3–D Secure
An XML-based protocol used to better authenticate online credit
card and debit card transactions. The protocol ties the
financial authorization of the transaction to an online
authentication of the cardholder’s identity. The authentication
is based on a three domain model: the Acquirer Domain (the
Acquiring bank and the merchant that are charging the card), the
Issuer Domain (the Issuing bank of the cardholder), and the
Interoperability Domain (the system provided by the Card
Association to support the protocol). Hence 3-D. A transaction
using 3-D Secure redirects to the website of the cardholder’s
Issuing bank to authorize the transaction. The Issuing bank
authenticates the cardholder’s identity by requiring the entry
of a password tied to the credit card. Visa offers the protocol
under the name Verified by Visa, MasterCard as MasterCard
SecureCode, and JCB International as J/Secure.
Back to the top
ACH
The Automated Clearing House is an
electronic payment network which exchanges funds via Electronic
Funds Transfer (EFT) throughout the U.S. fifty states and
territories. Over 98% of the nation's banks including the
Federal Reserve belong to the ACH.
Back to the top
ACH Associations
Provide rules and guidelines for the
efficient operation of the ACH Network. There are 36 regional
ACH associations whose memberships include financial
institutions and affiliates. NACHA, the National Automated
Clearing House Association forms the governing foundation for
the regional associations.
Back to the top
Acquiring Bank:
A card association member bank or financial institution that
accepts credit card payments on behalf of a merchant. Also
referred to as an Acquirer because the member bank accepts or
acquires payments from credit cards that are issued by other
member banks (Issuing banks or Issuers).
Back to the top
Addenda
Records:
Records that may be attached to certain
ACH entries for the purpose of carrying additional information.
Back to the top
Address
Verification System:
A system that verifies the numeric portions of a cardholder’s
billing address. Also called AVS. The numbers in the street
address and the zip code are compared to the street address and
zip code on file with the cardholders issuing bank. AVS can
return a variety of responses that are organized into AVS Codes.
For example, Visa AVS Code Y means that the street address and
the 5 digit zip code provided match what the issuer has on file.
Visa AVS Code X means the street address and the 9 digit zip
code provided match, while Code Z means the street address does
not match but the 5 digit zip does, and Code R means the system
is unavailable. In declines due to AVS failure, the
authorization will stay on the cardholder’s account until the
issuing bank removes it. Sometimes the authorization amount may
be subtracted from the cardholder’s available balance and an
online statement may show the held funds as an actual charge.
These authorizations can remain on a cardholder’s account for up
to 7 days or more. For this reason, merchants should avoid using
$1.00 charges to verify accounts, and instead use AVS only
authorizations.
Back to the top
Affinity Partner:
An institution or organization that lends its name to an issuing
bank in order to market a credit card. The issuing bank can use
the affinity partner’s mark or name on the card and in exchange
the affinity partner is paid a fee or a percentage of the
balance on the card. Some examples of affinity partners are
retailers, sports teams, universities, and charities. American
Express: A financial services company that is both the issuer
and acquirer of its cards and transactions. Unlike Visa and
MasterCard, in which there are card associations made up of
issuers and acquirers that send sales transactions back and
forth to each other, American Express is the only issuer and
acquirer of its sales. Although they can sign merchants up to
accept American Express (for which they are paid a fee by
American Express), when processing American Express sales
merchant service providers are in effect only passing the
transactions onto American Express for clearing. American
Express settles the sales, adjudicates all chargeback disputes
and sends funding and a separate merchant processing statement
directly to the merchant. Also sometimes known as “AmEx” or
“Amex.”
Back to the top
API
Gateway:
A point-of-sale system used to accept electronic payments on a
website. API stands for Application Programming Interface. This
is a set of protocols provided in order to build applications.
Gateway is short for Payment Gateway. The term API is commonly
used to distinguish this type of point-of-sale from other
Payment Gateways, like a Secure Payment Page, the difference
being that the API allows the Gateway to interface with the
merchant’s shopping cart software and this allows the
transaction to take place within the shopping cart and without
the cardholder having to leave the merchant’s website to pay.
Back to the top
ARC:
Account Receivable debit conversion of a mailed or drop box
delivered consumer check
Back to the top
Archiving:
Online archiving of check images without
payment processing
Back to the top
Authorization:
A response from a cardholder’s issuing bank that payment
information is correct and that funds are available. Sometimes
referred to as an “Approval”. The issuing bank will hold the
amount of the authorization unavailable to the cardholder until
the merchant settles or clears the transaction. In a credit card
transaction the funds are held against the cardholder’s credit
limit. In a debit card transaction the funds are held against
the cardholder’s bank account balance. Authorizations are a key
component to credit card processing and it is very important
that the merchant (and the merchant’s acquiring bank) is using
them correctly and in the most efficient manner possible. How a
merchant conducts and works with authorizations can affect
everything from the discount rate and transaction fee paid on
the sale to successful settlement of the sale to the sale being
charged back to the merchant being able to win the chargeback
dispute.
For ACH: refers to the
authorization of an ACH transaction by a consumer or company.
Most authorizations must be in writing and must be retained for
a period of two years. There are 3 types: recurring,
non-recurring, one-time.
Back to the top
Authorization-Capture:
A request to the cardholder’s issuing bank to authorize or hold
funds or an amount against the balance for a sale and then
immediately after the issuing bank returns an authorization or
approval to settle or “capture” the sale.
Back to the top
Authorization-Only:
A request to the cardholder’s issuing bank to authorize or hold
funds or an amount against the balance for a sale. The
authorization or hold will remain until the merchant settles or
clears the sale, or until the cardholder removes the
authorization and it disappears or “falls off”. Sometimes
settlement is referred to as “Capture” or “capturing the sale”.
Issuing banks have differing policies and can leave
authorizations in place from anywhere to 1-5 days to 30 days to
even longer.
Back to the top
Back End
Network:
A platform that settles captured credit card transactions. The
captured transactions are received from the Front End Network.
The transactions are settled through the Interchange system.
Also referred to as a Back End Processor or Back End. Some
examples of Back End credit card processing networks are Chase
Paymentech, First Data Omaha, First Data Nashville, Global
Payments, Nova Information Systems, RBS WorldPay, TSYS Acquiring
Solutions, Pay by Touch.
Back to the top
Bank:
A financial institution devoted to borrowing and lending out
money, acting as a payment agent and depositor for customers.
The role as a payment agent is what comes into play in credit
card processing. Just as banks make and receive payments for
their customers in the form of written checks or electronic fund
transfers, they also make and receive credit card payments for
their customers. The banks making the payments are called
Issuing banks or Issuers. The banks accepting credit card
payments are called Acquirers or acquiring banks.
Back to the top
Bank
Card:
A small plastic card issued to a cardholder that allows the use
of a credit line granted to the cardholder by the issuer or
issuing bank of the card. The line of credit can be used to make
payments to merchant or get cash advances on the credit line.
Most bank cards conform to the ISO 7810 standard. Some examples
of bank cards are credit cards, charge cards, debit cards. Bank
Card is also the name of a Japanese credit card.
Back to the top
Batch:
A collection of captured credit card transactions, typically
from a day’s worth of a merchant’s business, awaiting
settlement. Until settlement, the batch is stored in the
merchant’s point-of-sale system (terminal or gateway). At the
end of the day, the batch is sent to the Back End Network, where
the captured transactions are settled through the Interchange
system. This method of credit card processing is sometimes
referred to as batching or batch processing.
Back to the top
Blended
Rate:
A type of credit card transaction pricing in which a collection
of fees are combined into one fee (usually a discount rate,
hence blended rate). Most often it refers to the practice of
combining the discount rate and the transaction fee into a
single, blended, discount rate. The merchant is not charged a
per transaction or per item fee because those costs are covered
by the discount rate. This is sometimes referred to as trading
pennies for points because the blended discount rate is usually
higher than the discount rate plus transaction fee. This type of
blended rate tends to favor merchants with a lower average
ticket. A blended rate can also mean the credit card pricing
practice of combining qualified, mid-qualified, and
non-qualified discount rates into a single, blended, rate. In
this scenario, even though the discount rate may be referred to
as blended, the merchant is usually still charged a per
transaction or per item fee. This type of blended rate is more
common in an international merchant account.
Back to the top
BOC:
Back office conversion of a check
previously received by a merchant at the business.
Back to the top
Capture:
When a merchant processor submits a transaction with
authorization to the acquiring bank for settlement. The
acquiring bank then sends the transaction and authorization to
the cardholder’s issuing bank for settlement. Capture is the
second part of a credit card transaction. The first part is
authorization, getting the issuing bank to tell the acquirer
that the card details are valid and that the sale amount is
available for payment. Capture is taking the previously
authorized sale amount to the issuing bank and requesting that
the issuing bank make payment on it. Settlement is the act of
the issuing bank making payment on a credit card transaction
that has been both authorized and captured.
Back to the top
Card Code
Verification:
A security measure for credit and debit cards. Also referred to
as CCV or Card Security Code (CSC). Card Code Verification is
meant to better identify the credit card and validate that it is
being used by the actual cardholder, thus increasing protection
against fraud. The first code is called Card Verification Code 1
(CVC1). It is encoded within the magnetic strip of the card and
validated when the card is swiped in Card Present transactions.
Also referred to as Card Verification Value 1 (CVV1). The second
code is called Card Verification Code 2 (CVC2) and is a 3 or 4
digit number appearing on the back of the card or on the front
of the card after the card number. It is used in Card Not
Present transactions to validate that the actual credit card is
present and not just the credit card number. Also referred to as
Card Verification Value 2 (CVV2).
Back to the top
Card
Not Present:
A credit card transaction when the card is not swiped through a
point-of-sale terminal and the merchant does not obtain a sales
draft signed by the cardholder. Also referred to as CNP, keyed,
or MoTo, for Mail Order / Telephone Order. Transactions through
an internet or ecommerce merchant account are considered to be
Card Not Present. Merchant service providers charge higher rates
and fees for Card Not Present credit card processing because the
transactions are assumed to carry a higher risk of chargeback
for fraud or cardholder dissatisfaction. There is higher risk of
fraud because in the Card Not Present environment it is more
difficult to connect the cardholder to the sale. When the card
is swiped and a sales draft is signed, it is easier for the
merchant to validate that the card and the cardholder were
present at the time of the sale and that the cardholder did in
fact authorize the purchase. There is a higher risk of
cardholder disputes for dissatisfaction with the merchant’s
product or service because when the cardholder is signing a
sales draft and leaving with the product in hand, they are less
able to hold the merchant liable for deceptive practices or
failure to make delivery.
Back to the top
Card Present:
A credit card transaction when the card is swiped through a
point-of-sale terminal and the merchant obtains a sales draft
signed by the cardholder. Also referred to as CP, retail, or
swiped. Merchant service providers charge a lower discount rate
and transaction fee for Card Present credit card processing
because the transactions are assumed to carry a lower risk of
chargeback for fraud or cardholder dissatisfaction. When the
card is swiped and the cardholder signs a sales draft it better
validates that both the card and the cardholder were present at
the time of the sale and that the cardholder did in fact
authorize the purchase. This lowers the risk of fraud. There is
a lower risk of cardholder disputes for dissatisfaction with the
merchant’s product or service because when the cardholder is
signing a sales draft and leaving with the product in hand, they
are less able to hold the merchant liable for deceptive
practices or failure to make delivery. In order for a
transaction to be considered Card Present, the card must be
swiped through the point-of-sale terminal’s magnetic strip
reader. If the card’s magnetic strip is worn and unreadable or
the merchant keys in the credit card number for some other
reason, even if the merchant obtains a signed sales draft, the
transaction will be considered Card Not Present and higher
discount rates and transaction fees may apply, as well as a
higher risk of chargeback.
Back to the top
Card Security Code:
A security measure for credit and debit cards. Also referred to
as CSC or Card Code Verification (CCV). Card Security Code is
meant to better identify the credit card and validate that it is
being used by the actual cardholder, thus increasing protection
against fraud. The first code is called Card Verification Code 1
(CVC1). It is encoded within the magnetic strip of the card and
validated when the card is swiped in Card Present transactions.
Also referred to as Card Verification Value 1 (CVV1). The second
code is called Card Verification Code 2 (CVC2) and is a 3 or 4
digit number appearing on the back of the card or on the front
of the card after the card number. It is used in Card Not
Present transactions to validate that the actual credit card is
present and not just the credit card number. Also referred to as
Card Verification Value 2 (CVV2).
Back to the top
Card Verification Code:
A security measure for credit and debit cards. Also referred to
as CVC and Card Security Code (CSC) and Card Code Verification (CCV)
and Card Verification Value (CVV or CV2). Card Verification Code
is meant to better identify the credit card and validate that it
is being used by the actual cardholder, thus increasing
protection against fraud. The first code is called Card
Verification Code 1 (CVC1). It is encoded within the magnetic
strip of the card and validated when the card is swiped in Card
Present transactions. Also referred to as Card Verification
Value 1 (CVV1). The second code is called Card Verification Code
2 (CVC2) and is a 3 or 4 digit number appearing on the back of
the card or on the front of the card after the card number. It
is used in Card Not Present transactions to validate that the
actual credit card is present and not just the credit card
number. Also referred to as Card Verification Value 2 (CVV2).
Back to the top
Card
Verification Code 1:
A security code encoded within the magnetic of a credit card and
validated when the card is swiped in Card Present transactions.
Also referred to as CVC1 or Card Verification Value 1 (CVV1).
Back to the top
Card
Verification Code 2:
A credit card security measure consisting of 3 or 4 digit number
appearing on the back of the card or on the front of the card
after the card number. It is used in Card Not Present
transactions to validate that the actual credit card is present
and not just the credit card number. Also referred to as Card
Verification Value 2 (CVV2) or Card Verification Code 2 (CVC2).
Back to the top
Card
Verification Value:
A security measure for credit and debit cards. Also referred to
as Card Security Code (CSC) and Card Code Verification (CCV) and
Card Verification Value (CVV or CV2). Card Verification Value is
meant to better identify the credit card and validate that it is
being used by the actual cardholder, thus increasing protection
against fraud. The first code is called Card Verification Code 1
(CVC1). It is encoded within the magnetic strip of the card and
validated when the card is swiped in Card Present transactions.
Also referred to as Card Verification Value 1 (CVV1). The second
code is called Card Verification Code 2 (CVC2) and is a 3 or 4
digit number appearing on the back of the card or on the front
of the card after the card number. It is used in Card Not
Present transactions to validate that the actual credit card is
present and not just the credit card number. Also referred to as
Card Verification Value 2 (CVV2).
Back to the top
Card
Verification Value 1:
A security code encoded within the magnetic of a credit card and
validated when the card is swiped in Card Present transactions.
Also referred to as CVV1 or Card Verification Code 1 (CVC1).
Back to the top
Card
Verification Value 2:
A credit card security measure consisting of 3 or 4 digit number
appearing on the back of the card or on the front of the card
after the card number. It is used in Card Not Present
transactions to validate that the actual credit card is present
and not just the credit card number. Also referred to as Card
Verification Value 2 (CVV2) or Card Verification Code 2 (CVC2).
Back to the top
Cardholder:
One who possesses a card and especially a credit card. The
cardholder is the individual or organization to whom a credit
line or bank account has been issued by the Issuing bank. The
cardholder uses a credit or debit card to access the available
balance of the credit line or the cash balance of the bank
account in order to make payments to merchants or to get cash
advances.
Back to the top
Cash
Concentration:
Companies that have decentralized units
use the ACH to concentrate cash into a centralized bank account
- replaces wire transfer.
Back to the top
CCD:
A debit or credit by an organization of
it’s own or another organization’s bank account
Back to the top
Charge
Card:
A card that allows short term loans to the cardholder, primarily
in order to make payment on purchases. Most charge card issuers
require payment of the loan in full at the end of each month.
Unlike a credit card, there is no line of credit. American
Express is an example of a charge card. Credit cards are often
referred to as charge cards and vice versa, as the difference
between the two is not often recognized by the general public.
If issued to a large business or organization, charge cards are
sometimes referred to as purchasing cards.
Back to the top
Chargeback:
A return of funds by the cardholder’s issuing bank. It reverses
a previous authorization and settlement of funds from a
cardholder’s line of credit or bank account balance. US Federal
Reserve Regulations afford this right of reversal to US credit
card and debit cardholders. Card Association and bank network
rules also provide this right to cardholders in the United
States and internationally. Cardholders can initiate chargebacks
for a variety of reasons: fraudulent use of the card,
unauthorized use, unauthorized or unrecognized charges, failure
to deliver, dissatisfaction with products or services, and for
an extended period of time after the sale, from 3 months to 2
years.
Back to the top
Chargeback Reason Code:
A number used by issuing banks to identify the reason for a
chargeback. Each card brand uses a different system of reason
codes. Reason codes provide the rational behind the chargeback
(technical, clerical, cardholder dissatisfaction, fraud, etc.)
and the required media that the merchant and acquiring bank must
provide in order to dispute the chargeback.
Back to the top
Check 21:
Federal legislation enacted to permit
electronic image transfer of all types of paper checks,
including business, third-party, government, cashiers, and
personal.
Back to the top
Check Guarantee:
Protects merchants against various
contingent liabilities for immediate orders
Back to the top
Check Truncation:
Stopping or truncating a
paper check by turning it into an electronic item at the Point
of Sale (POS) or in lockbox check truncation.
Back to the top
China
UnionPay:
A domestic credit card association in the People’s Republic of
China. Also referred to as CUP. UnionPay credit cards are
usually affiliated with either Visa or MasterCard. UnionPay
debit cards are not affiliated with Visa or MasterCard.
Back to the top
Consumer Account:
A bank account of a natural person for
personal not commercial purposes
Back to the top
Consumer Credit:
An exchange of goods or services between one party and another
when the parties have agreed to defer payment for or the return
of the goods or services to a later date when the party
receiving the goods or services is an individual (consumer). A
credit card is a form of consumer credit.
Back to the top
Corporate
Payments:
Business to business ACH Network
collection and disbursement of funds. The Federal government is
mandating this form of payment for corporate taxes and payments
to government vendors.
Back to the top
Credit:
An exchange of goods or services between one party and another
when the parties have agreed to defer payment for or the return
of the goods or services to a later date. Merchant services is a
way for merchants to outsource the provisioning of credit and
lines of credit to their customers to credit card associations
and issuers. In exchange for charging a transaction fee and
discount rate on the amount of the sale, the card association
makes immediate, or near immediate payment, on behalf of the
customer to the merchant. The card association or issuer then
collects payment from the consumer / cardholder.
Back to the top
Credit Card:
A small plastic card issued to a cardholder that allows the use
of a credit line granted to the cardholder by the issuer or
issuing bank of the card. The line of credit can be used to make
payments to merchants or get cash advances on the credit line.
Credit cards typically provide access to a revolving line of
credit which allows the cardholder to make a minimum payment on
the balance each month for which the issuer charges an interest
payment, rather than being required to pay the balance in full.
Back to the top
Credit Card Association:
An organization or entity owned by a collection of banks that
licenses, sets terms and rules, and oversees the operations of
credit card programs. Also referred to as Card Associations, or
the Card Associations when referring to Visa and MasterCard.
Banks that are members of the association are often referred to
as Member Banks. Member banks can issue credit cards and acquire
credit card transactions from fellow member banks and other card
associations. Visa and MasterCard are both credit card
associations.
Back to the top
Credit Card ID:
A security measure for credit and debit cards. A 3 or 4 digit
number appearing on the back of the card or on the front of the
card after the card number. It is used in Card Not Present
transactions to validate that the actual credit card is present
and not just the credit card number. Also referred to as CCID or
Card Verification Value 2 (CVV2) or Card Verification Code 2.
Back to the top
Debit
Card:
A small plastic card issued to a cardholder that allows the use
of a bank account held by the cardholder with the issuer or
issuing bank of the card. The card can be used to make purchases
from and payments directly to merchants or to withdrawn funds
from the bank account via ATM or cash advance or cash back
transactions. Debit cards often carry card association marks and
can be used in a similar manner to credit cards, but are subject
to different rules, rates and fees, and security measures.
Merchant processing authorizations, captures, and settlements of
debit cards can have different effects on available balances
than merchant processing of credit cards.
Back to the top
Decline:
A response from a cardholder’s issuing bank rejecting an
acquirer request for authorization of a credit card transaction.
When a transaction is declined, authorization and capture do not
occur and there is no settlement of funds from the cardholder to
the merchant. Declines can be caused by insufficient funds or
balance unavailable or invalid card information and many other
reasons.
Back to the top
Decline Code:
A number used by acquiring banks to identify the reason for a
decline. Acquirers use many different systems of decline codes.
The information provided by a decline code can help a merchant
to decide if and how to attempt to re-authorize the transaction
and capture the sale.
Back to the top
Descriptor:
The information that appears in a cardholder’s billing statement
to clearly identify the source of a credit or debit card
transaction. The acquiring bank provides merchants with data
fields with character limits that allow the merchant to provide
identifiers and contact information. Operating with a descriptor
that is both clear and easy to identify and that allows the
cardholder to quickly get into contact with the merchant is a
key component of successful merchant credit card processing.
Some examples of descriptors are: Unique, Soft, and Member Help
Site or Member Support URL.
Back to the top
DFI:
A depository financial institution (a bank).
Back to the top
Diners
Club International:
A charge card company. Also referred to as Diners Club. The
first charge card company, cardholders could purchase, primarily
meals at participating restaurants, and were required to pay the
balance in full at the end of each month. Early competitors were
American Express and Carte Blanche. Eventually purchased by
Citibank and formed an agreement with MasterCard so that Diners
Club cards now have a MasterCard logo and acceptance rights.
Diner’s Club International also owns enRoute, a Canadian credit
card.
Back to the top
Direct
Deposit:
The disbursement of funds to consumer
accounts. Includes payroll, interest, trust disbursements,
expense payments, dividends, pension payments, etc. This is the
most widely used ACH service.
Back to the top
Direct
Payment:
The collection of funds from
consumer or business accounts. This normally would be used to
collect payments for monthly dues as in: health club membership,
rent, phone, utility bills, newspaper bills, trash collection,
mortgage payments, lease payments, etc.
Back to the top
Discount Rate:
A percentage of each sale that is charged to a merchant by a
merchant service provider as a fee for processing a credit or
debit card transaction. The discount rate is a mark up of the
interchange fee that an acquirer or acquiring bank pays to an
issuing bank or credit card issuer as a fee for processing a
credit or debit card transaction. The issuing bank deducts the
interchange fee from the settlement amount sent to the acquiring
bank. The acquirer then passes this fee plus a mark up (discount
rate) onto the merchant and deducts it from the settlement of
the credit or debit card transaction.
Back to the top
Discover Card:
A credit card issued by Discover Bank. Discover debit cards are
also issued by other issuing banks. Although they can sign
merchants up to accept Discover Cards (for which they are paid a
fee by Discover), when processing Discover Card sales merchant
service providers are in effect only passing the transactions
onto the Discover Network for clearing. Discover settles the
sales, adjudicates all chargeback disputes and sends funding and
a separate merchant processing statement directly to the
merchant.
Back to the top
Dues and
Assessments:
A fee charged by the card associations for processing a credit
or debit card transaction. If the card used in the purchase is a
Visa card, the dues and assessments are charged by Visa, if a
MasterCard is used, then MasterCard charges the fee. Dues and
Assessments are the second largest component of the fee charged
a merchant for processing a credit or debit card sale.
Back to the top
Dynamic
Currency Conversion:
A financial service that converts a credit or debit card
purchase from an outside currency to the currency in which the
card has been issued. A cardholder can purchase a good or
service priced in an outside currency and have the conversion to
the currency their card is issued in at the time of the sale
rather than seeing the conversion from one currency to another
later on in their billing statement. Also referred to as DCC or
Cardholder Preferred Currency (CPC). Dynamic Currency Conversion
is controversial because the service provider can provide a
currency conversion at the point of sale that has a profit
margin built into it, resulting in a higher conversion fee than
what might be charged by the issuing bank. Also, some issuing
banks will charge their cardholders foreign transaction fees on
these sales. Taken together, these fees can substantially raise
the purchase price and the cardholder may not be aware of the
increased cost until well after the purchase.
Back to the top
Dynamic Descriptor:
A descriptor is the information that appears in a cardholder’s
billing statement to clearly identify the source of a credit or
debit card transaction. A Dynamic Descriptor is a descriptor
that can be modified on a per transaction basis. Also referred
to as a Dynamic Billing Descriptor or a Soft Descriptor or a
Soft Billing Descriptor. Dynamic descriptors can be used to
better identify purchases from different brands, store
locations, or sales URLs that our operated by a single merchant.
Dynamic descriptors can also be used to better identify
purchases in a recurring billing or installment billing by
specifically identifying the time period being paid for or
product being purchased. Dynamic descriptors can also be used to
better authenticate cardholder identification by providing a
specific descriptor tied to a transaction that can then only be
identified by having access to the cardholder’s billing
statement.
Back to the top
ECP:
Electronic Check Presentment
Back to the top
Effective
Date:
The date an exchange of funds takes place.
Back to the top
EFT:
Electronic Funds Transfer is the transfer
of funds from one bank account to another bank account utilizing
the ACH Network.
Back to the top
Electronic
Check Representment:
An ACH Network service that allows for the
electronic representment of a returned paper check marked
non-sufficient funds (NSF). Provided that certain guideline are
fulfilled the check can be collected electronically.
Back to the top
FI:
A financial institution.
Back to the top
FMS:
Financial Management Service
Back to the top
Forced
Authorization:
A transaction that has been captured without an authorization.
Also referred to as a Forced Capture. A forced authorization can
occur when a sale is authorized on one network and captured on
another or when an authorization has fallen off due to delay in
capturing.
Back to the top
Foreign
Transactions:
A debit or credit card transaction where the acquirer or
acquiring bank is located in a different country, jurisdiction,
or card association region than the cardholder’s issuer or
issuing bank. Some issuing banks charge their cardholders an
additional fee for foreign transactions called a Foreign
Transaction Fee. Some issuing banks do not charge a foreign
transaction fee.
Back to the top
FRB:
Federal Reserve Bank
Back to the top
Front End
Network:
A platform that authorizes and captures credit card
transactions. Captured transactions are sent to the Back End
Network for settlement. Also referred to as the Front End
Processor or Front End. Some examples of Front End credit card
processing networks are Vital, Global Payments, Chase Paymentech,
FDMS Omaha, FDMS Nashville, Elavon.
Back to the top
Funding:
Payment by a merchant service provider to a merchant for credit
card transactions processed by the merchant processor’s
point-of-sale system or payment gateway. Also referred to as
Settlement. Funding can be for the full amount of the sale with
discount rates, transaction fees, and reserves taken at the end
of each billing period, or funding may be less discount rates,
transaction fees, and reserves. Funding can occur daily, within
two business days, or weekly or twice a week.
Back to the top
Geo-IP
Address Match:
Comparing the IP address of the customer or cardholder in an
online transaction to the billing address listed for the credit
card or bank account. If the IP address does not match the
billing address for the credit card, it is an indication of
fraud. For example, if a transaction from a credit card with a
billing address in New York state originates from an IP address
in Vietnam, then it is likely that the sale is unauthorized or
that the credit card number has been stolen.
Back to the top
Interchange:
A fee that an acquirer or acquiring bank pays to an issuing bank
or credit card issuer as a fee for processing a credit or debit
card transaction. The issuing bank deducts the interchange fee
from the settlement amount sent to the acquiring bank. The
amount of the interchange fee is set collectively by the members
of the card associations, both issuing and acquiring banks.
Interchange is the largest component of the fee charged to a
merchant for processing a credit or debit card sale.
Back to the top
Internet Initiated Entries:
(WEB) a consumer authorizes a Receiver or
Merchant to debit their account via the internet.
Back to the top
ISO
7810:
An international standard defining the size, shape, and physical
characteristics of identity cards. There are four card sizes:
ID-1, ID-2, ID-3, ID-000. ID-1 is commonly used for credit
cards, debit cards, ATM cards, and charge cards.
Back to the top
ISO
7812:
An international standard governing magnetic stripe
identification cards such as credit cards, debit cards, ATM
cards, and charge cards.
Back to the top
ISO
8583:
An international standard for systems that exchange electronic
transactions made by cardholders of credit cards, debit cards,
ATM cards, and charge cards. ISO 8583 is the standard used by
the Visa and MasterCard card associations to conduct
authorizations or credit card transactions on their respective
networks.
Back to the top
Issuer
Access Control Server:
In a transaction in which the cardholder is participating in
Verified by Visa the Web address of the Issuer ACS is returned
to the merchant server. If the cardholder is not participating,
the ACS returns an attempted authentication message and returns
the transaction to the merchant server. The merchant can then
either decline or proceed with a standard authorization. Most
banks outsource ACS to third parties. For example, Arcot,
Cardinal Commerce, Cyota, One Bridge, Total Systems.
Back to the top
Issuer Decline:
A decline is response from a cardholder’s issuing bank that
payment information is either incorrect and or that funds are
not available. When a transaction is declined, authorization and
capture do not occur and there is no settlement of funds from
the cardholder to the merchant. An Issuer Decline is a decline
where the issuing bank or issuer of the cardholder’s credit card
or debit card is declining the transactions for a reason other
than invalid payment information or unavailable funds. Some
examples of issuer declines are declines due to the Merchant
Category Code, or declines due to the location of the acquiring
bank.
Back to the top
Issuing Bank:
A card association member bank or financial institution that
issues credit or debit cards to cardholders. Also referred to as
an Issuer because the member bank issues or sends payments from
credit cards that are acquired by other member banks (Acquiring
banks or Acquirers).
Back to the top
J/Secure:
JCB International’s name for the 3-D Secure Protocol. 3–D Secure
is an XML-based protocol used to better authenticate online
credit card and debit card transactions. The protocol ties the
financial authorization of the transaction to an online
authentication of the cardholder’s identity. The authentication
is based on a three domain model: the Acquirer Domain (the
Acquiring bank and the merchant that are charging the card), the
Issuer Domain (the Issuing bank of the cardholder), and the
Interoperability Domain (the system provided by the Card
Association to support the protocol). Hence 3-D. A transaction
using 3-D Secure redirects to the website of the cardholder’s
Issuing bank to authorize the transaction. The Issuing bank
authenticates the cardholder’s identity by requiring the entry
of a password tied to the credit card. Visa offers the protocol
under the name Verified by Visa, MasterCard as MasterCard
SecureCode, and JCB International as J/Secure.
Back to the top
Japan
Credit Bureau:
A Japanese credit card brand. Also referred to as JCB or JCB
International.
Back to the top
Laser:
An Irish debit card brand. Several different financial
institutions issue and acquire Laser cards in the Republic of
Ireland.
Back to the top
Lockbox
Check Truncation:
Also called Accounts Receivable Truncation
System (ARTS) is the process of turning checks received in the
mail by a biller into electronic items.
Back to the top
Luhn
Algorithm:
A formula used to validate credit card numbers. Also referred to
as Luhn formula or modulus 10 or mod 10 algorithm.
Back to the top
Maestro:
A debit card brand owned by MasterCard. Used primarily in the
European Union, Latin America, and India.
Back to the top
Mail Order
Telephone Order:
A credit card transaction when the card is not swiped through a
point-of-sale terminal and the merchant does not obtain a sales
draft signed by the cardholder. Also referred to as Card Not
Present or CNP, keyed, or MoTo, for Mail Order / Telephone
Order. Merchant service providers charge higher rates and fees
for Mail Order Telephone Order credit card processing because
the transactions are assumed to carry a higher risk of
chargeback for fraud or cardholder dissatisfaction. There is
higher risk of fraud because in the Mail Order Telephone Order
environment it is more difficult to connect the cardholder to
the sale. When the card is swiped and a sales draft is signed,
it is easier for the merchant to validate that the card and the
cardholder were present at the time of the sale and that the
cardholder did in fact authorize the purchase. There is a higher
risk of cardholder disputes for dissatisfaction with the
merchant’s product or service because when the cardholder is
signing a sales draft and leaving with the product in hand, they
are less able to hold the merchant liable for deceptive
practices or failure to make delivery. The Acquirer or Acquiring
Bank is charged a higher Interchange Fee for these types of
cards and transactions, and passes the cost onto the merchant.
Back to the top
MasterCard SecureCode:
MasterCard’s name for the 3-D Secure Protocol. 3–D Secure is an
XML-based protocol used to better authenticate online credit
card and debit card transactions. The protocol ties the
financial authorization of the transaction to an online
authentication of the cardholder’s identity. The authentication
is based on a three domain model: the Acquirer Domain (the
Acquiring bank and the merchant that are charging the card), the
Issuer Domain (the Issuing bank of the cardholder), and the
Interoperability Domain (the system provided by the Card
Association to support the protocol). Hence 3-D. A transaction
using 3-D Secure redirects to the website of the cardholder’s
Issuing bank to authorize the transaction. The Issuing bank
authenticates the cardholder’s identity by requiring the entry
of a password tied to the credit card. Visa offers the protocol
under the name Verified by Visa, MasterCard as MasterCard
SecureCode, and JCB International as J/Secure.
Back to the top
Member
Help Site:
A website operated by a merchant that is devoted to customer
service and support. Also referred to as a Member Support URL. A
Member Help Site is often used in a merchant’s descriptor as a
way to identify the charge and to provide a fast and easy way
for the cardholder to contact the merchant. A Member Help Site
can also be used in a merchant descriptor provide a more
discreet identifier for the credit card transaction.
Back to the top
Member Support URL:
A website operated by a merchant that is devoted to customer
service and support. Also referred to as a Member Help Site. The
use of the term Member derives from the common use of these
sites by merchants who provide membership or subscription
services. A Member Support URL is often used in a merchant’s
descriptor as a way to identify the charge and to provide a fast
and easy way for the cardholder to contact the merchant. A
Member Support URL can also be used in a merchant descriptor
provide a more discreet identifier for the credit card
transaction.
Back to the top
Merchant:
A dealer in commodities or goods and services they do not
produce themselves. In credit card processing, the merchant is
the party accepting payment from the cardholder in exchange for
goods and services. In order to accept credit cards as payment,
a merchant must have a Merchant Processing Agreement with a
Merchant Service Provider to authorize, capture, and settle
transactions via an Acquirer or Acquiring Bank that has extended
the merchant a line of credit called a Merchant Account.
Merchant is a widely used term in the credit card processing
industry, which in fact is also referred to as Merchant
Services.
Back to the top
Merchant Account:
An agreement by an Acquiring Bank or Acquirer to provide a line
of credit for the purpose of accepting payment via credit card.
Often governed by a Merchant Processing Agreement providing the
terms under which the merchant accepts sales and receives
settlement in exchange for fees paid to the Acquirer and / or
the Merchant Service Provider.
Back to the top
Merchant Category Code:
A four digit number assigned to a merchant by Visa and
MasterCard to identify the merchant’s transactions by business
type. Also referred to as MCC. In some cases, Issuers or Issuing
Banks may decline a credit card transaction based on the
Merchant Category Code.
Back to the top
Merchant Plug In:
A software module used to ask for 3D-Secure verification from an
issuing bank. Also referred to as MPI. The Merchant Plug In
reads the account number of the credit card and sends a query to
the cards issuer or issuing bank to determine if the card is
participating in 3D-Secure. If the card is participating, the
issuer will respond by returning a web address for the Issuer’s
Access Control Server or ACS.
Back to the top
MICR
:
Magnetic Ink Character Recognition
Back to the top
Mid-Qualified:
The discount rate a merchant pays on any transaction that fails
to qualify for a Qualified Discount Rate. Also referred to as
Partially Qualified or Mid Qual or Mids or the Mids. In the Card
Present environment, a card that is keyed into a point-of-sale
system rather than having its magnetic strip swiped through a
card reader is considered Mid Qualified. In the Card Not Present
environment, a Mid Qualified can be caused by the use of a
business or rewards card. The Acquirer or Acquiring Bank is
charged a higher Interchange Fee for these types of cards, and
passes the cost onto the merchant.
Back to the top
NACHA:
The National Automated Clearing House
Association is the chief rules making and interpretation body of
the ACH. NACHA is the cooperative governing body for 36 regional
ACH associations.
Back to the top
NOC:
Notification of Change is an advice from an RDFI to an ODFI that
entry information requires corrections and includes the
correction details.
Back to the top
Non-Qualified:
The discount rate a merchant pays on any transaction that fails
to qualify for either a Qualified Discount Rate or a Mid
Qualified Discount Rate. Also referred to as Non Qual or the
Nons. In the Card Present environment, card that is keyed into a
point-of-sale system rather than having its magnetic strip wiped
through a card reader can be Non-Qualified. Certain rewards and
business cards have additional required fields, like a purchase
order number, that must be filled to get a Qualified Discount
Rate. If batch settlement is delayed, it can cause transactions
in the batch to be charged at the Non-Qualified rate.
Back to the top
Non-Recurring Payment Authorization:
An individual or company authorizes the
debit of their account for a varying period and/or amount.
Notification must be sent 10 days before the effective date with
the amount to be debited.
Back to the top
NSF Check:
A paper check that has been returned by the banking system due
to non-sufficient Funds. These can be electronically represented
through the ACH Network using Electronic Check Representment.
Back to the top
NTR:
Negotiated Transaction Rate – the fee for
a transaction.
Back to the top
ODFI:
The Originating Depository Financial
Institution, the bank that initiates an Electronic funds
transfer through the ACH Network on behalf of the Originator.
Back to the top
One Time Payment Authorization:
An individual or company authorizes a
one-time debit of their account. The authorization is usually a
written authorization but in some instances a recorded
telephonic authorization may be used.
Back to the top
Order
Verification Email:
An email sent by a merchant to a cardholder following a card not
present credit card transaction. Also referred to as a Order
Confirmation Email. Most often used in ecommerce or internet
credit card processing. An order verification email is a useful
tool to the merchant, allowing the merchant to better confirm a
cardholder’s email address, get an entry into the cardholder’s
email inbox as opposed to being tagged as spam or junk mail
(this is helpful for future email communications), and to
provide the cardholder with the merchant’s contact information,
refund policy, and terms and conditions.
Back to the top
Originator:
An individual or a company that initiates an ACH transaction.
Back to the top
Original Entry:
A debit or credit ACH transaction directed
to an account at an RDFI.
Back to the top
Payment
Card Industry Compliance:
A certification process that validates that a merchant or
merchant service provider is operating under and adhering to the
standards of the PCI DSS. Also referred to as PCI Compliance.
Compliance is certified by Qualified Security Assessors who have
been themselves certified by the PCI SSC.
Back to the top
Payment Card Industry Data Security Standard:
A security standard for technical and operational requirements
for processing credit card payments. Also referred to as PCI
Data Security Standard or PCI DSS.
Back to the top
Payment Card Industry Security Standards Council:
An independent body originally formed by Visa, MasterCard,
American Express, Discover, and JCB to formulate and manage the
continuing development of the Payment Card Industry Data
Security Standard. Also referred to as PCI Security Standards
Council or PCI SSC.
Back to the top
Payment Gateway:
A point-of-sale system used to accept electronic payments on a
website. Also referred to as a Gateway. Payment Gateways
securely transfer credit card data from the merchant or the
merchant’s shopping cart to the acquirer or acquiring bank or
Front End Processor. Many Payment Gateways also have a feature
called a Virtual Terminal that allows the merchant to key in
credit card data from phone or mail order credit card
transactions.
Back to the top
Personal Identification Number:
A number, usually 4 digits, used as a code to identify a
cardholder and authenticate a transaction. Also referred to as
PIN. Personal Identification Numbers are most often used in ATM
transactions and in retail or card present debit card
transactions.
Back to the top
PIN
Secured:
A debit card transaction that has been authenticated by the
provision of the cardholder’s Personal Identification Number at
the time of sale by being keyed into the point-of-sale system or
credit card terminal, often via a PIN Pad. Also referred to as
PIN Secured Debit. Debit card transactions that have been PIN
Secured often cost the merchant less in processing fees because
there is typically no discount rate applied, only a transaction
fee charged by the debit card’s network. Debit card transactions
that have not been PIN Secured are treated as credit card
transactions and thus are typically charged a discount rate in
addition to the transaction fee.
Back to the top
Point-Of-Sale:
A credit card terminal or other system, like a cash register or
software or a Payment Gateway, that is used by merchants to
authorize and accept credit card transactions as payment.
Back to the top
Positive Pay:
Verifies consumer name, routing and
account number and that account is open.
Back to the top
PPD:
A debit or credit of a consumer’s account
entry pursuant to an authorization.
Back to the top
Pre-Notification:
or Prenote is an ACH entry with no value that is sent to
an RDFI to verify account information prior to sending a live
entry.
Back to the top
Qualified Security Assessor:
A designation conferred by the Payment Card Industry Security
Standards Council on individuals or organizations validating
that they are qualified to conduct PCI Compliance audits. Also
referred to as QSA or PCI QSA or Payment Card Industry Qualified
Security Assessor.
Back to the top
RCK:
Refers to returned check. Represents the electronic check
process for electronic representment of NSF checks. Electronic
check representment.
Back to the top
RDFI:
Receiving Depository FI – the FI (bank)
receiving debits or credits for its Receivers.
Back to the top
Rebill
Email:
An email sent by a merchant to a cardholder prior to a card not
present recurring or subscription credit card transaction. Also
referred to as a Rebilling Confirmation Email. Most often used
in ecommerce or internet credit card processing of recurring,
subscription or installment billing. A rebill email is a useful
tool to the merchant, allowing the merchant to better confirm a
cardholder’s email address, to provide the cardholder with the
merchant’s contact information, refund policy, and terms and
conditions, and to allow the cardholder a quick and easy way to
contact the merchant with questions or cancel the sale,
subscription, or membership.
Back to the top
Receiver:
The individual or company that holds an
account to which an ACH entry is sent.
Back to the top
Recurring Billing:
The practice of charging a cardholder each month for a
membership, subscription, or service. Also referred to as
Rebilling or Rebills. Many payment gateways and merchant service
providers offer automated recurring billing features and
services that allow merchants to process recurring credit card
transactions for membership and subscription sales without
having to retain sensitive cardholder data.
Back to the top
Recurring Payment Authorization:
An individual or company authorizes the
periodic debit of their account for the same period and amount.
Back to the top
Retrieval Request:
A request from a cardholder’s Issuer or Issuing Bank to a
merchant’s Acquirer or Acquiring Bank for specific details of a
credit card transaction between the two parties. Retrieval
Requests can occur for many different reasons, such as a
cardholder dispute, a processing error at the point-of-sale, or
an inquiry into suspected fraud. The Acquirer is usually asked
to provide information such as cardholder name, card number,
date of the transaction, transaction amount, authorization
number, merchant name, merchant location, and cardholder
signature (if available).
Back to the top
Return:
The return of a debit item by an RDFI when
there is NSF or UA (bounced check).
Back to the top
Return Entry:
The return of an original entry that either could not be posted
or was not able to be identified by the RDFI - closed account,
NSF, wrong account number, etc.
Back to the top
Return Reason Codes:
Or R Codes are rejections of original ACH
entries by the RDFI.
Back to the top
RTN:
Routing Number – the 9 digit number assigned to a bank.
Back to the top
Soft
Descriptor:
A descriptor is the information that appears in a cardholder’s
billing statement to clearly identify the source of a credit or
debit card transaction. A Soft Descriptor is a descriptor that
can be modified on a per transaction basis. Also referred to as
a Dynamic Billing Descriptor or a Dynamic Descriptor or a Soft
Billing Descriptor. Soft descriptors can be used to better
identify purchases from different brands, store locations, or
sales URLs that our operated by a single merchant. Soft
descriptors can also be used to better identify purchases in a
recurring billing or installment billing by specifically
identifying the time period being paid for or product being
purchased. Soft descriptors can also be used to better
authenticate cardholder identification by providing a specific
descriptor tied to a transaction that can then only be
identified by having access to the cardholder’s billing
statement.
Back to the top
Solo:
A debit card brand in the United Kingdom. Solo cards require
that all funds be available in the cardholders account in order
for an authorization to be approved, thus there is no line of
credit function.
Back to the top
Switch:
A debit card brand in the United Kingdom. Switch is owned by
Maestro, a debit card brand owned by MasterCard.
Back to the top
BTerminal:
A point-of-sale system used in Retail and Card Present credit
and debit card transactions. Most terminals are equipped with a
card reader to swipe the magnetic strip on a credit or debit
card. Most terminals are also equipped with a keypad allowing
card numbers and additional information such as Address
Verification and CVV2 to be entered and authenticated in Card
Not Present transactions and transactions where the magnetic
strip on the card is worn or unreadable.
Back to the top
Tel:
A debit of a consumer account pursuant to an oral authorization
via telephone.
Back to the top
Telephone-Initiated
Entry:
(TEL) is an entry initiated through a telephone authorization
for a one time debit for collection of funds for payment of
goods and services. A TEL is valid only when there is an
existing relationship between the parties or if no existing
relationship, the consumer initiates the telephone call.
Back to the top
Third Party Processor:
Any processor that participates in a relationship within the ACH
processing flow - usually as an Originator of transactions for
clients.
Back to the top
Transaction Code:
A number assigned to a credit or debit card transaction in order
to track it through a merchant or merchant service provider’s
point-of-sale system or payment gateway. Also referred to as a
Transaction Number or Transaction ID. Transaction Codes are
useful because it allows a quick and easy way to identify
individual transactions and link them to the key information
involved in the sale, such as cardholder name and address,
authorization code, AVS and CVV2 results, sale amount and date,
and card number.
Back to the top
Transaction Fee:
An amount that is charged to a merchant by a merchant service
provider as a fee for processing a credit or debit card
transaction. The transaction fee is a mark up of the interchange
fee that an acquirer or acquiring bank pays to an issuing bank
or credit card issuer as a fee for processing a credit or debit
card transaction. The issuing bank deducts the interchange fee
from the settlement amount sent to the acquiring bank. The
acquirer then passes this fee plus a mark up onto the merchant
and deducts it from the settlement of the credit or debit card
transaction. Also referred to as a Trans Fee. In some cases,
Transaction Fees may be applied to actions performed by the
merchant other than sales, such as refunds, credits, voids, or
authorizations.
Back to the top
Truncation:
In ACH it normally refers to stopping or truncating a paper
check as in POS or lockbox check truncation and turning that
paper check into an electronic item.
Back to the top
UA:
Unavailable Funds – funds are in the bank
but not credited to the account.
Back to the top
Unique
Descriptor:
A descriptor is the information that appears in a cardholder’s
billing statement to clearly identify the source of a credit or
debit card transaction. A Unique Descriptor is a descriptor that
is unique to the individual merchant, as opposed to a Generic
Descriptor that is operated by a Payment Services Provider and
is used by many different merchants. A Unique Descriptor is one
of the benefits of a direct merchant account, and allows a
cardholder to more easily identify the source of the transaction
and contact the merchant with any questions.
Back to the top
Universal Cardholder Authentication Field:
A method used by MasterCard to generate the Accountholder
Authentication Value used in 3-D Secure. Also referred to as
UCAF.
Back to the top
Verification:
Verifies routing and account number and
that account is open.
Back to the top
Verification Code:
A security measure for credit and debit cards. Also referred to
as V-Code or V Code or CSC or Card Code Verification (CCV).
Verification Code is meant to better identify the credit card
and validate that it is being used by the actual cardholder,
thus increasing protection against fraud. The first code is
called Card Verification Code 1 (CVC1). It is encoded within the
magnetic strip of the card and validated when the card is swiped
in Card Present transactions. Also referred to as Card
Verification Value 1 (CVV1). The second code is called Card
Verification Code 2 (CVC2) and is a 3 or 4 digit number
appearing on the back of the card or on the front of the card
after the card number. It is used in Card Not Present
transactions to validate that the actual credit card is present
and not just the credit card number. Also referred to as Card
Verification Value 2 (CVV2).
Back to the top
Verified by Visa:
Visa’s name for the 3-D Secure Protocol. 3–D Secure is an
XML-based protocol used to better authenticate online credit
card and debit card transactions. The protocol ties the
financial authorization of the transaction to an online
authentication of the cardholder’s identity. The authentication
is based on a three domain model: the Acquirer Domain (the
Acquiring bank and the merchant that are charging the card), the
Issuer Domain (the Issuing bank of the cardholder), and the
Interoperability Domain (the system provided by the Card
Association to support the protocol). Hence 3-D. A transaction
using 3-D Secure redirects to the website of the cardholder’s
Issuing bank to authorize the transaction. The Issuing bank
authenticates the cardholder’s identity by requiring the entry
of a password tied to the credit card. Visa offers the protocol
under the name Verified by Visa, MasterCard as MasterCard
SecureCode, and JCB International as J/Secure.
Back to the top
Virtual
Terminal:
A feature included in many
Payment Gateway products that allows a merchant to manually key
in Card Not Present credit and debit card transactions. Also
referred to as VT. A virtual terminal may be used as a
point-of-sale to process credit cards and also as a user
interface to allow the merchant to perform tasks such as, batch
uploads, manual recurring bills, credits, voids, authorizations,
and captures.
Back to the top
Visa
Electron:
A debit and credit card brand owned by Visa and operated
primarily outside of North America. Visa Electron requires that
all funds be available at the time of a purchase and cannot be
overdrawn.
Back to the top
Voice
Authorization:
An authorization code that has been obtained by calling the
cardholder’s Issuer or Issuing Bank, rather than processing the
credit or debit card transaction via a retail point-of-sale
terminal or payment gateway. Also referred to as a Voice Auth.
Back to the top
WEB:
A debit of a consumer account pursuant to
an authorization via the Internet.
Back to the top |