Glossary Of Terms

A

ABA Routing Number: Also referred to as Transit Routing Number. Directs electronic ACH deposits to the proper bank institution.

Account Number: Unique sequence of numbers assigned to a cardholder account that identifies the issuer and type of financial transaction card.

ACH (Automatic Clearing House): Nationwide electronic funds transfer network which enables participating financial institutions to distribute electronic credit and debit entries to bank accounts and to settle such entries.

Acquirer: Bank that sponsors merchants for the acceptance of credit card transactions.

Acquiring Bank: Financial institution (also called a merchant bank, or acquirer) that processes a merchant's transactions and credits payment to the merchant account. A merchant account at the acquiring bank receives funds from a cardholder when a transaction is complete.

Approval: Code issued by a card issuing bank allowing a sale to be charged against a cardholder's account. Approval means that the amount is within the cardholder's remaining credit limit and the card has not been reported lost or stolen. Approvals are requested via an AUTHORIZATION.

Approval/Authorization: All participants in the chain from the retailer to the cardholder have said that they are ready, willing, and able to complete this Sale, Refund or PreAuth. The transaction is queued for completion during the next batch closure.

Auth Only: Transaction in which the merchant does not intend to charge the cardholder until a later time, if at all. See PRIOR AUTHORIZATION.

Authorization: The request to charge a cardholder. If not used within a certain time period, the authorization will expire. Time period determined by issuing bank.

Authorization Center: Department that electronically communicates with a merchant's request for an authorization on credit card transactions to the cardholders bank. Transmits the authorization via voice authorization or electronic point of sale equipment.

Authorization Code: Numerical or alphanumerical code sent by the card issuer, given to a sales transaction as verification that the sale has been authorized. The authorization code is always included on the merchant sales draft.

AVS (Address Verification System): System available to merchants who key transactions which matches the street number and zip code of the cardholder with the information given to the merchant. This allows the merchant to verify that the person requesting the goods or services is the person who owns the cards.

B

Bank Identification Number: Digits of a credit card that identify the ISSUING BANK. Sometimes the first six digits. Often referred to as a BIN.

Basis Point: 1/100th of a percentage point.

Batch: Collection of credit card transactions saved for submitting at one time, usually at the end of each day. Batch fees are charged to encourage a merchant to submit his or her transactions at one time, rather than throughout the day.

Batch Fee: Incurred for settling each batch from the terminal.

Batch Processing: Type of data processing where related transactions are transmitted as a group for processing.

C

Capture: Submission of a credit card transaction for processing and settlement. POS terminals and real-time processing software capture transactions to submit to merchant account providers or credit card processors.

Card Present: A transaction evidenced by the swiping a card through a terminal or by an imprinted and signed credit card draft.

Card Issue: Financial institution (or its agent), which issues the financial transaction card to the cardholder. The card issuer remains unchanged throughout a transaction.

Cardholder: Person or company who has an active credit card account with which transactions can be processed.

Card Validation Code (CVC): Unique encrypted 3-digit value that is encoded in the magnetic stripe and printed on the back of a MasterCard. It is used as an additional means of Cardholder validation during the authorization or referral process.

Card Verification Value 2 (CVV2): Unique encrypted 3-digit value that is encoded in the magnetic stripe and printed on the back of a Visa Card. It is used as an additional means of Cardholder verification during the authorization or referral process.

Certification: Process during which a terminal or software provider meets certain standards required by the certifier.

Chargeback: Fee charged for transactions that are successfully challenged by a credit card holder. After a charge is disputed and adjudicated in the cardholder's favor, the transaction total and chargeback fee are deducted from the merchant account.

Chargeback Reason Code: Two-digit code identifying the specific reason for a chargeback.

Check Services: Authorization of a check.

Clearing: Process of exchanging financial details between an AQUIRER and an ISSUER to facilitate posting of a cardholder's account and reconciliation of a customer's settlement position.

Close Batch: Process by which transactions with authorization codes are sent to the processor for payment to the merchant.

Cookies: Small files that are automatically downloaded from a web server to the computer of someone browsing a web site. The data can then be accessed any time the user returns to the site.

D

Data Encryption: Scrambling of information sent over the Internet. Data encryption ensures that only the intended recipient has the ability to read and understand the information.

Debit: Charge to the customers bank card account.

Debit Card: Used by consumers in place of cash and purchases are deducted automatically from the cardholder's account. Requires a PIN (Personal Identification Number) for use.

Decline: The processing network or the cardholder's bank has refused to complete a transaction for Sale, Refund or PreAuth. The processor passes back to the retailer any reason it receives if a Decline is issued.

Deposit: When a merchant closes a batch and sends the transactions to the host computer for settlement. Typically, batches should be closed on a daily basis to ensure the lowest discount rates.

Digital Certificate: Online identification that authenticates a consumer, merchant and financial institution. Digital certificates are used during SET transactions.

Discount Rate: Amount charged to a merchant for the daily processing of credit card transactions. This fee that applies to all retail card present & magnetic stripe read items that are authorized and batched out on a daily basis.

Domain: Designation for a particular location on the Internet. A domain, for example "FastTransact.com," contains files that make up the content of web pages under that address. Domain names are associated with IP addresses.

E

E-Check: Electronic equivalent of a paper check.

E-commerce: Processing of economic transactions, such as buying and selling, through electronic communication. E-commerce often refers to transactions occurring on the Internet, such as credit card purchases via web sites.

EDC (electronic data capture): Use of a POS terminal for validating and submitting credit card transactions to a merchant account provider or other credit card processor. For online credit card processing, software takes the place of the POS terminal.

EFT (Electronic Funds Transfer): Method of transferring money from one bank account to another using a variety of electronic methods such as bank wire transfer, federal wire transfer, international wire transfer.

Electronic Draft Capture: System in which each transaction is routed to the host computer for processing and storage. The stored transactions are used to create settlement files and transactions reports.

Encryption: Process of encoding a PIN pad with the processor's configuration and key injection for the purpose of accepting debit cards. Most common formats are DUKPT (Derived Unique Key Per Transaction) and Masterkey (MasterCard's debit key encryption format).

F

Facsimile Draft: Paper record that is provided to an acquirer as a substitute for an actual sales draft.

Factoring: The term is often applied to ISO's that offer to process credit card transactions through their own merchant account rather than through an account established by the merchant, in exchange for a percentage of the transaction or other fee.

FDIC (Federal Deposit Insurance Corporation): Federal program that protects consumers by providing insurance for bank deposits in the event that a bank becomes insolvent.

Force Transaction/ Offline Transaction: Entry of a transaction after a referral message is displayed on the POS terminal. Network interruption of service that allows the merchant to enter a transaction and the approval code as a forced entry with an authorization code.

Front End: User interface that appears on a web page and allows a visitor to interact with dynamic features including databases, shopping cart programs, and online purchase processing software.

FTP (File Transfer Protocol): Set of standard codes for transferring files over the Internet. FTP is usually used for retrieving large files or files that cannot be displayed through a browser. Windows FTP and Fetch are examples of FTP software.

Fulfillment: The acquirer provides the issuing bank with an original sales draft or a legible copy.

G

Gateway: An application that accepts transactions from online merchant storefronts and routes them to a financial institution's processing system.

H

Holdback (aka Reserve Account): A portion of the revenue from a merchant's credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note: Merchant account providers almost never pay interest on holdbacks.

Host Capture: Type of transaction capture in which transaction information is stored in the processor's host computer and not at the merchant's POS system. Compare to Terminal Capture. Settlement occurs at the host computer and is automatic: no merchant initiation is required.

Hot Card: A bank card that has been used excessively. Usually indicating that the card has either been stolen or counterfeit.

I

ICS (Internet Commerce Services): The services an Internet commerce provider offers to enable clients to handle many facets of their business on the Internet.

Imprint: Can be electronic (by swiping a card thru a card reader) or manual (by obtaining a physical imprint using an imprinter). One of the two is always required on a credit card transaction to prove that the card was present.

Interchange: Standard format for sharing or transferring data electronically between parties that do not share a common application. Usually a format that is platform-independent is agreed upon as a standard. Examples of common interchange formats include EDI (electronic data interchange), ASCII (American Standard Code for Information Interchange), and GIF (graphics interchange format). Interchange is the operating system of Visa/MasterCard for authorization, settlement, capture and passing through of interchange and other fees in addition to monetary and non -monetary information regarding bank card transaction/processes.

Interchange Fee: Servicing fees paid by acquirers to issuers for transaction costs. Visa/MasterCard establishes and periodically reviews interchange rates.

IP Address (Internet Protocol Address): Designation for a particular location on the Internet, such as "140.23.719.6." IP addresses are associated with domain names.

ISO (Independent Sales Office): Firm or organization that offers to process online credit card transactions, usually in exchange for transaction fees or a percentage of sales. Merchants must generally establish a merchant account before contracting for ISO services, although some ISO's claim not to require separate merchant accounts. See also factoring.

ISP (Internet Service Provider): Company that provides access to the Internet, including Web browsing and e-mail. ISP's often offer connections that can be accessed by dialing a telephone number through your computer's modem.

Issuer/Issuing Bank: A licensed member of Visa/MasterCard that holds the contractual agreements with other financial institutions and issues bank cards.

Issuing Bank: The bank that maintains the consumer's credit card account and must pay out to the merchant's account in a credit card purchase. The issuing bank then bills the customer for the debt.

L

Local Area Network (LAN): Data communication network confined to a limited geographic area with moderate to high data information. The area consists of single or cluster buildings. It is owned solely by its user and does not use common carrier circuits although it may have gateways or bridges to other public or private networks.

M

Magnetic Stripe: Stripe on the back of a bank card that contains magnetically encoded cardholder account information. The name of the cardholder is stored on Track I and the account number and expiration date are stored on Track II.

Mail Order/Telephone Order (MOTO): This type of account is used by mail order companies, anyone accepting phone orders or any other system where the merchant can't physically see the card and/or the cardholder. Currently this is the type of account is used for Internet Businesses accepting credit cards online. The merchant and the cardholder do not need to be in the same physical location. MOTO accounts are also known as Card Not Present or CNP accounts.

MAP (Merchant Account Provider): Bank or other institution that hosts merchant accounts and processes online credit card transactions. The term is also often used broadly to include any credit card processing service, including ISO's.

Merchant Account: Bank account established by a merchant to receive the proceeds of credit card purchases. By establishing a merchant account, the merchant bank 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 Account Types: There are two basic types of merchant accounts. A Retail account is merchant account that is approved for use in a physical store where the cardholder and the card are present. Typically the merchant swipes the card through a card reader to get your card numbers so this account is sometimes referred to as a "swipe" account or "cardholder present" account. Retail accounts are the least risky type of account and therefore the merchant account provider charges the merchant must less than the riskier "card not present" type of accounts. A "card not present" account is also called a Mail Order - Telephone Order (MOTO) account. This is the account used by mail order companies, anyone accepting phone orders or any other system where the merchant can't physically see the card and/or the cardholder. Currently this is the type of account used for Internet Businesses accepting credit cards online. Because there is increased risk for charge backs and fraud with MOTO accounts, merchant account providers always charge the merchant higher rates and fees for this type of account.

Merchant Acquirer: A member that has entered into agreement with a merchant to accept deposits via bank card transactions.

Merchant Agreement: Written contract between the merchant and the acquirer regarding their rights, rates, and responsibilities.

Merchant Bank: Bank that holds a merchant account. After a consumer buys a product using a credit card, the merchant bank places funds into a merchant account in exchange for the right to collect on the debt owed by a consumer. See also merchant account provider.

Merchant Category Code (MCC): Merchant classification code that identifies the merchant by business type and or processing type, authorization and settlement.

Merchant Number: Number that identifies each merchant to the processing company.

Merchant Services Provider (MSP): A bank, ISO, or other firm that provides services for processing financial transactions, usually credit card sales. Many MSP's provide merchant accounts, while others require their clients to establish merchant accounts on their own. Some MSP's claim that they do not require merchant accounts; this may indicate factoring, which is illegal in many areas. See also holdback.

MID (Merchant Identification Number): Refers to the Merchant Identification Number. This unique number identifies a merchant.

Mid-Qualified: Transaction that did not interchange at the best rate because it was entered manually or was not settled in a timely manner.

MID/TID: MID - Merchant ID number and TID - Terminal ID numbers. For example, a grocery store typically has a single MID but has a distinct TID for each cash register terminal. By sorting all of that MID's traffic by TID, management can see which register contributed which set of transactions. Most Web retailers have just one terminal, so all traffic is associated with a single MID/TID. However, You may have more than one account associated with the same MID/TID. In that event, you'll find that batches often contain transactions from more than one account.

MO/TO discount rate (mail order / telephone order discount rate): The discount rate charged by the merchant account provider for credit card transaction in which the actual credit card was not available to the merchant.

Monthly Minimum: Amount in fees and percentages charged by a merchant services provider in a given month. If account activity does not generate the monthly minimum, the account holder must make up the difference.

N

Net Payment: Payment to the merchant for sales drafts less credits minus the specified discount fee.

Net Revenue: Discount income less interchange expenses.

Net Settlement: The settlement through an actual transfer of funds.

Non Face-to-Face Transactions: Any transaction where the card is not present at the time of the sale.

Non-Qualified Rate: A fee that applies to all retail, MO/TO Internet items without an AVS match, AVS Request, delayed or incomplete transactions/batches/batch settlements for foreign cards, business cards and or corporate cards.

Notification: A message where the sender notifies the receiver of an activity taken, requiring no approval or response.

P

PIN (Personal Identification Number): Personal Identification Number used by cardholder to authenticate card ownership for ATM or debit card transactions. The cardholder enters his/her PIN into a PIN pad. Customer entry of his/her PIN is required to complete an ATM/Debit card transaction.

Point of Sale (POS): The place and time at which a transaction occurs. This term also refers to the devices or software used to capture transactions.

Post Authorization: A sale transaction for which you received a VOICE AUTHORIZATION at an earlier time.

POS Terminal: A piece of equipment used at a merchant location that is connected to the bank and or their authorization service provider via phone lines to authorize, record and forward information electronically. If the credit card is available, the merchant can swipe the card through the terminal. See also swipe discount rate and MOTO discount rate.

Posting: The process of recording debits and credits to individual cardholder account balances.

PreAuth: An event where no money flows but the cardholder's account is asked whether a pending Sale is likely to be successful. The authorization/approval of a PreAuth usually indicates that a follow-up Sale will also be Approved, but do keep in mind that the favorable condition of the cardholder's account may change before you can issue a Sale.

Presentment: The process the acquirer uses to send transaction information to the issuer for reimbursement.

Prior Authorization: An authorization that has been obtained previously, either through operator or through credit card equipment.

Processor: A transaction processor; a large computer center that processes data from credit card transactions and settles funds to merchants.

Q

Qualification: A level at which a transaction interchanges. Level of qualification (qualified, mid-qual, et cetera) is dependent on how credit card number is entered, how quickly a transaction is settled, the type of industry, specific information, etc.

R

Real-Time Authorization: Authorizes a credit card in real-time, as a customer makes their purchase.

Real-time Processing: The verification and processing of credit card transactions immediately following a purchase. Real-time verification on the Web usually takes less than five minutes. Real-time verification is especially important for Web sites that sell products and services that consumers expect immediately, such as memberships to the site or software downloads.

Reason Code: A code used to provide additional information to a member regarding chargebacks, presentments, or retrieval requests.

Receipt: A hard copy of an invoice or sales draft that took place at the point of sale that includes a date, merchant name and or location, account number, dollar amount, reference code and the type of account.

Reconciliation: An exchange of messages between two institutions (acquirer, card issuer, or their agents) to reach agreement on their financial totals.

Recurring Fees: Regular, usually monthly, charges for maintaining a merchant account. Recurring fees include the discount rate, transaction fees, statement fee, and monthly minimum.

Recurring Transaction: A transaction that is charged to the cardholder on regular scheduled intervals for goods and or services provided.

Reference Number: A code given to a transaction by Host based processors.

Replacement Authorization: An authorization used when a previous authorization was approved and a subsequent authorization is required because the amount of the transaction is now different from the originally approved amount.

Representment: A financial transaction originated by a merchant to recover funds charged back by a card issuer.

Request: A message where the sender informs the receiver that a transaction is in progress and a response is required to complete the activity.

Reserve Account (aka Holdback): A portion of the revenue from a merchant's credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note: Merchant account providers almost never pay interest on holdbacks.

Retrieval Request: A request to a merchant for documentation concerning a transaction, usually a cardholder dispute or suspicious sale/return. A Retrieval Request can lead to a CHARGEBACK.

Reversal: A transaction from the acquirer to the card issuer informing the card issuer that the previously initiated transaction cannot be processed as instructed, i.e., is undeliverable, unprocessed or cancelled by the receiver.

S

Sales Draft: An actual paper documentation of a transaction.

Secure Server: A Web server or other computer connected to the Internet that is capable of establishing encrypted communication with clients, generally using SSL or SET.

Security: An internal department within the Credit/Risk Department that monitors the performance of the entire portfolio/merchant client base by monitoring suspect accounts and or transactions for possible fraudulent activity.

Settlement: The process by which transactions with authorization codes are sent to the processor for payment to the merchant.

Setup Fees: Fees charged for establishing a merchant account, including application fees, software licensing fees, and equipment purchases.

Shopping Cart Program: A software package that runs as part of a Web site to collect and record purchasing decisions by a visitor. Shopping cart programs are stored on Web servers.

S.I.C. Code (Standard Industry Classification): Refers to Standard Industry Classification. These codes are four digits used to identify the business type.

SSL (Secure Socket Layer): A system for encrypting data sent over the Internet, including e-commerce transactions and passwords. With SSL, client and server computers exchange public keys, allowing them to encode and decode their communication.

Stored Value Card: A pre-paid card that stores a monetary value from which the purchase amount is deducted after each transaction.

Suspect Transaction: A transaction that occurs one day prior to or directly after an account number is listed in the Warning Bulletin or pick up list.

Swiped Card: Credit card information that is read directly into the terminal as a result of swiping or sliding the credit card thru a card reader. The information magnetically encoded in the magnetic stripe is transmitted. This information includes secret data that helps validate the card.

Swipe Discount Rate: The discount rate charged by a merchant account provider for transactions in which a credit card is swiped on the POS Equipment. It is also available for inspection by the merchant. Swipe discount rates are generally lower than MOTO discount rates because the merchant can match signatures and perform other checks for fraud or misuse.

T

Terminal: An end-use device (usually with display monitor and keyboard) with little or no software of its own that relies on a mainframe or another computer (such as a PC server) for its "intelligence." A variation of this kind of terminal is being revived in the idea of the thin client or network computer. The term is sometimes used to mean any personal computer or user workstation that is hooked up to a network.

Terminal Based: A system that captures credit card transactions and holds them until settlement.

Terminal Capture: Type of software in which transaction information is stored in software, not at the host computer. Merchants using terminal capture must initiate SETTLEMENT at the end of each day or shift. Compare to HOST SETTLE.

TMF (Terminated Merchant File): A file listing the names of merchants and their principals whose bank card relationship has been terminated by the acquirer.

Third Party Processor: A non-member agent, employed by an acquiring bank, which provides authorization, settlement, and merchant services to a merchant.

Ticket Size: The monetary value of an order placed by credit card.

Transaction: Action between cardholder and merchant that results in activity on a cardholder account.

Transaction Fee: A per transaction charge incurred by merchants. This is in addition to the percentage DISCOUNT fees.

Truncation: An anti theft mechanism in which the complete credit card number and expiration date does not appear on the sales receipt. The last four digits of the credit card number will appear on the sales receipt.

U

URL (Uniform Resource Locator): An address for a file (or page) located on the Internet, usually the Web. Example: http://www.fasttransactonline.com.

V

VAR (Value Added Reseller): Third party software vendors.

Voice Auth: A transaction authorization that is provided by an operator, usually when an issuer sends a "Please Call" message to the merchant instead of an authorization number.

W

Web Host: The computer which has your active web site on it. To host a web site, a host computer must have proper server software, connection capacity for the traffic that comes to the web site and a unique and static internet protocol (IP) address. An IP address looks like 4 sets of numbers separated by periods, i.e. "123.11.123.1" A uniform resource locator, or URL, is a unique name that has been assigned to a static IP of a specific host computer making it easier to find a web site.

Web Server: A computer dedicated to storing the various files that make up Web pages and the protocols needed for communicating with other computers via the Internet.

Wireless: Describing radio-based systems that allow transmission of telephone and/or data signals through the air without a physical connection.