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Glossary of Terms
Navigating through a sea of technical terms, phrases, and acronyms can be confusing, even for someone familiar with the payment processing industry. Here is a list of some of the most commonly used payment processing terms to help you.
A unique sequence of numbers assigned to a cardholder account that identifies the issuer and type of financial transaction card.
A tool that, in conjunction with tokenization, automatically keeps credit cards in the Cardknox data vault updated to ensure subsequent transactions are not declined.
A licensed member that maintains the merchant relationship and acquires the data relating to a transaction from the merchant or card acceptor and submits that data into interchange, either directly or indirectly.
Automatic Funds Transfer – A transaction in which funds are securely transferred from one bank account to another via electronic or telecommunications technology.
Anti-Money Laundering – A set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. See KYC for more information.
A yearly fee charged by some independent sales organizations (ISOs) and acquirers to maintain a merchant’s account. This is also called a renewal fee, subscription fee, or membership fee.
Application Programming Interface – A technological interface or communication protocol between a client and a server intended to simplify the building of client-side software. See https://www.cardknox.com/features-cardknox/ for more information.
Automated Teller Machine – An unattended, magnetic stripe-reading or EMV (Europay, Mastercard®, and Visa®) chip-enabled terminal that dispenses cash, accepts deposits and loan payments, enables a bank customer to order transfers among accounts, and make account inquiries.
A process defined in operations regulations whereby a transaction is approved by or on behalf of an issuer; commonly understood to be receiving of a sales validation by the merchant, telephone, or authorization terminal.
A code notifying you that you have obtained the authorization for a specific card transaction.
Address Verification System – Also referred to as Address Verification Service, AVS is a system used to verify whether the billing address given by the customer matches the credit card used for the transaction. This system checks the billing address of the credit card provided by the user with the address on file at the credit card company. If a merchant chooses not to use AVS, Visa and Mastercard will not support their transactions and will charge an additional percentage on those sales.
Cardknox feature that enables the AVS response to occur before the authorization so that if the transaction is declined, there is no temporary hold on the customer’s card.
A debit or credit card issued by an issuing bank. Also referred to as “bankcard.”
A collection of credit card transactions saved for submitting at one time, usually each day. Merchants who do not have real-time verification systems must submit their transactions manually through a point-of-sale (POS) terminal. Batch fees are charged to encourage a merchant to submit his or her transactions at one time, rather than throughout the day.
Browser-Based POS – Cardknox application that allows a POS running in a browser to accept EMV payments while remaining out of PCI scope.
The interval between periodic billings for goods sold or services rendered, typically sent on a monthly basis.
Bank Identification Number – The first 6 digits of a credit or debit card number. Also referred to as Issuer Identification Number (IIN)
A payment card industry governing body that sets rules and interchange rates. Visa, Mastercard, Discover, and American Express are the four largest card associations in North America.
The customer to whom a card has been issued, or the individual authorized to use the card.
A chargeback occurs when a cardholder disputes a credit card transaction with his or her credit card issuer. The card issuer initiates a chargeback against the merchant account. The amount of the disputed transaction is immediately withdrawn from the merchant’s bank account, and the merchant has 10 days in which to dispute the chargeback with supporting documentation such as proof of purchase, customer signature, proof of delivery, etc. A chargeback is ultimately decided and resolved by the card association. A chargeback fee is usually assessed to the merchant on top of the actual transaction. See also Retrieval request.
A bill of exchange or draft on a bank drawn against deposited funds to pay a specified sum of money to a specified entity (e.g., a person or business) on demand. A check is considered cash and is negotiable when endorsed.
The collection of funds on which a check is drawn and payment of those funds to the holder of the check.
The process of exchanging financial transaction details between an acquirer and an issuer to facilitate posting of a cardholder’s account and reconciliation of a customer’s settlement position.
Funds represented by checks or drafts that pass between banks through the Federal Reserve system.
Card Not Present – A transaction made with a payment card in which the customer does not physically present the card to the merchant at the time of the transaction. Examples include online, mobile, and MOTO transactions.
A voice authorization code that you might initiate when you suspect a card is stolen or counterfeit, or when a customer is acting suspiciously.
A payment method that uses near field communication (NFC) technology to enable purchases using an NFC-enabled EMV chip card, or other payment-enabled device such as a mobile phone, at the point of sale without having physical contact with the payment terminal. See NFC for more information.
A refund or return of goods by a consumer to the merchant.
A transaction card bearing an account number assigned to a cardholder with a credit limit that can be used to purchase goods and services and to obtain cash disbursements on credit. The cardholder is subsequently billed by an issuer for repayment of the credit extended at once or on an installment basis.
Merchant services providers that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Also referred to as “third-party processors.”
The process by which the transaction currency is converted into the currency of settlement or the currency of the issuer for the purpose of facilitating transaction authorization, clearing, and settlement reporting. The currency of transaction is determined by the acquirer; the currency of the issuer is the preferred currency used by the issuer, and most often, the currency in which the cardholder will be billed.
Card Verification Value – Security feature used with card-not-present transactions. The CVV is a 3- or 4-digit code either printed or embossed on a credit or debit card. Also known as Card Security Code (CSC). Issuer variations:
• American Express, Discover – CID • Mastercard – CVC,CVC2 • Visa – CVV, CVV2
Dynamic Currency Conversion – A credit card processing solution that allows merchants to offer international customers the choice to pay with Visa and Mastercard in either their local currency, or the merchant’s base currency.
The exchange rate includes a 3% margin which is displayed on the receipt along with the conversion. By paying in their local currency, tourists and business travelers can make informed decisions about their purchases and feel confident knowing the exact amount they are paying. In addition, cardholders have the choice of opting out and paying without converting the sale to avoid being charged international fees when their issuer does not charge. Revenue split is available to merchant.
A transaction card used to initiate a debit transaction. In general, these transactions are used primarily to purchase goods and services and to obtain cash, for which the cardholder’s asset account is debited by the issuer.
Fees based on the debit network that issues the debit card. Debit fees are comprised of network fees and transaction fees, and usually consist of a flat fee and a statement fee.
Cardknox feature that enables a transaction to be re-routed to an alternate processor if the transaction was initially declined.
A consumer account set up to allow e-commerce transactions through a particular credit card processing system. Before the consumer can make a purchase, he or she must first establish an account with the credit card processor, who provides an identification number and password. The consumer can then make purchases at any Web site that supports the digital wallet system.
The rate charged to a merchant for payment processing services on debit and credit card transactions.
Electronic Benefits Transfer – An electronic system used in the United States that allows state welfare departments to issue benefits via a magnetically encoded payment card. See https://www.cardknox.com/ewic-ebt/ for more information.
The buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the Internet. These business transactions occur either as business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer, or consumer-to-business.
Electronic draft capture – A system in which the transaction data is captured at the merchant location for processing and storage.
Electronic funds transfer – A paperless transfer of funds initiated from a terminal, computer, telephone instrument, or magnetic tape.
A credit or debit card with an embedded microchip and associated technology designed to enable secure payments at compatible point-of-sale terminals. Also referred to as “chip card,” “PIN-and-chip,” and “smart card.” See https://www.cardknox.com/emv/ for more information.
Enterprise Resource Planning – Software application used to integrate all of the processes needed to run a company with a single system.
WIC (Women, Infants, and Children) – WIC is a federal grant program designed to provide supplemental nutritious food and nutrition education to low-income pregnant, breastfeeding, and non-breastfeeding postpartum women, and to infants and children up to age five who are found to be at nutritional risk. An eWIC card is WIC’s electronic payment card issued to participants in the program used to obtain nutrition benefits. See also “EBT card.” See https://www.cardknox.com/ewic-ebt/ for more information.
A bank that, along with its branches, is one of 12 banks that make up the Federal Reserve System. The role of each Federal Reserve Bank is to monitor the commercial and savings banks in its region to ensure that they follow Federal Reserve Board regulations. The reserve banks act as depositories for member banks in their regions, providing money transfer and other services.
An institution that collects funds from the public to place in financial assets such as stocks, bonds, money market instruments, bank deposits, or loans. Depository institutions such as banks, savings and loans, credit unions, and savings banks, pay interest on deposits and invest the deposit money mostly in loans.
A specific dollar limit used to determine which card transactions you must authorize. For example, if your business has a floor limit of $1,000, you must get authorization for any transaction over that amount. Note: All airline, telephone, and mail order transactions must be authorized, even if the amount is under your floor limit.
A wrongful or criminal deceptive activity used to obtain money, assets, or other property.
Option that enables a merchant the flexibility to process transactions under their own merchant account. The Cardknox gateway-only option also offers pre-processing functions such as fraud screening and processor routing.
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. Also referred to as a “reserve.” After a predetermined time, holdbacks are turned over to the merchant. Note: merchant account providers almost never pay interest on holdbacks.
A Cardknox technology solution that integrates into your payment forms, enabling you to design and customize the look and feel of your payment and checkout flows. You can process transactions without having sensitive card data touch your server, keeping you out of PCI scope.
Cardknox’s proprietary Interchange Qualification Monitoring (IQM) technology that gathers transaction data and routes every transaction to the payment processing platform that can process the payment for the lowest cost.
The fee that the card association charges the merchant to get the funds into the merchant’s bank (acquiring bank) and to get the billing information to the cardholder’s bank (issuing bank). Interchange fees are determined based on credit card regulations and how the appropriate data is captured, including card swipe or dip, address, and electronic signature as needed. These fees are also based on the timeliness of the settlement of transactions.
Independent Sales Organization – A company that sells credit card processing services independently from a financial firm or bank, allowing a business to accept credit card payments.
The member bank that enters into a contractual agreement with card associations to issue cards.
The bank that maintains the consumer’s credit card account and which must pay out to the merchant’s account in a credit card purchase. The issuing bank bills the customer for the debt.
Independent Software Vendor – An individual or organization that develops, markets, and sells software products that run on third-party software and hardware platforms.
Interactive Voice Response – Technology that allows a computer to interact with humans through the use of voice and dual tone multi-frequency (DTMF) signal input using a touch tone keypad. In telecommunications, IVR allows customers to interact with a company’s host system via a telephone keypad or by speech recognition. See https://www.cardknox.com/phonepay/ for more information.
Know Your Customer – The process of a business identifying and verifying the identity of its clients and assessing their suitability, along with the potential risks of illegal intentions towards the business relationship. The term is also used to refer to the bank regulations and anti-money laundering regulations which govern these activities.
A rewards program a merchant offers to its customers who meet certain criteria, such as making frequent purchases.
The magnetically encoded stripe on the bank card that contains information pertinent to the cardholder account. The physical and magnetic characteristics of the magnetic stripe are specified in ISO Standards 7810, 7811, and 7813.
A device that reads information recorded on the magnetic stripe of a card. Also known as a “card swipe reader.”
Multi Currency Pricing – An e-commerce solution that converts the merchant’s base currency into the customer’s foreign currency. Merchants are funded in US currency at a guaranteed rate without any fluctuation risk.
An institution that participates in the programs offered by card associations such as issuers and acquirers.
A retailer, or any other person, firm, or corporation that (pursuant to a merchant agreement) agrees to accept credit cards, debit cards, or both, when properly presented.
A specialized bank-approved and issued account to process credit card transactions. It is one of three parts needed to accept credit cards. The other required parts are a local bank checking account (to deposit funds) and a processing solution (to access the merchant account) such as a terminal or gateway.
A bank that has entered into an agreement with a merchant to accept deposits generated by bank card transactions; also referred to as the “acquirer” or “acquiring bank.”
The number that a financial institution assigns to a merchant to identify the business.
Payment made with a mobile payment application using a mobile device such as a smartphone or tablet. Examples include Apple Pay, Cash App, Google Pay, Venmo, and Zelle.
The 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.
The discount rate charged by the merchant account provider for credit card transactions in which the actual credit card was not available to the merchant. MOTO discount rates are generally higher than swipe discount rates to account for the increased chance of fraud or nonpayment.
Near Field Communication – A set of communication protocols that enable two electronic devices, one of which is usually a portable device such as a smartphone, to establish communication by bringing them within 1 to 2 inches of each other.
Technical solution enabling a merchant to accept cashless payments across all channels, including online, in-store, mobile, e-wallet, and MOTO.
Payment Facilitator – Merchant service provider that simplifies the merchant account enrollment process by enabling a business to sign up as a sub-merchant under the payment facilitator’s merchant account.
A service provider that allows merchants to process mobile or e-commerce payments. Payment aggregators enable businesses to accept credit and debit card payments without setting up a merchant account through a bank.
Payment Card Industry Data Security Standard – The PCI information security standard for organizations that handle branded credit cards from the major card issuers.
The PCI Standard is mandated by the card brands but is administered by the Payment Card Industry Security Standards Council (PCI SSC). The standard was created to increase controls around cardholder data to reduce credit card fraud. Validation of compliance is performed annually or quarterly, either by an external Qualified Security Assessor (QSA) or by a firm specific Internal Security Assessor (ISA) that creates a Report on Compliance for organizations handling large volumes of transactions, or by Self-Assessment Questionnaire (SAQ) for companies handling smaller volumes.
A set of requirements developed by the PCI SSC to ensure that companies that store, transmit, or process credit card data comply with the highest standards of security. Within the PCI DSS standards, there are 4 levels of PCI compliance. These levels are based on the annual number of transactions for any given merchant.
PCI DSS Level 1 is the highest level of compliance and is defined as follows:
Processing greater than 6 million Mastercard or Visa transactions annually, OR, A merchant that has experienced an attack resulting in compromised card data, OR, A merchant deemed Level 1 by a card association
Payment Card Industry Security Standards Council – Global forum that brings together payments industry stakeholders to develop and drive adoption of data security standards and resources for safe payments worldwide.
The code that transmits a customer’s order to and from a merchant’s bank’s transaction-authorizing agent, usually a merchant account provider. See also “real-time processing.” See https://www.cardknox.com/ for more information about the Cardknox payment gateway.
A company that provides code and/or software for an e-commerce site enabling it to transfer information from its shopping cart to the acquiring bank, and on through the rest of the credit card transaction process. See also “payment gateway.”
Personal Identification Number – A four-to-twelve character secret code that allows an issuer to positively authenticate the cardholder for the purpose of approving an ATM or terminal machine transaction occurring at a point-of-interaction device.
Secure PIN debit card processing feature which results in the lowest processing fees.
A software component, also called an extension, that adds a specific feature to an existing program to enable customization.
Point of Sale – A location where a transaction takes place between a merchant and a customer when a product or service is purchased, commonly using a point-of-sale system to complete the transaction. POS can also refer to point-of-sale hardware and software, such as electronic cash register systems, touch-screen displays, barcode scanners, and receipt printers.
A device that allows a customer to swipe, tap, or insert a credit card to make a charge. Also known as a “terminal machine.” See https://www.cardknox.com/supported-emv-equipment/ for more information.
A 6-digit alphanumeric string of characters that form part of a postal address in Canada that follows the province or territory abbreviation.
A device, software, or virtual product that allows a merchant to connect to a merchant account. Without a processing solution like a credit card terminal, there would be no way to verify, approve, and deposit credit card transactions.
Payment Service Provider – A company that combines the functions of both a payment gateway and a payment processor, and can connect to multiple acquiring and payment networks.
Point-to-Point Encryption – a security standard created by the Payment Card Industry (PCI) to ensure payment card data remains secure from the beginning to the end of the transaction process.
The process of having a customer’s credit card information validated and processed automatically and in real-time. The credit card will be charged and the money will be deposited into your bank account all automatically.
A hardcopy document representing a transaction that took place at the point of sale, with a description that usually includes the transaction date, merchant name/location, primary account number, amount, and reference number.
Regularly occurring charges for maintaining a merchant account. Recurring fees include the discount rate, transaction fees, statement fee, and monthly minimum.
Regularly scheduled customer payments that occur over time at specific intervals, such as daily, weekly, monthly, quarterly, or annually.
Money returned to a customer in exchange for the return of purchased goods or services, or when the purchased goods or services were unsatisfactory or unfulfilled.
A retrieval request occurs when a cardholder cannot remember a credit card transaction, or when the bank wants order information. The card issuer initiates the retrieval request, and the merchant has 10 days to respond with the order information or the retrieval request will turn into a chargeback. Retrieval requests usually include a fee issued against the merchant.
A 9-digit number established by the American Bankers Association (ABA) used to identify a bank or financial institution when clearing funds or processing checks. Also referred to as a routing transit number.
Software Development Kit – A collection of software used for developing applications for a specific device or operating system. SDKs typically include a compiler, which is used to create applications from source code files, and an integrated development environment (IDE) enabling a developer to write source code, fix program errors, and edit a program’s graphical user interface (GUI). See https://www.cardknox.com/features-cardknox/ for more information.
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.
The process by which merchant and cardholder banks exchange financial data and value resulting from sales transactions, cash disbursements, and merchandise credits.
Fees charged for establishing a merchant account, including application fees, software licensing fees, and equipment purchases.
A payment transaction card that contains an embedded computer chip (either a memory chip or a microprocessor) that stores and transmits data. This data is usually associated with either value, information, or both and is stored and processed within the card’s chip.
A transaction card, such as a gift card or prepaid card, containing a computer chip that can store electronic “money.” Unlike a credit card, a stored-value card can only spend out the dollar amount its owner has already put into the card account. It is similar in function to a prepaid calling card but is available for all purchases.
A recurring payment that occurs on a regular, fixed schedule. Examples include memberships, charitable donations, and rent.
The discount rate charged by a merchant account provider for transactions in which a credit card is 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.
An exchange or transfer of goods, services, or funds between a customer and a merchant.
The date on which a cardholder effects a card purchase of goods, services, or other things of value, or effects a cash disbursement.
A charge for each credit card transaction, collected by the merchant account provider or ISO.
A process that replaces sensitive cardholder data with a string of unique characters to safeguard payment card information during a transaction.
Value Added Reseller – A company that adds features or services to an existing product, then resells it (usually to end-users) as an integrated product or complete turnkey solution.
Identifies a transaction canceled by a merchant before it settles through a customer’s payment card account.
A 5- to 9-digit numeric code used by the United States Postal Service (USPS) to identify a particular postal delivery area in the United States. The 9-digit code is referred to as “ZIP+4” with the last 4 digits identifying a specific delivery route within a delivery area.
A set of fraud prevention protocols that enables a real-time, secure, information-sharing connection between merchants, payment networks, and financial institutions to authenticate customers more accurately and reduce fraud in card-not-present transactions. Each card network (Visa, Mastercard, American Express, and Discover) has their own version of 3-D Secure.
- 3D Secure version 2.0 improvements over version 1.0: Stronger authentication methods – Biometric and risk-based authentication methods replace static passwords
- Improved customer experience – No need to enter a password or complete a sign-up form
- Browser-based and in-application support for more devices – Enables mobile, in-app, and digital wallet payment applications