Glossary
Acquirer
An Acquirer is a Visa / Master Card Affiliated Bank or Bank/Processor alliance that is in the business of processing credit card transactions for businesses and acquires new merchants.
Acquiring Bank
A financial institution that provides credit card processing accounts for merchants. Also referred to as a merchant bank or an acquirer, the bank receives funds from a cardholder when a credit card transaction is completed, and then deposits the payment amount, less any fees, into the merchant's business checking account.
Address Verification Service (AVS)
The process of validating a cardholder's given address against the issuer's records, to determine accuracy and deter fraud. This service is provided as part of a credit card authorization for mail order/telephone order transactions. A code is returned with the authorization result that indicates the level of accuracy of the address match and helps secure the most favorable interchange rates.
Adjustment
An adjustment is initiated by the acquirer to correct a processing error. The error could be a duplication of a transaction or the result of a cardholder dispute. The acquirer debits or credits the merchant DDA account for the dollar amount of the adjustment.
API
Application Program Interface. A set of calling conventions defining how a service is invoked through a software package. Historically, "application programming interface". Practically, an API is any interface that enables one program to use facilities provided by another, whether by calling that program, or by being called by it.
Authorization
The process of verifying the credit card has sufficient funds (credit) available to cover the amount of the transaction. An authorization is obtained for every sale. An approval response in the form of a code sent to a merchant's POS equipment (usually a terminal) from a card issuing financial institution that verifies availability of credit or funds in the cardholder account to make the purchase. Also see Point-Of-Sale.
Authorization Response
An issuing financial institution's electronic message reply to an authorization request, which may include:
Approval -- transaction was approved
Decline -- transaction was not approved
Call Center -- response pending more information, merchant must call the toll-free authorization phone number.
Authorization Code
A code that a credit card issuing bank returns in an electronic message to the merchant's POS equipment that indicates approval of the transaction. The code serves as proof of authorization.
Average Ticket (Average Sale)
The average dollar amount of a merchant's typical sale. The average ticket amount is calculated by dividing the total sales volume by the total number of sales for the specified time period.
Batch
The accumulation of captured credit card transactions in the merchant's terminal or POS awaiting settlement.
Capture
The submission of an electronic credit card transaction for financial settlement. Authorized credit card sales must be captured and settled in order for a merchant to receive funds for those sales. Also see Settlement.
Cardholder
Any person who holds a payment card account (bankcard or otherwise). Person that uses a credit card to purchase goods and services.
Card Issuing Bank
An EFT Network Member-Bank that runs a credit card or debit card "purchasing service" for their account holders. An example is CitiBank and the CitiBank Visa Card that they issue.
Card Not Present
A transaction where the card is not present at the time of the transaction (such as mail order or telephone order). Credit card data is manually entered into the terminal, as opposed to swiping a card's magnetic stripe through the terminal.
Chargeback
A credit card transaction that is billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on behalf of the cardholder. Typical cardholder disputes involve product delivery failure or product/service dissatisfaction. Cardholders are urged to try to obtain satisfaction from the merchant before disputing the bill with the credit card issuer.
Credit (Reversal)
Nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately "undo" an authorization and return it to the open-to-buy balance on a cardholder's account. Some card issuers do not support reversals.
CSP
Certified Solutions Provider. The Paymark Certified Solutions Provider program offers eCommerce solution providers - web integrators, web developers, and Internet consultants - valuable resources and expertise to accelerate the development and deployment of payment enabling technology for their customers.
The Certified Solutions Provider program equips members with the training and support resources needed for continued success in tailoring payment solutions for customers, and; opportunities for joint marketing so you, your customer, and our owner banks benefit from the association, the chance to use state-of-the-art payments technology that will help you optimise integrated payment solutions for the next generation of eCommerce.
Debit Card
Payment card whose funds are withdrawn directly from the cardholder's checking account at the time of sale (online debit on a Debit Network) or after batch settlement (off-line debit on a Credit Card Network).
EFT (Electronic Funds Transfer)
A method of transferring money from one bank account to another, using any of a wide variety of electronic methods currently available.
ETSL - See Paymark
Interchange
The standardized electronic exchange of financial and non-financial data associated with sale and credit data between merchant acquirers and card issuers on various types of MasterCard and Visa transactions.
Interchange Fee
A fee paid by an acquirer to an issuer for transactions entered into interchange. The interchange fee is a percentage applied, according to Visa/MasterCard regulations, to the dollar value of each transaction. There are multiple categories of interchange, and Visa and MasterCard each have their own criteria for their own categories. A transaction must meet the specified criteria for a category in order for that category's rate to be applied. Each transaction is evaluated individually, so various interchange rates may apply within one batch of merchant transactions.
Issuing Financial Institution
The financial institution that extends credit to a cardholder through bankcard accounts. The financial institution issues a credit card and bills the cardholder for purchases against the bankcard account. Also referred to as the cardholder's financial institution.
Magnetic Stripe
A strip of magnetic tape affixed to the back of credit cards containing identifying data, such as account number and cardholder name.
Mail Order/Telephone Order (MOTO)
Credit card transactions initiated via mail, email or telephone. Also known as card-not-present transactions.
Merchant
Customer of a processor/acquirer.
Merchant Account
A specialized bank account established between a merchant and a financial institution in order to process credit card purchases. By establishing a merchant account, the financial institution agrees to pay the merchant for valid credit card purchases in exchange for the right to collect on the debt owed by the consumer.
Merchant Bank
A financial institution that provides credit card processing accounts for merchants. Also referred to as an acquiring bank or an acquirer, the bank receives funds from a cardholder when a credit card transaction is completed, and then deposits the payment amount, less any fees, into the merchant's business checking account.
Merchant Facility
A facility that allows a merchant to accept credit card payments from a customer.
Merchant Identification Number (MID)
This number is generated by a processor/acquirer and is specific to each individual merchant location. This number is used to identify the merchant during processing of daily transactions, rejects, adjustments, chargebacks, end-of-month processing fees, etc.
Merchant Services Provider
A bank, an ISO, or any other firm that provides the various services required for the processing of a merchant's credit card sales.
Merchant Services Fee
The fee charged by a merchant bank for use of a merchant facility. Usually charged and expressed as a percentage of the transaction amount.
Monthly Minimum
The minimum amount that will be charged to a merchant by a merchant services provider in any given month
Paperless DD
Paperless Direct Debit enables organisations to sign up customers for Direct Debit collections over the telephone, Internet, telephone keypad, face to face or interactive TV. Unlike conventional direct debits, a written signature is not required as a valid form of authorization.It speeds up and simplifies the sign up process, whilst at the same time further increasing an organisation's administrative cost savings. It is more convenient for customers too, with no forms to complete or the possibility of delays.Paymark
The system, rebranded recently as the Paymark EFTPOS network, processes nearly 75% of all electronic transactions in the New Zealand retail market on behalf of more than 50 card issuers and acquirers. More than 65,000 merchants and 80,000 terminals are currently connected to the network that is now 3DES and EMV compliant. The company offers services to merchants, card issuers and acquirers for eftpos, eCommerce, mCommerce and ATM payment and related transaction processing.Payment Gateway
A Payment Gateway is a technology service usually available over a network that permits subscribing service applications to perform one-stop electronic transactions, usually related to credit cards. It is usually a third-party service that is actually a system of computer processes that process, verify, and accept or decline credit card transactions on behalf of the merchant through secure Internet connections. The payment gateway is the infrastructure that allows a merchant to accept credit card and other forms of electronic payment.
PCI-DSS
The PCI DSS is a multifaceted security standard that includes requirements for security management, policies, procedures, network architecture, software design and other critical protective measures.
PCI DSS stands for Payment Card Industry Data Security Standard. It was developed by the major credit card companies as a guideline to help organizations that process card payments prevent credit card fraud, cracking and various other security vulnerabilities and threats. A company processing, storing, or transmitting payment card data must be PCI DSS compliant or risk losing their ability to process credit card payments and being audited and/or fined. Merchants and payment card service providers must validate their compliance periodically. This validation gets conducted by auditors - i.e. persons who are the PCI DSS Qualified Security Assessors (QSAs). Although individuals receive QSA status reports on compliance can only be signed off by an individual QSA on behalf of a PCI council approved consultancy.
Point of Sale (POS)
A location where credit card transactions are performed with the cardholder present, such as a retail store. The card is read magnetically, and the cardholder's signature is obtained as insurance against the transaction. This is the most secure form of credit card commerce.
POS Terminal
Equipment used to capture, transmit and store credit card transactions at the point of sale.
Preferred Direct Debit Initiator
A Preferred Initiator is an organization that no longer has to lodge direct debit authorities with most trading banks prior to beginning direct debit initiations.
Processor
A Processor is the company that actually routes an Authorization Request from a Point of Sale device (such as a Verfone credit card terminal) to Visa or Master Card, and then arranges for Fund Settlement to the merchant. Such processors are traditionally accessed via direct dial out modems connecting to their system. Processors need to have a Sponsoring Bank in order to gain access to the Visa and Master Card networks. When a Processor or other entity has made such an arrangement with a Sponsoring Bank to resell their services, they are called an Agent of that bank.
Real-Time Processing
Real-Time Processing means that when a web site's customer conducts an online purchase, that the check or credit card information is conveyed to the Processor at that exact time so that an authorization can be requested and received at that moment. Real-Time Processing always implies that a Secure Payment Gateway is being utilized, whether proprietary or third party. Please see Secure Payment Gateways and Real Versus Non-Real Time Processing.
Reserve Account
One method that ACH Processor's use to mitigate risk, is to require that merchants maintain a Reserve Account at the Processor's Sponsoring Bank. This allows the Processor to issue a Hold on funds in this account when fraud has been detected or an excessively large number of returns is received. Merchants with good credit and history can usually meet the expectations of ACH Processors for covering returns and so are not always required to keep a reserve account. In cases where a reserve is required, the minimum-reserve-balance in the account is set at about 20% of the anticipated processing volume. New merchants are usually allowed to build up their reserve by sending in transactions which are not withdrawn until the minimum reserve balance is achieved; after that, the merchant is allowed to withdraw the excess funds for transfer to their home town bank.
Secure Payment Gateways
Secure Payment Gateway companies help other Processors conduct secure business on the internet using Secure Socket Layer (SSL) technology.
They provide a system that passes credit card data, authorization requests, and authorization responses over the internet using encryption technology.
The transaction information is sent by the Payment Gateway secure server via leased line to the credit card network where the validity of the card is checked and the availability of funds on that account is verified. An authorization code is returned via leased line to the Payment Gateway; the authorization is encrypted by the Payment Gateway and transmitted in encrypted form to the web server of the merchant, which triggers fulfillment of the order.
Rather than try and create their own Secure Web System, many Banks and Bank/Processor alliances will use a Secure Payment Gateway Provider to perform this task for them.
Secure Payment Software/Software Module/Payment Module
In order to conduct secure business on the web, the Secure Gateway Provider runs a Secure Host System, and sells/licenses software modules that allow Shopping Carts and other applications to request and receive Credit Card Authorizations via their system using encrypted communications. (This is called Real Time Authorization.)
The other features of this licensed software are the functions provided to merchants online when they connect to the Secure Payment Gateway host; merchant can access their own account information, use a “Virtual Terminal” to conduct transactions, handle administrative tasks, etc. (These features all “live” on the provider’s Host computer system.)
Shopping Cart
These applications typically provide a means of capturing a client’s Credit Card information, but they rely on the Software Module of the Secure Gateway Provider, in conjunction with the Secure Payment Gateway, in order to conduct secure Credit Card transactions online.
Any given shopping cart can work with any given Secure Gateway Provider, the only requirement being that some computer code be written or provided to communicate with the Secure Gateway of choice, and that this code be integrated into the Shopping Cart Application.
Signature Capture
Electronic capturing of the cardholder's signature is becoming a powerful tool for charge back defense. At the point of sale, the customer is asked to sign the invoice, folio, or charge slip over a special digital device that turns the signature into a manageable set of digital events so that a program can reproduce the signature faithfully. A capture of the swipe and an electronic signature at the point of sale virtually assures that the customer and card were physically there and an authorization was obtained for the purchase of goods and/or services. A database maintains the signature in an encrypted form to be reproduced when requested for retrieval requests.
Setup Fees
The initial costs that are incurred by a merchant in the process of establishing a merchant account with an acquiring bank or other merchant services provider, including application fees, software licensing fees and equipment purchases.
Terminal
Equipment used to capture, transmit and store credit card transactions.
Third-Party Processor
A Third Party Processor is an independent processor that is contracted with by a Bank or Processor to conduct some part of the transaction processing process.
Some of these Third Party Processors specialize in running and hosting networks of Point Of Sale (POS) terminals connected to their Host via dial out modem; they produce the software in the POS terminals as well as in their host, and route authorization requests to Visa or Master Card as needed (MAPP, MDI, FDR, for example).
Other Third Party Processors specialize in the Settlement of credit card transactions with Visa and Master Card so that merchants can be paid (FDR for example).
In the world of Online Credit Card Processing, the Secure Payment Gateway Provider is another type of Third Party Processor.
Third Party Aggregator
A third party aggregator is an organization that offers merchant services to other merchants by sharing/using the organisation’s own merchant facility. This removes the need for the end-user client to secure their own merchant facility directly with a merchant bank.
Ticket Size
The actual monetary value of the goods or services purchased in a single credit card transaction.
Transaction Fee
The pre-determined and customary charge that is incurred for each individual credit card transaction a merchant processes, and collected by the merchant account provider.
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