 states and territories through a magnetic payment card.

Electronic Funds Transfer: also known as EFT. Process of transferring funds between bank accounts using an electronic network instead of a physical paper based transaction. Both ACH and eCheck are types of EFT.

Electronic Payment Network: also known as EPN. A privately-owned electronic clearning house network operating within the ACH Network.

EMV®: Part of the Europay®, MasterCard® and Visa® networks.  EMV is a security protocol that helps card issuers, merchants and consumers reduce fraud from counterfeit and stolen payment cards through the use of smart chip cards. Microprocessor-embedded chips are installed on credit cards, creating an extra layer of security during point-of-sale transactions.

Encryption: Method of concealing sensitive information before transmission. Encryption does not prevent interference of unahtorized users, rather it secures the information from being deciphered. Used to transmit cardholder and transaction information between merchant and card issuing banks.

eWallet: also known as Digital Wallet.

F

Federal Reserve: also known as the Fed. Created in 1913, is the central banking system for the United States. The Fed has created stability within US markets by creating a check-clearing system to help control the transfer of funds between member banks.

Financial Institution: A highly regulated organization that provides monetary services including depistory, lending and investment services to the public.

FinTech: Terminology for emerging technologies and organizations in the financial industry. Many of these technologies focus on improving exisiting financial services.

Fraud: Use of theft to profit at another's expense. Occurs in the payment processing industry when cardholder account information is stolen and used unknowingly. Another type of fraudlent activity is Friendly Fraud.

Freeze: When a moratorium is placed on an activity. Many times in the finance industries an individual's credit has a freeze due to fraud. In the merchant services industry, payment cards can have a freeze placed on them due to security concerns.

Friendly Fraud: When a customer knowingly charges back on a merchant using a false claim. Citing a problem with the products or services or they did not initiate the sale are common reasons used.

Front-end Processor: Processors that are connected to the card associations to help deliver card authorizations and settlement services to the merchant acquiring banks.

G

Gateway: Service that securely connects a merchant location to the payment processor. Most commonly referred to as a Payment Gateway.

Gift Card: Prepaid card issued by a merchant for use on their closed loop network. Funds are stored directly on the card unlike payment cards on the debit or credit networks.

H

Hold: Certain industries place a hold on funds after the payment card has been authorized. Common in such environments as gas stations where authorization holds can be upwards of $125. These holds are generally reversed after the sale has been finalized.

Hosted Checkout Page: Services offered by payment processors that allows merchants to quickly and securely implement the processor's checkout services into their website. Customers never enter payment card account information, thus reducing a merchant's risk of a security breach and eliminating the need for PCI Compliance.

I

Independent Sales Organization: also known as ISO. An independent company selling credit card processing services of a larger payment processing organization.

Interactive Voice Response: also known as IVR. System that allows computers to connect with a telephone call and be controlled through both voice and keypad instructions. Used to accept secure payments over the phone.

Interchange: The system that allows for primarily authorizations and settlements along with other information and fees to sent between member organizations.

Interchange Fee: Costs charged by the card issuer to the merchant acquirer for transaction fees. Visa® and MasterCard® establish interchange rate fees for their networks.

Interchange Network: Global network managed by Visa®, MasterCard®, American Express® and Discover® to offer payment services between card issuers and merchant acquirers. Merchants that are part of the network are able to accept payments from cardholders of member card issuing organizations.

Issuer: also known as Card Issuer or Card Issuing Bank. Provider of the debit or credit card to the consumer, the issuer manages the consumers account fund through various levels of security and fraud protection. The issuer is responsible for funding merchant authorizations and collecting funds from cardholders.

J

JCB®: formerly known as Japanese Credit Bureau. Established in 1961, JCB® is the largest and primary payment card brand in Japan.

K

Knuckle-Buster: also known as Zip-Zap Machine. A handheld machine that uses carbon paper to create an impression of the consumer's card. Not commonly used today, merchants are encouraged to maintain one for emergency purposes.

L

 

M

Mail Order/Telephone Order: also known as MOTO. A type of card-not-present transaction when payment is authorized over the telephone, through the mail or another method without a physical presence.

Magnetic Stripe: The strip along the back of a payment card that is encoded with the cardholder's account information. Information is available when the strip is swiped through a POS terminal.

MasterCard®: Multinational payment processor of debit and credit transactions. Along with Visa®, maintains a vast global networks for merchants and cardholders.

Merchant Acquirer: also known as Acquirer. Financial organization that processes payments for merchants. An acquirer provides access for merchants to the payment card networks. The acquirer underwrites the merchant's account, provides payment software and hardware and is responsible for fees generated by the merchant.

Merchant Agreement: Contractual agreement signed between the merchant and acquirer upon application approval. This agreement will list all rates, fees and terms associated with the merchant accound.

Merchant Category Code: 4 digit code used by credit card companies to classify businesses. Similar to SIC Code.

Merchant Identification Number: also known as MID. Number assigned to each merchant account to help with accounting, billing and customer service issues.

Merchant Services Provider: also known as MSP. A third-party company that provides payment processing services for a merchants. Merchant Services Providers can also help with the card networks in managing merchant accounts.

Mobile Payments: Use of a mobile device, including mobile phones or tablets, to pay for services or products.

N

National Automated Clearing House Association: also known as NACHA. Founded in 1972, NACHA developed, governs and administered the current ACH Network that is operated by the FED and EPN.

Near Field Communications: also known as NFC. Wireless technology that provides a secure connection between devices in close promimixty to each other. Used for payments between mobil devices and equipped POS systems.

O

Offline Debit Transaction: also known as Signature-Debit transactions. Debit card transactions are made through the credit card network instead of the debit network, charging merchants the interchange fees.

Online Payments: also known as PIN Debit. Debit card transactions are made through the debit network, requiring customer's to enter their PIN Number.

Open Loop: Ability to use credit, debit and gift cards for payment anywhere cards are accepted, per network guidelines.

P

P2P Payments: also known as Peer-to-Peer. Transactions between individuals for primarily non-commerecial purposes; including splitting bills or sending money to a friend.

Payment Card: also known as Bank Card. Card issued by a financial institution that allows cardholder to access funds through either credit or debit networks, including ATM machines, or gift/prepaid cards.

Payment Gateway: also known as gateway. Financial protocol that encrypts and transmits cardholder account information and transaction details from a merchant's website to the payment processor.

Payment Platform: Provides merchants and customers a means to transfer funds between on another. Platforms can vary from Payment Gateways to POS terminals to Digital Wallets.

Payment Rail: also known as Payment Platform.

Payment Service Provider: also known as PSP. Provide merchants online services for accepting a variety of payment methods through a single gateway integration. Most PSPs offer credit, debit and electronic check/EFT payment options through 1 account.

PCI DSS: acronym for Payment Card Industry Data Security Standards. A series of requirements set for merchants, processors, financial institutions, hardware manufacturers, software developers and other organizations to adhere to. The purpose of the PCI standards is to provide enhanced security measures for all aspects of the payment processing industry.

Personal Identification Number: also known as PIN. Security code set up by the cardholder to protect their debit card from unathorized useage in the event of card theft.

PIN Authorization Request: Requirement that the cardholder verify their identity by entering their PIN number to complete the transaction.

PIN Pad: Device that allows for cardholders to securely enter their PIN number. Either an addon or integrated into the POS, the pin pad encrypts the cardholder PIN number.

PIN Verification: Process handled through the card issuer to verify the cardholder information through the use of the PIN number.

PINless Debit Transaction: Debit transaction that does not require the use of a PIN number.

Point of Sale: also known as POS. Location where payments are accepted; including cash, credit, debit and check transactions.

Point of Sale System: also known as POS System. An electronic system that allows for merchants to accept payments. POS systems usually include software for added functionality in addition to accepting payment cards.

Point of Sale Terminal: also known as POS Terminal. The hardware or software application that accepts the cardholder's payment card information. A terminal can be either an online application, like a payment gateway or hardware like a credit card terminal.

Prepaid Cards: Payment card that is not associated to a bank account, rather funds are loaded for use by the cardholder. Prepaid cards are primarily members of the card association network and usually have the ability to add funds again in the future.

Processor: Organization that manages credit and debit card transactions between merchants and customers. Processors can be described as either a front-end processor or a back-end processor.

Q

Quick Response Code: Use of a square barcode, also known as QR Code, on mobile phones to be scanned for payment. QR Codes can be attached to customer payment accounts for fast checkout.

Quick Service Restaurants: also known as QSR or simply Fast Food Restaurants. Food and drinks are served quickly to customers with minimal to no table service provided by the restaurant.

R

Radio Frequency Identification: also known as RFID. Electromagentic technology that is the premise for contactless payment processing. These tags allow for the secure transfer of cardholder data to equipped terminals from contactless payment cards.

Reason Code: Numerical identification for the purpose of a chargeback, fee or need for additional documentation.

Receipt: Summary of a transaction that occurred. Can either be a physical printout or an electronic document that shows location, date, time, products and/or services along with any additional fees. Receipts will also show the method of payment and are many times required to return or exchange a product.

Recurring Billing Transaction: A business model that requires payments on an anniversary date; including monthly, quarterly or annually. This type of billing is common with membership services.

Reloadable Card: A prepaid card with the ability for cardholders or other organizations to add funds. Commonly used for individuals without bank accounts.

Response Code: Reply from the card-issuing bank as to whether or not an authorization was approved. Approved transactions will include an authorization code. Transactions that are declined will display a unique code that will inform merchants and cardholders as to the reason the transaction failed.

Retreival Request: Process when a credit card issuer requests additional information from a merchant for a transaction by one of their cardholders. Many times a retreival is the first step taken by a credit card issuer during a dispute filed by a customer.

Routing Number: Unique number attached to a financial institution for use with checking accounts, savings accounts and other financial accounts.

S

Secure Sockets Layer: also known as SSL. An encryption protocol used to securely send information over a computer network. e Commerce has begun shifting towards TLS to provide increasingly secure connections between servers and web browers.

Secure Payment Page: An SSL secured webpage used to accept and transfer sensitive information. Used in e Commerce to securely receive and send customer card account information.

Settlement: Process when pending funds from a transaction are moved from the card issuer through the acquiring bank to the merchant. This step completes the transaction for the merchant.

Shopping Cart: software program that allows customers to store items for purchase from an e commerce merchant. The shopping cart allows for the payment processor's payment gateway to link the merchant website to the credit card, debit card and/or echeck networks.

Standart Industrial Classifcation: also known as SIC Codes. The Standard Industrial Classification. A 4-digit coding system used by government agencies to to classifying industries.

Smart Card: Payment card that included an embedded EMV Chip to prevent fraud from counterfeit cards.

T

Terminal Identification Number: also known as TID. Unique number attached to each POS device and can be used to track card usage in the event of questionable or fraudulent charges.

Third-Party Processing: Service providers that are authorized by card issuers or merchant acquirers to process transactions.

Token: Electronic security protocol that removes the need for a payment card number and creates a unique ID to be used during a payment transaction. This allows for an added layer of security with sending payment information.

Transaction: The process of a cusotmer and merchant agreeing on exchanging products or services for a fee. Transactions handled electronically are sent through the payment networks for either credit and debit card or for electronic check.

Transaction Date: Date of which a tranaction was processed by the merchant.

Transaction Fees: Fees that are charged per occurance to a merchant.

Transaction ID: also known as Trans ID. Unique identification number assigned to each transaction that occurs.

Transaction Status: The current stage of a transaction cycle. Transactions can move at different speeds depending on the issuing banks, providing such responses as: Authorized, Captured, Declined, Voided or Under Review.

Transport Layer Security: The most recent level of transaction security utilizng the most modern encyption standard. TLS includes the use of HTTPS and SSL certificates on web browers and websites.

U

Unauthorized Transaction: The use of a payment card is not approved by the cardholder. Unathorized transactions are usually fraudulent and result in a loss by the merchant.

Under Review: Response by the payment processor when reviewing a potential fraudulent transaction. Transactions can be delayed and might require the cardholder to contact their card issuer.

V

Visa®: Global payment processor of debit and credit transactions. Maintains one of the largest international payment networks for merchants and cardholders alike.

Voice Authorization: Approval response received through communication between the card issuer and merchant acquirer.

Void: A transaction that is cancelled after authorization, but before settlement of funds. Initiated by the merchant through their POS system or their payment processor.

W

Wallet: also known as Digital Wallet or eWallet.

X

 

Y

 

Z

Zip-Zap Machine: also known as Knuckle Buster.

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