Glossary

Acquirer (acquiring bank) 

A bank or financial institution that processes credit or debit card payments on behalf of a merchant. The acquirer allows merchants to accept card payments from card-issuing banks. 

Acquirer agreement 

An agreement between an ISV, ISO, or payment facilitator and the acquirer that sells processing services. This contract is negotiated 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) 

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

Annual fees 

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

Anti-Money Laundering (AML)

Anti-Money Laundering activities and controls are practices and procedures designed to identify and protect against financial criminals seeking to disguise illicitly gained funds as legitimate. Many institutions, especially those in the financial sectors, are required by the Bank Secrecy Act (BSA) to have detailed programs in place to prevent, detect, and report potential money laundering activities. 

Application 

A container for Identities, Transfers and etc. A Platform can have multiple applications. 

Authorization 

The approval process to prove the customer has sufficient funds on their payment card to pay for a transaction. 

Automated Clearing House (ACH)

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

Automated Clearing House (ACH) credit 

Funds are electronically deposited into a bank account. 

Automated Clearing House (ACH) debit 

Funds are electronically debited from a bank account. 

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. It is the same as the bank's SWIFT code. 

Bank Identification Number (BIN)

Identifies the bank or financial institution issuing the card. The first six or eight digits on the credit card identify the card issuer.

Basis points (bps) 

A financial term that describes a common unit of measure. One basis point is equal to 1/100th of 1% or 0.01%. 

Batch

A group of card transfers collected for submitting to settlement to the merchant's bank account. 

Batch fee 

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.

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 

Capture 

After a card has been authorized, a capture is initiated. A capture signifies that the transaction has taken place and officially moves the customer's funds into the designated merchant account. 

Cardholder 

The person who is issued a credit or debit card. 

Card networks

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

Card-not-Present (CNP)

A transaction where the card cannot be physically presented to the merchant at the time of 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 (CP) 

A transaction where the cardholder can present a physical card to the merchant. Transactions can be completed via swiping the card through a magnetic card reader, waving the card in front of a contactless payment terminal or inserting 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 transaction made by the card issuer to the merchant's acquiring bank because of a dispute, POS error, or fraud. An excessive number of chargebacks can result in issues with card networks who may refuse to onboard merchants on their networks.

Chargeback fee

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.).  

Consumer-to-business (C2B)

Classifies any transaction where a consumer pays a business.

D 

Debit 

An amount withdrawn from an account. 

Dispute 

Also known as a chargeback. A claim made by a cardholder to the issuing bank that questions the validity of a credit or debit charge. 

Dues and assessments 

Fee paid to the card network for use of their credit card and to process transactions on their networks.

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.  

eCheck 

An electronic form of a check. 

eCheck refund 

A reversed eCheck. 

eCheck return 

A failed eCheck. 

Embedded payments  

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

Equipment fees 

Fees charged to merchants to lease or for maintenance of payment processing equipment.

Europay, Mastercard and Visa (EMV) 

A chip-based standard for payment cards using chip and pin systems for card present transactions. EMV is designed to combat fraud. 

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 

A secure connection involved in the transmittal of a payment transaction message between the merchant point of sale and the acquiring processor.  

I 

Identities 

Created after a Merchant Identity is provisioned.  

Independent Sales Organization (ISO)

An ISO 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 into 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)

An ISV is an individual or organization that sells 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 fees 

Fees that go to the issuing banks. 

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 

The card network that issues a credit or debit card. 

Issuing processor 

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

K

Know Your Customer (KYC) 

The process of confirming the identity of a merchant or customer. The verification of the identity is meant to prevent fraud, identity theft, money laundering, and terrorist funding. 

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 

Markup fees

Fees that go to the credit card processors. These fees are negotiable. 

Merchant 

Any business that accepts credit or debit cards, or alternative payment methods as a source of payment. A merchant offers goods or services in exchange for payment. 

Merchant Category Code (MCC)

A four digit number that classifies a business by the type of goods or services it provides. 

Merchant Identification Number (MID)

A unique code provided to a merchant by their payment processor.  

N 

National Automated Clearing House Association (NACHA) 

National association responsible for developing and enforcing ACH rules and guidelines. 

Non-sufficient funds (NSF) fee 

Fee charged to process and track transaction(s) that have been reversed due to insufficient funds.  

Notice of Change (NOC)

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

O 

Originating Depository Financial Institution (ODFI)

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 (PCI) 

Consists of all the organizations which store, process, and transmit cardholder data, including automated teller machines (ATMs), point of sale (POS) terminals and credit, debit, prepaid, and electronic money cards. PCI is governed by the Payment Card Industry Security Standards Council.

Payment Card Industry Data Security Standards (PCI -DSS)

An information security standard for organizations that handle payment cards. This standard is governed by the Payment Card Industry Security Standards Council and exists to increase controls around cardholder data and to reduce credit card fraud. Compliance is validated on an annual basis, either by a qualified security assessor, or by self-assessment questionnaire, depending on the volume of transactions made by each organization.

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 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 

Represents either a credit card or bank account. 

Payments Processor 

Software/technology that processes transactions between merchants, issuing banks, and acquiring banks. 

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)

An institution qualified to receive Automated Clearing House (ACH) entries.  

Reconciliation 

The process in which incoming and outgoing funds are matched. 

Refund 

When a customer cancels the purchase of product or service after they have paid and the merchant must return the funds to the customer. 

Representment 

Part of the chargeback process. Representment occurs when the merchant does not agree with the customer's clams and will not accept the chargeback. 

Retrieval request fee (RRF)

Fee charged when a customer or the customer's issuing bank requests a copy of a sales draft. Credit card processors charge a nominal fee to process the request. 

S 

Settlement

A collection of transactions that are batched together in a settlement to pay out the merchant.

Standard Industrial Classification (SIC)

A government-maintained list of codes identifying and classifying 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 a merchant by a credit card processor. A TID can be used to identify the source of a transaction. 

Termination rights 

The right to end an existing payment processing contract.

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 

Void transaction 

A transaction that is canceled before it settles through a customer's credit or debit card. 

W 

Wire transfer

A near real-time transfer of funds between bank accounts. This feature is limited for bank to bank or intrabank transfers.