Below is a glossary of terms common to the merchant services arena.
ABA Routing Number:
This 9-digit number is assigned by the American Banker’s Association and is used to identify individual banks. When performing an ACH transfer from one bank account to another, this number is used to assist the electronic routing of funds.
An access number is a telephone number used by the modem in a computer to communicate with an Internet Service Provider allowing for online access.
ACH (Automated Clearing House):
A processing organization networked with others to exchange (clear and settle) electronic debit/credit transactions (no physical checks).
This is the status of a Visa/Master Card member bank that establishes and maintains the merchant relationship and processes all merchant transactions.
Address Verification Service (AVS):
AVS is a tool for merchants to reduce the risk associated with card not present transactions, such as mail order, telephone order or Internet transactions. The billing address given by the customer is passed in the transaction and it is checked against the billing address on file at the customer’s card issuing bank.
A fee charged to Merchants, which can be used to lower the discount rate.
This is a fee for processing the paperwork and setting up the account.
The procedure a member can use to resolve a chargeback-related dispute between two members. MasterCard or Visa resolves the dispute between members and decides responsibility for the fines that may be assessed to the participating members.
This is a process where an issuing bank or authorized agent approves a transaction for the specified amount. This process takes place by the merchant via telephone or terminal before the transaction is completed.
This code is given by the credit card issuer and authorizes a specific transaction. This number should be saved for future reference.
A communication charge for each transaction (Sale, Credit, Void), and each time a merchant closes a batch of transactions.
Automated Response Unit (ARU):
An ARU allows the manual keyed entry and subsequent authorization of a credit card over a cellular or land-line telephone. A business typically imprints their customer’s card with an imprinter and then processes the transaction instantaneously over the phone.
Average Ticket Size (AVT):
The average Visa/MasterCard dollar amount of each transaction the merchant anticipates processing or actually processes over time.
Bankruptcy Notification Service:
This service is a joint effort between MasterCard and Visa. Bankruptcy filings and cases are gathered from all the bankruptcy courts and sent to the credit bureau for account numbers. Bankruptcy information is routed daily to appropriate members.
1/00th of a percentage point is a basis point. In merchant processing terms there are three distinct categories: Qualified, Mid-Qualified, and Non-Qualified. Concerning the discount rate, there is an increase of basis points from Qualified to Mid-Qualified and an increase from Mid-Qualified to Non-Qualified.
The credit card transactions remaining on a merchant’s terminal are stored in an “open” batch. They will remain there unless the merchant “batches out”. Once the merchant batches out, the daily sales are submitted for processing, and the batch is now “closed” or “settled”.
Business Financials are a set of reports including a: Profit and Loss Statement, Balance Statement, and Statement of Cash Flow.
The financial institution or company that has provided a card to a cardholder.
A transaction evidenced by the action of swiping a card through a terminal or by an imprinted and signed credit card draft.
The person who the credit card is issued to and whose name is embossed upon the face of the card.
A transaction in which only a bank or financial institution can submit, for cash to a cardholder. The transaction is posted against the cardholder’s bankcard account. Interest fees for cash advances are charged from the day of the transaction.
The situation in which the issuer is faced with a delinquent loan of such severity that it must absorb the amount of the debt, at least temporarily, in order to clear the amount from its ledgers. The issuer may still attempt to collect some or all of the amount owed through the recovery process.
A chargeback is the result of an action taken by a cardholder who disputes a credit card transaction through their credit card issuer. The card issuer initiates a chargeback against the merchant’s account. The sale amount of the disputed transaction is immediately debited from the merchant’s bank account. Merchants have 10 days in which to dispute the chargeback. This may be accomplished by providing the card issuing bank with a proof of purchase by the cardholder. This could be a signature or proof of delivery. A chargeback fee is generally assessed to the merchant account by the merchant bank for the handling of this process.
A system that acts as the gatekeeper of merchant processing. Applications are entered into the system, checked for completeness, and are summarized to quickly determine the status of a file.
Contingent Liability refers to a situation created when a merchants processes transactions before the date a cardholder receives the goods or services purchased. Travel agencies and mail order / telephone order merchants pose contingent liability risks to the bank.
A document used by a corporation that designates individuals to allow them to act as signers on behalf of the company.
A plastic card having a magnetic strip, issued by a bank or business authorizing the holder to buy goods or services on credit. Also called charge card.
Credit Card Fraud:
Credit card fraud is a kind of fraud where a merchant (business, service provider, seller, etc.) is “tricked” into releasing merchandise or rendering services, believing that a credit card account will provide payment for goods/services. The merchant later learns that they will not be paid, or the payment they received will be reclaimed by the card’s issuing bank.
Credit Card Processing:
Obtaining immediate authorization of a credit card purchase when ordering online. The card processing company notifies the merchant, and the merchant confirms or denies the order with the customer.
Credit Card Processors:
Merchant Services providers that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Web site operators usually must first establish their own merchant account before contracting for credit card processing services.
Credit Card Terminal:
A credit card terminal is a stand-alone piece of electronic equipment that allows a merchant to swipe or key-enter a credit card’s information as well as additional information required to process a credit card transaction. A credit card terminal is a dedicated piece of equipment that only processes credit cards although it is common for related transactions including gift cards and check verification to also be performed. A credit card terminal typically must be plugged in to a power supply and connected to a telephone line.
A credit report is run on every signing principal on the merchant account application and is used to make approval decisions.
Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and other products against which the customer can compare the organization’s products.
(Card Verification Value2) A three digit security code that is printed on the back of most credit cards and is sometimes asked by the merchant along with the card information. This code helps aid in reducing fraud in a card-no-present environment and helps validate a genuine Visa / MasterCard credit card.
The collection, formatting and storage of information in computer memory. Some point-of-sale terminals perform data capture functions.
A multitude of companies that honor card transactions by debiting the cardholder’s checking account for the purchase amount. Debit Networks are smaller than their credit based counterparts and are more numerous. Some examples are Star, Interlink, NYSE, and many others.
An account used by a customer to make deposits and withdrawals at a financial institution. Includes checking, savings and NOW accounts, etc.
Direct Mail Merchant:
Indicates merchants that submit actual sales drafts for payment (paper merchant) through the mail for payment
Direct Marketing is a scenario where a merchant solicits business to people who did not ask to be solicited, otherwise known as “junk mail”. Direct Marketing is often confused with “Mail Order / Telephone Order”. A merchant that sends catalogs or brochures to their prior customers or current subscribers is not a direct marketer. A merchant that sends catalogs or brochures to everyone is a targeted area is considered a direct marketer.
A percentage of each transaction that the merchant is charged by the Merchant Services Provider for facilitating a credit card transaction.
Doing Businss As (DBA):
The DBA is the name the public sees, whether on a physical storefront or on the web. If the merchant has another business, then we would need a separate application for both.
A downgrade occurs when the merchant does not meet the Visa/MasterCard requirements for a transaction and as a result the transaction is moved to a lower level of interchange. The merchant pays a higher rate for downgrades.
E-Commerce stands for Electronic Commerce. E-Commerce is the process of buying or selling goods or services via the internet. This is most commonly done though a merchant’s or service provider’s website and usually involves an online catalog and shopping cart. Payments are processed with an online gateway.
Also referred to as Electronic Data Capture terminal. A point-of-sale device that reads information encoded in the bankcard’s magnetic stripe, performs authorization functions, stores transaction data and batches and transmits that data to the acquirer for processing.
Electronic Funds Transfer System-An electronically-based system that eliminates the need for paper (such as a check) in the movement of funds, e.g., ATM withdrawal or a pay-by-phone transaction.
Electronic Ticket Caputre (ETC):
An ETC system reaches out and “grabs” sales ticket information electronically. Buyer information is contained on the magnetic strip on the back of the credit card. The merchant “swipes” the card through a terminal, and the buyer information is “read” by the computer system and merged with the sales information. It then processes the ticket just as if the merchant was making a manual deposit at a bank. This action is normally done in “batches” of tickets, such as at the end of the day.
Electronic Transactions Association (ETA):
ETA is the association for the electronic payments industry and serves the needs of organizations who offer transaction processing products and services. ETA is an international association with over 400 member companies spanning 7 different countries. The ETA holds an annual meeting and expo.
The process of printing data, in the form of raised characters, on the bankcard. Provides identification of the card and allows the imprinting of sales drafts.
The method used to scramble financial information for security purposes. For example, all Personal Identification Numbers (PIN’s) are encrypted when transmitted for authorization.
In a face-to-face environment, transactions take place with the cardholder and merchant face-to-face. The cardholder either swipes the terminal or signs an imprinted sales draft. This type of transaction has the lowest discount rate as it is considered low risk.
The purchase of debts owed, or “accounts receivable,” in exchange for immediate payment at a discount. In e-commerce, the term is often applied to ISOs 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. Factoring of credit card debt is prohibited.
Federal Tax ID Number:
This is a 9-digit number assigned by the IRS and is used to track business taxes. All applications are required to specify their Federal Tax ID number. Some smaller merchants who are sole-proprietors may use their personal Social Security Number in place of a Federal Tax ID number.
Full Business Name:
The full name of a business, which directly corresponds to a Federal Tax ID Number.
This is a service which connects the shopping cart with the card processor. Essentially, the gateway accepts the data in the shopping cart’s format, translates it to the card processor’s format and sends it to the card processor. It then does approximately the same thing, but in reverse, when it returns the authorization and other codes to the shopping cart.
A personal guarantor is somewhat like a co-signer. The guarantor agrees to personally guarantee any processing losses that are incurred as a result of doing business with the merchant. A personal credit report may be ordered for review by our underwriters.
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.
A slide-type device used to create an embossed image of the credit cards characters on to a transcription slip. It is a necessity for all merchants to have a manual imprinter for special case where a physical imprint may be needed.
Independent Contractor / Independent Sales Organization (IC/ISO)
This is an acronym for a registered sales representative, people that have been contracted by a company to sell its merchant processing services throughout the nation.
Integrated Point Of Sale (IPOS):
This acronym refers to conventional terminals that are “smarter” and more sophisticated in that they may be set-up to communicate with like terminals owned by the same merchant -even if they are located at different locations and with different merchant numbers.
The exchange of transactions between clearing members for Visa and MasterCard transactions, according to the associations operating rules and regulations. During this process transactions are routed to the appropriate card issuing bank.
Internet Merchant Account:
A Merchant Account is a relationship between a retailing company and a Merchant Bank, which allows the retailer to accept credit card payments from customers via the Internet.
A transaction is “keyed” when the information from a credit card is manually typed into a terminal or computer. A transaction is keyed because either the card is not present at the time the transaction is entered or the equipment being used to process the transaction can’t read the card.
A stripe (on the bankcard) of magnetically encoded cardholder account information.
Magnetic Stripe Reading Terminal:
A point-of-sale terminal which reads the encoded information from the magnetic stripe when the bankcard is swiped through the terminal “slot.” The terminal automatically transmits account and transaction information to the authorizing agent.
Member Alert To Control High-Risk Merchants (MATCH):
As a way to control high-risk Merchants, MATCH is an alert system that uses an electronic bulletin board to track businesses and people when their merchant account has been reported “terminated” by an acquiring bank for fraud, factoring, and other serious violations of their merchant agreement.