MERCHANT SERVICES DICTIONARY

Acquirer

Also called the acquiring bank, the financial institution that creates and maintains a merchant account, receives transactions from the merchant, and initiates the interchange via VISA/MasterCard. The acquirer must be a licensed member of MasterCard or VISA.

Address Verification Service (AVS)

Generally utilized by online/mail order merchants, a service that verifies the cardholder's address. However, AVS does not guarantee that a transaction is valid.

Annual Fee

Similar to credit card accounts, merchant accounts charge an Annual Fee. This is billed for running an account throughout the year.

Application/Set Up Fee: A fee charged upon account set up. Some providers omit this fee.

ABA Routing Number

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

ACH (Automated Clearing House)

The paperless funds transfer system maintained by the Federal Reserve or other entities that have networks to exchange electronic funds transfer items.

3DES: Also called triple DES

An extremely secure encryption system that encrypts data 3 times, using 3 64-bit keys, for an overall encryption key length of 192 bits.

ACH, Daily Discount or Batch Fee: A fee charged for settling a batch at the end of the day. If no transactions were made on any given day, this fee should not be charged.

Acquirer

Any bank, financial institution, and public or private company that maintains a Seller's credit card processing relationship and receives all transactions from the Seller to be distributed to the credit card issuing banks.

Address Verification Service (AVS)

A service provided in which the Seller verifies the Cardholder's address with the Issuing Bank. Address verification is not a guarantee that a transaction is valid.

Adjustment

A debit or credit to a Cardholder or Seller account to correct a transaction error.

Arbitration

The process followed by the Card Associations to determine whether an Issuer or an Acquirer has ultimate responsibility for a chargeback. Either member initiates this process after the re-presentment process is completed.

Associations

Any entity formed to administer and promote credit cards, including but not limited to MasterCard International®, VISA®, U.S.A., or VISA International®, that are licensing and regulatory agencies for credit card activities.

Acquiring Bank

Merchant bank contracted through the Financial Services Office on behalf of all University units and affiliates to perform bank/credit card processing services.

Approved Scanning Vendor (ASV)

Organizations that have been approved by the Payment Card Industry Council to validate adherence to certain Payment Card Industry Data Security Standards requirements by performing external vulnerability scans of Internet facing environments of merchants and service providers.

Authorization

Process by which a merchant obtains prior confirmation from the acquiring bank that a specific financial transaction will be processed successfully when settlement is completed.

Authorization response

The reply to a request for approval on a transaction.

Authorization response code

A code returned in the authorization response to indicate approval of a transaction. The code is recorded on the transition receipt as proof of Authorization.

Back-end Processor

A data processing company that contracts with Acquirers to provide communication and processing systems that connect with the interchange systems for clearing and settlement services on behalf of those Acquirers. (In some cases the Acquirer may act as its own back-end processor.)

Bankcard

Any valid card issued by a Card Association or other card-issuing organization that is presented in payment for goods and services or to obtain cash advances.

Batch

A group of accumulated transactions that have been captured, but not yet settled. Merchants generally settle their batches at the end of each day.

BIN (Bank Identification Number)

The 6-digit range of numbers assigned by the Federal Bureau of Standards and used by card companies to identify their financial transactions. The Discover® range begins with '6' (6xxxxx), the MasterCard® range begins with '5' (5xxxxx), and the VISA® range begins with '4' (4xxxxx).

Bank/Credit Card

Unexpired credit card affiliated with a credit card company (e.g., Visa U.S.A., MasterCard International) or branded debit card, ATM cards, and any other card or device other than cash or checks affiliated with recognized banking networks for which a merchant has established card acceptance with the acquiring bank.

Bank/Credit Card Acceptance Fees/Charges

Costs imposed on merchants by the acquiring bank in exchange for the privilege of accepting a card. Fees are assessed in the following categories:

Card Association

Any entity whose members issue credit or debit cards or acquire card payment transactions on behalf of their customers.

Card not present transactions

Transactions that are processed without the card or the cardholder being present, e.g., phone or Internet orders.

Card present transactions

Transactions in which the cardholder and the card are present.

Cardholder

A person or entity that is issued a credit or debit account that is accessed through the use of a card.

Cancellation / Termination Fee

Since there are fees involved in setting up a merchant account (administration costs, credit checks, server maintenance, etc.,) providers have a Cancellation/Termination Fee in place, which is paid if a contract is terminated prematurely. Depending on which provider is chosen, this fee may be based on the length of time a merchant has remaining on their minimum account period, or their monthly average fee.

Card associations

Payment networks such as VISA® or MasterCard® (and others) that act as a gateways between acquirers and issuers for authorizing and funding transactions

Cardholder

The owner of the credit or debit card that is being used to make a purchase

Check conversation

A check protection service by which a merchant scans a check image and converts it into an electronic transaction, similar to a PIN-based debit, for which the merchant is paid immediately. Check conversion requires a check imager peripheral.

Check guarantee

A check protection service by which a merchant guarantees she/he will receive payment for a check, even in the event of insufficient funds. Check guarantee requires a check reader peripheral.

Clearing

The exchange of transaction details between an acquirer and an issuer, which posts the transaction to the cardholder's account and reconciles it for settlement.

Chargeback

A reduction of the merchant's cash receipts initiated by the acquiring bank in response to a transaction that has been rejected by the acquiring bank, issuing bank or disputed by the cardholder.

Convenience Fees (a.k.a. surcharge)

Costs imposed on cardholders by the merchant to defray the expense of providing a convenient alternate payment channel (e.g., Internet, self-service kiosks, Interactive Voice Response (IVR)).

Card Verification Value

A 3 or 4 digit code printed on the back or front of a bank card; is an important security feature that protects Internet and phone transactions from fraud. The card verification value ensures that the credit card number is legitimate and that the card is in the possession of the purchaser.

Clearing

The transfer of data between Issuers and Acquirers.

Control Number

Number that uniquely identifies a retrieval request or chargeback.

Credit/Pending Settlement

Transactions of this status have been entered as credits, but have not yet been submitted for settlement. These transactions will remain in this unsettled state until they are submitted for settlement. Once a credit has been settled, its status changes to Credited.

Credit Slip

A paper or electronic representation of credit that is issued to a Cardholder on a prior credit card sale.

CVV1/CVV2

CVV1 is the three-digit value embedded on the magnetic strip of the bank's card. CVV2 is printed on the signature panel on the bank of cards immediately following the card account number. The 3-digit value helps validate that the cardholder has a card in his/her possession, and the card account is legitimate. A paper or electronic representation of credit that is issued to a Cardholder on a prior credit card sale.

Cardholder Information

Personally identifiable data associated with the cardholder including account number, expiration date, card validation number (e.g. CVV2, CVC2), transaction information or any other information that may be used to personally identify a bank card account or holder.

Centralized Payment Process

Controlled system of Internet sites, software applications, and communication protocols that interact together for the purpose of capturing and transferring cardholder information to the acquiring bank via the Internet and securely storing the information in a single repository, commonly known as a "gateway".

DUKPT

Derived Unique Key Per Transaction. An encryption technique for secure key-management that uses a unique key for each separate transaction to prevent the disclosure of any previously used key.

Discount Rate

A discount rate is a fee associated with collecting, assessing, approving, processing, and settling credit card transactions. This fees is often a percentage of the transaction value.

Electronic Benefits Transfer (EBT)

A government-funded, cash assistance program that distributes payments such as Food Stamps and Temporary Assistance for Needy Families (TANF) on cards that can be swiped and used with POS terminals.

ECommerce

Website based business transaction utilizing electronic payments such as bank/credit cards.

Imprinter

A manual device used to imprint embossed card information onto sales drafts for transaction records. An imprinter cannot authorize a transaction, merely capture card information. Imprinters are primarily used as a backup when other processing equipment is unable to read a card's magnetic stripe. For merchants without an electronic printer, an imprint is needed to prove a card was present if a key-entered transaction is disputed.

Interchange

The process of authorization and settlement of card transactions through VISA or MasterCard. Interchange includes the transmittal of cardholder information, transaction data, and fees.

Interchange Fee

The amount card associations charge acquirers for each card transaction they process. Card associations pay interchange fees to the issuer as compensation for expenses incurred in providing lines of credit to cardholders. The acquirer's cost is passed on to merchant as a part of the discount rate.

Issuer

Also called the issuing bank, the financial institution that issues a credit card to a cardholder. The issuer must be a licensed member of MasterCard or VISA.

Internet Gateway Fee

A monthly fee for Internet gateway services that can amount to as much as $30 and doesn't include other fees a provider charges per transaction. An additional gateway transaction can also be charged that averages between 5 and 20 cents per transaction.

Interchange Network

An electronic network maintained by Discover®, MasterCard®, American Express, or VISA® that exchanges data relating to the value of card sales and credits among Issuers and Acquirers.

Issuer

Any Discover®, MasterCard® American Express or VISA® member, or a commercial organization that establishes and maintains customer credit lines that are accessed through the use of a card. (Public and private companies and financial institutions that offer card-accessed lines of credit to consumers and businesses.)

Issuing Bank

Financial institution that grants credit to a cardholder by issuing a credit card to the cardholder.

Magnetic stripe reading

When the credit card is swiped through the terminal to record the card information. Obtaining a magnetic strip reading proves the card's presence at the time of a transaction.

MasterCard®

A registered mark for MasterCard International, Inc.

MATCH

A shared database maintained by the Card Associations that lists all Sellers terminated for cause by Acquirers.

MCC or MCC Codes

Special numbers assigned by the Card Associations to Seller types for identification and tracking purposes. MasterCard® uses MCC (Seller Category Code), while VISA® uses SIC (Standard Industry Codes).

Merchant

A business that has contracted with an acquirer for card processing services and accepts credit cards as a method of payment for goods or services.

Merchant Account

A unique account established with the acquiring bank that is used to track equipment, transactions, fees, compliance activities, and designated points of contact and all related information of the merchant.

Message Authentication Code (MAC)

A data security feature that produces a unique code for every digital message, which allows the recipient to verify that data has not been altered since being transmitted by the sender.

Monthly Minimum Fee

The amount that a vendor pays towards their merchant account expenses, should their monthly transactions fall below the amount predetermined by the merchant account provider at the time of account setup. If you do not fall below the minimum amount for a given month, then this charge would not apply.

Monthly Statement / Support / Service Fee

A monthly fee of approximately $10 to $15 charged for services. A merchant account provider should provide the vendor with a toll-free number for full back-up support and assistance when needed.

Operating Guidelines

Rules and procedures published by the acquiring bank that specify the operational parameters that each merchant must adhere to when accepting a card as a form of payment.

Payment Gateway

An Internet-based service that transports credit card information from a computer terminal or Web site to a credit card processor, where it can be verified.

PIN Debit Transaction Fees:

A fee that applies when PIN numbers must be entered manually. This fee is normally a flat rate (no discount percentage added) and runs around 70 cents.

Point-of-sale terminal (POS)

Also called a card-processing terminal, a device used to record and transmit card transactions electronically for authorization and processing. POS terminals can transmit information via a regular telephone line, broadband Internet connection, or wireless signal.

Quasi-cash purchase

A transaction representing sale of items that are directly convertible to cash such as money orders and travelers cheques.

Qualified Security Assessor (QSA)

The Payment Card Industry (PCI) QSA designation is conferred by the PCI Security Standards Council to individuals that meet specific information security education requirements. The primary goal of QSA is to complete PCI compliance assessment, auditing and consulting for merchants to ensure and validate the merchant is meeting PCI standards.

Re-presentment

The re-submission by an Acquirer of a previously charged back sale in an attempt to re-charge the Cardholder. Chargebacks requires some form of additional documentation confirming the validity of the charge and disputing the chargeback reason.

Reprogramming Fee

A fee that applies whenever it is necessary to update a portion of transaction set up, which covers the cost of reprogramming both hardware and software.

Retrieval Request

A retrieval request occurs when your customer requests more information about a transaction that appears on his or her credit card statement.

Return Policy

The merchant's limitations and/or requirements on accepting returned merchandise.

Secure Socket Layer (SSL)

A security feature that keeps Internet communications private and ensures they have not been forged or tampered with.

Settlement

The exchanging of data or funds between the acquirer and the issuer. Settlement includes funding the merchant for the transaction and paying any necessary fees due to the issuer or acquirer for processing the transaction.

Shopping Cart

A software application needed for e-commerce and online transaction processing. Shopping cart software collects the items a cardholder selects for purchase, maintains a running total, and may calculate taxes and shipping.

Surcharge / Partially Qualified / Non-Qualified Fees

This fee usually ranges anywhere between 0.5% to 2.5% and applies to certain credit cards such as company credit cards, rewards cards, government cards and those used internationally. When speaking with different merchant account providers, get clear answers regarding these fees before signing on the dotted line.

Transaction Fees

Simply put, this is the cost incurred when a transaction takes place, and is usually linked with the discount rate. A transaction fee is charged regardless of whether the transaction is approved or not. The average transaction fee is usually between 20-30 cents, depending on the type of sale.

Sales Draft

The paper or electronic evidence of a purchase.

Secure Payment Page

A secure payment page assures customers that their payment information is encrypted for privacy and data integrity before it's sent over the Internet. This page is typically identified by the "s" in https:// (instead of http://). Payment gateway providers make this necessary e-commerce link possible by hosting the payment gateway software and individual secure payment pages on their own servers.

Securecode

A fraud prevention tool, MasterCard Issuers confirm consumers' identities in real time during transactions at participating merchant sites. When the consumer clicks "buy" at checkout, software installed on the merchant server recognizes registered MasterCard and an authentication screen appears in the consumer's browser. The consumer enters his/her password and the password is verified.

Seller or Online Seller

An individual or business that sells products or services and is capable of accepting payment for products and services via a Seller account.

Seller Account or Online Seller Account

The bank account a Seller identifies as the sole account from which monthly and/or transaction fees are debited.

Seller Bank

(Acquirer or Processor) The financial institution with which a Seller contracts to accept credit cards for payment of goods and services.

Seller Fees or Fees

Sellers are charged several types of fees for screening and processing online payments. Fees for products and services include, but are not limited to costs for the following:
– Monthly Online Seller Account
– Discount rate
– Per item charges for credit card and electronic check transactions
– Chargebacks.

Settlement

The process of transferring funds for sales and credits between Acquirers and Issuers, including the final debiting of a Cardholder's account and crediting a Seller's account.

SIC or Standard Industry Codes

Transaction

An act between a Seller and a Cardholder that results in either a paper or an electronic representation of the Cardholder's promise to pay for goods or services received from the act.

TID, Terminal ID

A unique identification number assigned to a specific point of sale (POS) device by the Acquirer.

TLS

Abbreviation for “Transport Layer Security.” Designed with goal of providing data secrecy and data integrity between two communicating applications. TLS is successor of SSL.

Travel & Entertainment (T & E) Card

A rewards card issued with incentives for making purchases where cash back or extra points are rewarded to the Cardholder when used at certain businesses including restaurants, airlines, hotels, car rental or tourism merchants. These merchants will pay a slightly higher interchange rate for these transactions. May be called “Perk” or “Perquisite” cards and some examples include Visa Rewards, Visa Signature Preferred, MasterCard World, Diners Club, Carte Blanche, American Express, etc.

Truncation

Method of rendering the full PAN unreadable by permanently removing a segment of PAN data. Truncation relates to protection of PAN when stored in files, databases, etc. See Index Token for protection of PAN when displayed on screens, paper receipts, etc.

Unauthorized Transaction

Any sale for which a Cardholder does not provide his/her specific authorization (This should not be confused with the failure to receive an authorization response from the Issuer.)

VAR Sheet

A sheet used by Value Added Resellers to assist in setting up the account.

Virtual Terminal

A credit card terminal run from the computer screen, iPhone or other smartphone or handheld device which runs in a window via web browser or other software application, rather than using dedicated hardware like a physcial credit card terminal. Examples include Transaction Central, SkipJack and Authorize.Net.

Voice Authorization

A Preapproval Authorization performed over the phone by a Merchant to verify funds on a card holder’s credit card or the validity of a customer credit card prior to charging the transaction.

Void

A void transaction describes a credit card transaction that has been deleted before settlement (close of batch). The transaction amount has only been authorized to the card holder’s account, therefore the cardholder should see that no funds were removed and card holder’s balance will clear the authorization amount within 24-48 hours.

Visa Signature Preferred (VSP)

A Rewards card from Visa offering cash back or points incentives. These cards are a higher rate to merchants. See Travel & Entertainment Cards.

WEP

Acronym for “Wired Equivalent Privacy.” Weak algorithm used to encrypt wireless networks. Several serious weaknesses have been identified by industry experts such that a WEP connection can be cracked with readily available software within minutes.

WPA/WPA2

Abbreviation for “WiFi Protected Access.” Security protocol created to secure wireless networks. WPA is the successor to WEP. WPA2 was also released as the next generation of WPA.

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