Payment Processing Glossary
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 Service: also known as AVS. Address Verification Service is the 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.
Authentication: The process of card-holder identification. This can be performed through AVS or using a Personal Identification Number (PIN).
Automated Clearing House: also known as ACH. Its 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.
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
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.
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.
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.
China UnionPay: also known as UnionPay.
Closed Loop: Payment network that is available to a specific organization. Most common examples 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 Limit: The maximum balance a card issuer will allow a cardholder to maintain.
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 Network: Financial network that allows debit cardholders to make payments and access funds from ATM machines.
Digital Wallet: also known as eWallet. Software applications 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 e-check transactions.
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 clearinghouse 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 unauthorized 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.
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.
Fraud: Use of theft to profit at another's expense. This occurs in the payment processing industry when cardholder account information is stolen and used unknowingly. Another type of fraudulent activity is Friendly Fraud.
Freeze: When a moratorium is placed on 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.
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.
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 allow 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.
Interactive Voice Response: also known as IVR. A 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 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 consumer's account fund through various levels of security and fraud protection. The issuer is responsible for funding merchant authorizations and collecting funds from cardholders.
Know-Your-Customer: also known as KYC. Due diligence process used by banks and financial institutions to confirm customer identification and verify the intent of financial services. This helps prevent malicious usage of the financial systems.
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.
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.
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 Identification Number: also known as MID. The 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 merchants. Merchant Services Providers can also help with the card networks in managing merchant accounts.
Near Field Communications: also known as NFC. The wireless technology that provides a secure connection between devices in close proximity to each other. Used for payments between mobile devices and equipped POS systems.
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 customers to enter their PIN Numbers.
Payment Card: also known as Bank Card. Card issued by a financial institution that allows a cardholder to access funds through either credit or debit networks, including ATM machines, or gift/prepaid cards.
Payment Gateway: also known as a gateway. The 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 one another. Platforms can vary from payment gateway services, such as Shopify, 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.
Point of Sale System: also known as POS System. An electronic system that allows 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 with 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.
Radio Frequency Identification: also known as RFID. Electromagnetic 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. It 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.
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.
Retrieval Request: Process when a credit card issuer requests additional information from a merchant for a transaction by one of their cardholders. Many times a retrieval is the first step taken by a credit card issuer during a dispute filed by a customer.
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 browsers.
Shopping Cart: a 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 e-check networks.
Smart Card: Payment card that included an embedded EMV Chip to prevent fraud from counterfeit cards.
Terminated Merchant File: also known as TMF. Used by the credit card processing industry during the application process to screen merchants before approving them for a merchant account. Known as the MATCH list by both MasterCard and American Express.
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 customer 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 cards or for electronic check.
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.
Visa®: Global payment processor of debit and credit transactions. Visa maintains one of the largest international payment networks for merchants and cardholders alike.
Wallet: also known as Digital Wallet or eWallet.
Zip-Zap Machine: also known as Knuckle Buster.