Glossary

acquirer/acquiring bank

An acquiring bank is a bank or financial institution that processes credit or debit card payments on behalf of a merchant. The acquirer allows merchants to accept credit card payments from the card-issuing banks within an association. 

acquirer agreement 

An agreement between an ISV, ISO, or PayFac and the acquirer that sells them processing services. This contract is negotiated over months and determines a variety of topics including but not limited to: processing rates, transaction fees, value added services, liability, and applicable service level agreements (SLAs).

Address Verification Fees (AVF) 

Fees charged for the verification of a credit cardholder's address. This is typically performed via the Address Verification System (AVS), which verifies that the zip code submitted at the time of processing matches the zip code on the cardholder's billing statement. 

Address Verification System (AVS) 

A system that verifies the zip code that is submitted at the time of processing matches the zip code of on the cardholder's billing statement. 

annual fees 

Fees associated with a credit card. This can include membership fees, as well as rewards costs.

Automated Clearing House (ACH)

A network between banks that facilitates the transfer of money between depository accounts at participating banks.

Automated Clearing House (ACH) refund 

A returned ACH transaction.

Automated Clearing House (ACH) return 

A failed ACH transaction.

 B

Bank Identifier Code (BIC)

Identifies the beneficiary's bank quickly and easily. It is the same as the bank's SWIFT code. 

Bank Identification Number (BIN)

The Bank Identification Number uniquely identifies the institution issuing the card. The first six or 8 digits on the credit card identify the card issuer. 

batch fee 

A fee charged for each submission of a batch file to a payment processor. Batch fee(s) are volume based fees charged for the processing load on the system that ingests and ultimately executes the transactions specified in a given batch file.

batch file 

A batch file consists of a bundle of processing records, generally for merchant settlements or fee processing.

Business-to-business (B2B)

Classifies any transaction or use case where a business sends money to another business. 

Business-to-consumer (B2C)

Classifies any transaction or use case where a business sends money to a consumer.

C 

Consumer-to-business (C2B)

Classifies any transaction where a consumer pays a business.

card networks

Refers to the four major US based card payment systems; Visa, Mastercard, American Express, and Discover. 

card not present (CNP)

Refers to the channel used to complete the transaction. Transactions can be completed via telephone, internet, mail, mobile device or any time the physical card is not interacting with a card reader. 

card present 

Refers to transactions where the customer swipes the card through a magnetic card reader, waves the card in front of a contactless payment terminal or inserts the card into a chip-reading device to request the transaction authorization. 

Card Verification Value (CVV)

Three digit code contained in the magnetic stripe of a payment card relied upon by the issuer to validate the presence of the actual card in a magnetic stripe read transaction. 

Card Verification Value 2 (CVV2)

Three digit code imprinted on the back of a payment card, a tool used to assist in validating the individual presenting the payment card is the actual cardholder. 

chargeback

A claim by a cardholder that a given transaction was incorrect or unauthorized. An excessive number of chargebacks can result in issues with networks who may refuse to onboard merchants on their networks.

chargeback fee

A fee charged for a chargeback. In the instance of a chargeback, additional work may be required to remediate the issue, including but not limited to: notifications, evidence collecting, escalation and others, most if not all service providers involved in the transaction may charge chargeback fees to the end merchant that incurs the initial chargeback.  

complex payment models 

Any model where a merchant uses a third party to gain access to the card networks and Application Performance Monitoring (APM) instead of a direct acquirer relationship (Marketplace, Payment Facilitation, Aggregation, Flash Title, ISO, ISV/VAR, etc.).  

D 

dues 

Fees charged by card networks for processing transactions. 

E 

early termination fees 

Fee that merchant(s) may incur as a result of the merchant terminating the processing agreement before the end of a specified period of time.  

embedded payments  

Refers to natively building and incorporating payments processing as an integral part of a business offering or product. 

equipment fees 

Fee(s) charged to merchants to lease or for maintenance of payment processing equipment.

F 

Foreign Exchange (Forex)

The trading of one currency for another. When a trade occurs, a fee is applied by the financial institutions of the receiving or originating institution. 

G 

gateway 

An entity (can comprise of multiple) involved in the transmittal of a payment transaction message between the merchant point of sale and the acquiring processor.  

I 

Independent Sales Organization (ISO)

An Independent Sales Organization contracts with a member bank to provide merchant or cardholder solicitation. ISO representatives sell businesses payment processing solutions to merchants so they can accept card payments, as well as card readers and payment processing rate contracts for a given acquirer or ISO.  

integrated payments 

Refers to the act of building and incorporating payments processing in to an existing business offering or product. This type of payments processing shares data between the business management system and the payments system.  

Integrated Software Vendor (ISV)

Software that incorporates a payments strategy or processing as part of its product offering. This type of software is generally associated with an integrated payments approach. 

interchange assessment

Assessments are paid every time a cardholder makes a purchase through a credit card. Assessments are paid directly to the card associations.  

interchange reimbursement fees

Fees paid by member banks related to transactions cleared through interchange, typically paid by acquirer to issuer.  

Internal Revenue Service (IRS) reporting fees 

Fees charged by a payment processing service for reporting payment processing information directly to the IRS for a given merchant.   

issuer 

A member that enters into a contractual relationship with a cardholder for the issuance of one or more card products. 

issuing processor 

An entity directly connected to the any of the card networks which transmits authorization, clearing, and settlement messages for exchange between acquirers and issuers. 

L 

liquidated damages 

A penalty or fee in a merchant agreement charged by the acquirer in the event an agreement is terminated early by the merchant to recoup costs associated with opening and maintaining the account. 

M 

merchant 

An entity that accepts a card for the sale of goods and or services or to originate funds transfers to another account, and submits the resulting transaction to an acquirer for interchange, directly or via a payment facilitator. 

Merchant Category Code (MCC)

This code identifies the type of merchant business. The MCC is included in the authorization transaction message so the issuer may make authorization decisions based on the content. 

Merchant Identification Number 

A unique code provided to merchants by their payment processor.  

monthly fees

Recurring monthly fees paid for access to a payment processing service.  

N 

Notice of Change (NOC)

A notice generated by a Receiving Depository Financial Institution in a ACH transaction to inform the Originating Depository Financial Institution of a change in the bank account being accessed in a transaction.   

non-sufficient funds (NSF) fee 

A fee charged to process and track transaction(s) that have been reversed due to insufficient funds. Various banking institutions and card networks charge NSF fees. 

O 

Originating Depository Financial Institution (ODFI)

Used in context of an ACH transaction. The ODFI acts as the interface between the Federal Reserve or ACH network and the originator of the transaction. 

originator

The entity that starts or 'originates' a transaction flow.  

P 

Payment Card Industry Attestation of Compliance (PCI - AoC)

A version of a PCI Report on Compliance available to the public that details a company's PCI compliance.  

Payment Card Industry Data Security Standards (PCI -DSS)

A data security standard for protecting payment card data that all companies working within the card payment industry must abide.
 

payment card industry fees

Fees associated with maintaining PCI compliance, including but not limited to: audit fees, external security assessment fees, infrastructure hosting fees (if cloud-based), and consulting fees (if needed in the absence of a formal compliance officer).  

Payment Card Industry Report on Compliance (PCI - RoC)

An audit report disclosing detailed processes and procedures in-place to validate a company's PCI compliance status. This document is not available to the general public. 

payment facilitator 

A service provider for merchants who want to accept payments online or physically. 

payment gateway fees

Fees charged by the gateway for the authorization, capture, and or processing of transactions. 

payment instrument 

A payment instrument is a paper-based or electronic means or other medium used to initiate the transfer of funds.

Push-to-Card (P2C)

A real time payments standard that allows individuals or businesses to instantly transmit funds to a specific card on a given card network. Funds are generally available immediately up to a specified limit based on use case, and funds settle at the time they appear in the account, meaning there is no liability for funds availability.  

R 

Receiving Depository Financial Institution (RDFI)

Used in context of an ACH transaction. The RDFI is qualified to receive ACH transactions.  

remittance detail

Data associated with what a payment is for.  

retrieval request fee (RRF)

A fee charged for the retrieval of information from a given data repository. Generally charged for receiving information about a given merchant from an acquirer/processor.  

S 

Service level agreement (SLA)

An agreement of service that is contractually obligated. The agreement can include details regarding but not limited to: uptime, percentage of chargebacks, response times as well as other operational details. Violations to the agreement may incur a penalties as noted in the agreement. 

settlement

The process of funds for a given transaction being received at their destination.  

Standard Industrial Classification (SIC)

A government maintained list of codes identifying business types from which MCC codes used by card networks are derived.   

statement fees

Fees for statement services. 

T 

Terminal ID (TID)

The individual identification number provided to given card reader to identify either the individual card reader itself, or the type of card terminal being used. 

third party payments provider

A company that provides either standalone or integrated payments as an independent provider or as a partner to your core business. 

tokenization 

Encryption of payment card data into a 'token' - a hashed version of the card that uses encryption to ensure that personal card information cannot be accessed while it is stored on file or in transmission to process a transaction. This technology allows 'card on file' processing without enormous risk to the cardholder and the entire payment card network. Tokenization is governed by the PCI standard and requires certification and audit of any provider of the service prior to its use. 

V 

Voice Authorization Fees (VAF)

Fees associated with voice processing of payments generally performed through a touch tone phone system.   

W 

wire transfer

A near real-time transmission system for transferring funds between bank accounts. Limited for bank to bank or intrabank transfers, wires are sent or received at pre-specified windows by each bank and have very high transmission limits.