This comprehensive guide contains every term you may want to know in relation to card processing and digital payments.
The American Banking Association (ABA) routing number is a unique, bank-identifying number that directs electronic ACH deposits to the proper bank. This number precedes the account number printed at the bottom of a check and is usually printed with magnetic ink.
A unique sequence of numbers assigned to a cardholder account which identifies the issuer and type of financial transaction card.
See Automated Clearing House.
The acquirer is the financial institution that processes credit card payments for products or services on behalf of a merchant. An acquirer is licensed as a member of Visa / MasterCard as an affiliated bank or processor.
The bank that maintains the merchant relationship and receives all transactions from the merchant.
Address Verification System (AVS)
This is a system used to verify the cardholders’ billing address by checking for validity against information provided to the issuing bank. This verification system helps reduce instances of fraud and is supported by Visa, MasterCard, Discover and American Express.
This refers to a correction made in the case of a duplicate transaction or an incident where a cardholder disputes a transaction. The acquirer initiates the adjustment to rectify the processing error. Depending on the situation, either a debit or credit is applied to the merchant DDA account when an adjustment is made.
A bank that participates in another bank’s acquiring program, usually by turning over its applicants for bank cards to the bank administering the bank acquiring program.
An organization that issues cards and acquires transactions, unlike Visa and MasterCard, which are bank associations.
See American Express.
The Application Programming Interface (API) is the interface by which an application program accesses the operating system and other services. An API is defined at source code level and provides a level of abstraction between the application and the kernel to ensure the portability of the code.
Any transaction that is approved by the cardholder or check writer’s bank. Approvals are requested via an authorization. An approval is the opposite of a declined transaction.
The procedure used to determine the responsibility for a chargeback-related dispute between two members.
A method of transmitting data in which the data elements are identified with special start and stop characters. An asynchronous modem cannot communicate with a synchronous modem. Compare with Synchronous (e.g. standard Hayes compatible modem).
A transaction in which the merchant does not intend to capture funds until a later time, if at all. See Prior Authorized Sale.
An authorization is a request to charge a cardholder. It reduces the cardholder’s open-to-buy but does not actually capture the funds. An authorization is the first transaction in the delayed settlement process. It does not bill the card until a delayed capture transaction is issued. The authorization must be settled in order to charge the account. If it is not used within a certain time period, it will drop off. The issuing bank determines the time period for drop off. Authorizations can only be used for credit card transactions.
Approved sale and authorization transactions always receive a numeric or alphanumeric authorization code that references the transaction for processing purposes.
Automated Clearing House
The Automated Clearing House (ACH) network is a nationwide, wholesale electronic payment and collection system. It is a method of transferring funds between banks via the Federal Reserve System. It is used by most, but not all, financial institutions.
The average dollar amount of merchant credit transactions.
This is the total sales volume divided by the total number of sales for a given period of time. It is used to establish the merchant’s average ticket amount in order to monitor for any irregularities.
See Address Verification Service.
Back End Processor
When a merchant submits a batch of payments, it goes to the front-end processor, which routes it to the back-end processor. A back-end processor accepts the settlement from the front-end processor and then moves the money from the issuing bank to the acquiring bank.
This refers to a Visa or MasterCard branded credit card issued by a financial institution. Other Card brands such as Amex, Discover, JCB etc. issue their cards directly and not through banks.
Bank Identification Number
The digits of a credit card that identify the issuing bank. It is sometimes the first six digits and is often referred to as a BIN.
One one-hundredth of a percent. Discount rates are expressed as basis points.
A collection of transactions submitted for settlement. Usually a merchant has one batch per day or per shift.
Once a batch is settled, it receives a batch ID. Every transaction in the batch shares this ID. If a transaction does not have a batch ID associated with it, the transaction has not been settled.
A type of data processing where related transactions are transmitted as a group for processing.
A sort of electronic bookkeeping procedure that causes all funds from captured transactions to be routed to the merchant’s acquiring bank for deposit. Clymb automatically submits all captured transactions for settlement on a daily basis. The time that it takes for these funds to reach the merchant account after settlement is 1-5 days, but varies by acquiring bank.
See Bank Identification Number.
A universal character-coding system.
A discount rate that includes communications costs as well as transaction fees. Also referred to as a flat rate.
The process of capturing funds from an authorization.
This is the person who has obtained a credit card from a bank or other institution and uses it for the purchase of goods and services.
The issuing bank or card issuer refers to the bank or financial institution that lends money to the cardholder. It can also be referred to as the cardholder’s financial institution. See Issuer, Issuing Bank.
A merchant environment where the cardholder (and the card) is not physically present at the time of purchase. Typical card-not-present transactions take place in businesses focused on mail order/telephone order, business to business, and Internet-based transactions.
A situation where the cardholder (and the card) is physically present at the time of purchase. Card-present transactions account for the majority of credit card transactions in the world and are accounted for by traditional retailers (e.g. gas station or restaurant) and all other situations where the cardholder is present at the time of purchase.
See Common Gateway Interface.
The act of taking back funds that have been paid to a merchant for a disputed or improper credit card transaction. The issuer can initiate this procedure 30 days after the settlement.
The number of calendar days in which a member may charge sales back to the merchant, beginning with the day after the date the record is first received by the member or agent and continuing until the end of the day on which it is dispatched as a chargeback item.
Chargeback Reason Code
A two digit code identifying the specific reason for the chargeback.
A service which guarantees check payment (up to the limit defined for the account), provided that the merchant follows correct procedures in accepting the check. The service determines whether the check writer has previously written delinquent checks. Companies like TeleCheck provide this type of service.
The process of exchanging financial details between an acquirer and an issuer to facilitate posting of a cardholder’s account and reconciliation of a merchant’s settlement position.
Common Gateway Interface
An interface program that enables an Internet server to run external programs to perform a specific function. Also referred to as gateways or CGI scripts, these programs generally consist of a set of instructions written in a programming language like C or PERL that process requests from a browser, execute a program and format the results in HTML so they can be displayed in the browser. Gateway scripts often add interactivity to a web page by enabling users to fill out and submit forms for processing.
A letter sent by a processor to a merchant on a daily or weekly basis to verify batch deposits.
See Retrieval Request
A credit is a transaction type that transfers funds from the merchant’s account back to a customer’s credit card. It is the only way to handle a refund after a transaction has been settled. This type of transaction is usually performed when a product is returned to the merchant. A credit can be performed in the Transaction Terminal area or through a merchant’s storefront application. Check refunds can only be done via credit card or through a non-electronic, paper check. A credit can only be issued to an account that has not had a previous authorization.
DBA stands for “doing business as” and is a legal term used in the United States and Canada, meaning that the trade name, or fictitious business name, under which the business or operation is conducted and presented to the world is not the legal name of the legal person (or persons) who actually own it and are responsible for it.
See Demand Deposit Account.
DCC stands for dynamic currency conversion and is a financial service in which a cardholder can have the cost of a transaction converted to their local currency when making a payment in a foreign currency.
An ATM bankcard used to purchase goods and services and to obtain cash. A debit card debits the cardholder’s personal deposit account and requires a Personal Identification Number (PIN) for use. Debit cards branded with a bankcard logo (e.g. Visa) can be accepted in Internet transactions without a PIN.
A transaction in which the issuing bank will not authorize the transaction.
A delayed capture is a transaction type that uses the information from an authorization transaction to capture funds. This is the second step in the delayed settlement process and should be used by merchants who do not provide immediate shipment of goods.
This is a two-phase process that utilizes an authorization transaction and a delayed capture transaction to process customer orders. This procedure is recommended when the merchant delivers goods or services more than 48 hours after they are ordered.
Demand Deposit Account
A standard checking or savings account into which electronic funds can be transferred.
Deposit Correction Notice
Refers to the adjustments (debits or credits) made for an out-of-balance condition due to various problems in the transmittal. The correction is made by the merchant’s acquirer at the time of capture prior to being sent out for interchange.
Amount charged to a merchant by the acquiring bank for processing a transaction. It is usually a percentage of the transaction amount. The rate is typically based on monthly transaction volume (total dollars) and average ticket.
Refers to Settlement.
E-Commerce, or Electronic Commerce, refers to the buying and selling of products or services online via the Internet or using other electronic means.
See Electronic Cash Register.
See Electronic Funds Transfer.
Electronic Cash Register
The combination of a cash register and a POS terminal, often PC-based.
Electronic Funds Transfer
The paperless act of transmitting money through a computer network.
EMV stands for Europay, MasterCard and Visa, the original founders of the standard, but it now also includes American Express, JCB, Discover and UnionPay. It’s a global standard for credit and debit card processing that promotes better security by embedding a smart chip into payment cards. Also known as chip & sign or chip & PIN.
See External Sales Agent.
External Sales Agent
AmEx term for ISO or MSP.
Front End Processor
The front-end processor handles the capture, authorization and settlement with the acquiring banks; has connectivity to all the card companies; and routes transactions to the appropriate network for authorization.
This was a preset limit established by an issuer that allowed merchants to accept credit card sales without authorization provided the merchant checks to see that the card number was not listed on a warning bulletin for lost or stolen cards. Floor limits are now rarely used.
This is the server address that is used to process transaction requests.
This is the port address that is used in conjunction with the host address when client is using a custom integration or storefront software application for transaction processing. Always use port 443.
Hardware and/or software that connects computer networks and allows them to communicate
Independent Sales Organization
Visa term for a company that is sponsored by an acquiring bank to solicit and sometimes support merchants.
The flow of information between issuers and acquirers, e.g. transactions, retrieval requests, chargebacks. This is the transfer rate exchanged between merchant acquirers and card issuers each time a Visa or MasterCard transaction is processed.
The fee charged by Visa and MasterCard for each credit card transaction. This fee is part of the discount rate. This is a fee that the acquiring bank pays to the issuing bank during a transaction (that uses the MasterCard or Visa network).
Internet Merchant Bank Account
This special type of account is required for merchants who wish to sell goods and services over the Internet and accept credit cards as payment. This type of account is different than a typical merchant account and is considered card-not-present.
Internet Service Provider
A company that supplies a method for individuals or companies to connect to the Internet.
See Independent Sales Organization.
See Internet Service Provider.
This is the bank or financial institution that extends credit to a cardholder through the issuance of a branded payment card for use in the payment of goods and services.
Credit card information that is entered via the Transaction Terminal
An association of banks that governs the issuing and acquiring of MasterCard credit card transactions and Maestro debit transactions.
A financial institution that is a member of Visa USA and/or MasterCard International. A member is licensed to issue cards to holders and/or accept merchant drafts.
See Member Service Provider.
Member Service Provider
MasterCard term for a company that is sponsored by an acquiring bank to solicit and sometimes support merchants.
A retailer, or any other entity (pursuant to a Merchant Agreement), that agrees to accept credit cards, debit cards, or both, when properly presented.
An account opened by a business that wishes to accept credit card payments. It is opened through a bank or a credit processing company.
A written agreement between a merchant and a bank (or possibly a merchant, a bank, and ISO) containing their respective rights, duties, and warranties with respect to acceptance of the bank card and matters related to bank card activity.
A bank that has entered into an agreement with a merchant to process bank card transactions, also called the acquirer or acquiring bank.
Merchant Category Code
A code assigned by an acquirer to a merchant to identify the merchant’s principal trade, profession, or line of business. This four digit code is also know as the SIC code.
Merchant Identification Number
A Processor or acquirer generates a number for each merchant location and uses it to identify the merchant during the processing of daily transactions. This unique identifying number is known as the Merchant Identification Number.
Refers to the qualification levels for a MasterCard transaction. Merit III is the highest discount, followed by Merit II, Merit I, and then Standard.
The Magnetic Ink Check Reader (MICR) number is the string of numbers on the bottom of a check.
Refers to Mail Order/Telephone Order, which are credit card transactions that take place via e-mail, fax, mail or telephone. These kinds of transactions where the customer’s card is not physically presented for payments are referred to as “card-not-present” transactions.
This is an electronic payment processing service which allows an online business to price goods in over 60 different currencies. Overseas customers then have the leisure of choosing to see items priced in a currency they understand, their own.
Also used to refer to communication networks like AT&T or CompuServe.
A broad term that describes a transaction that did not interchange at the best rate because it was entered manually, was not settled in a timely manner, or the data set required for the best interchange was not provided.
See Originating Depository Financial Institution.
The amount of credit available at a given time on a credit card holder’s account.
A central clearing facility which provides distribution and settlement of ACH transactions. ACH operators clear debits and credits electronically, rather than through the physical movement of checks. Currently there are four ACH Operators: the Federal Reserve System, which clears approximately 80% of all ACH transactions, Visanet ACH, New York ACH, and American ACH.
The original copy of the forms and signature used in the transaction. Also referred to as the hard copy.
Original Transaction ID
This is the unique Signio transaction ID that is used to process a secondary transaction, like a delayed capture, credit, or void.
Originating Depository Financial Institution
A financial institution that initiates and warrants electronic payments through the ACH network on behalf of its customers.
A company or other business entity that creates entries for introduction into the ACH network. For example, a billing company produces debit entries from customers’ financial institution accounts who have authorized direct payment for products and services.
Payment Card Industry (PCI) Data Security Standard (DSS)
These are strict requirements set forth by the PCI council detailing measures that payment processing organizations must take to help prevent credit card fraud, hacking and other various security vulnerabilities and threats.
Personal Identification Number used by a cardholder to authenticate card ownership for ATM or Debit card transactions. The cardholder enters his/her PIN into a PIN pad. The PIN is required to complete an ATM/Debit card transaction.
Point Of Sale
This could be a retail store or other location where a cardholder presents their card for processing. The card is read magnetically, and the cardholder’s signature is obtained as insurance against the transaction. This is the most secure form of credit card commerce.
See Point Of Sale.
A transaction for which a voice authorization was received.
See Prior Authorized Sale .
See Post Authorization.
The process of recording debits and credits to individual cardholder account balances.
Same as Auth Only.
Prior to the initiation of the first ACH entry to an ACH receiver or the ACH receiver’s account with an RDFI, an ACH originator may, at its option, deliver or send a pre-notification through an ODFI to its ACH operator for transmittal to the appropriate RDFI. The pre-notification shall provide notice to the RDFI that the originator intends to initiate one or more entries to that receiver’s account in accordance to the receiver’s authorization.
See Prior Authorized Sale.
Prior Authorized Sale
A transaction for which authorization was obtained at an earlier time, e.g. when a merchant has to call for authorization before services are rendered (hotel reservation, auto rental, etc.).
See Prior Authorized Sale.
Private Label Card
A bank card that can be used only in a specific merchant’s store. Typically not a bankcard.
A large data center that processes credit card transactions and settles funds to merchants. A processor connects to the merchant on behalf of an acquirer via a gateway or POS system to process payments electronically. Processors edit and format messages and switch to bankcard networks. They provide files for clearing and settlement and other value-added services.
A level at which a transaction interchanges. Level of qualification is dependent on how credit card number is entered, how quickly a transaction is settled, the type of industry, specific information, etc.
See Receiving Depository Financial Institution.
This is a process where a customer’s credit card is authorized and charged at the time of purchase.
A hard copy description of the transaction that occurred at the point of sale. Minimum information contained on a receipt is date, merchant name and location, account number, type of account used (e.g. Visa, MasterCard, AmEx, etc.), amount, reference number and/or authorization number, and action code.
A consumer, customer, employee, or business who has authorized ACH payments by Direct Deposit or Direct Payment to be applied against a depository account.
Receiving Depository Financial Institution
A financial institution that provides depository account services to consumers, employees, and businesses and accepts electronic debits and credits to and from those accounts.
A transaction in which a cardholder has given a merchant permission to periodically charge the cardholder’s account.
A one-letter code that indicates whether a transaction was approved or declined.
In some instances where risk is an issue, a merchant may be required to deposit funds in a reserve account held at the processors sponsoring bank. This process of mitigating risk is used by most ACH processors.
A one to three-digit number issued by Signio that indicates the result of a transaction. Approved transactions receive a “0”, while there are a variety of codes for declined transactions, which may have failed for a variety of reasons.
See Retrieval Request.
A request to a merchant for documentation concerning a transaction, usually initiated by a cardholder dispute or suspicious sale/return. A retrieval request can lead to a chargeback.
Any of the codes returned when a transaction is processed.
A transaction type supported by ClymbPayments that approves a transaction and settles it at the next settlement period.
SSL (Secure Sockets Layer)
An encryption system that allows merchants to securely process electronic transactions to processors. SSL is a secure web protocol used for encrypting data between the web browser and web server so that a third-party cannot intercept the credit card information.
Secure Payment Gateway
This refers to a system that passes credit card data, authorization requests, and authorization responses over the internet using encryption technology.
Settlement occurs when the credit cardholders’ funds are transferred between the card issuing bank and merchant acquiring bank. Put simply, money is exchanged from the customer to the merchant, to complete a purchase transaction.
Refers to Standard Industry Classification. These codes are four digit numbers used to identify business type.
This is a virtual cart where customers can add or delete items they wish to purchase. It is a software solution that runs on a merchant web site or online store.
See Secure Sockets Layer.
The lowest qualification level at which a Visa or MasterCard transaction may interchange. This occurs when a transaction is deposited several days after the original authorization and is not swiped.
Any additional charges to a merchant’s standard processing fees. They are a result of non-qualified transactions of different communications methods.
A state in which a batch of transactions is not released to interchange because of problems noticed by the host computer. Requires human intervention to fix the problem and settle the batch.
Credit card information that is transferred directly as a result of swiping or sliding the credit card through a card reader. Swiped cards are used in retail and other card-present situations. The information magnetically encoded in the magnetic stripe includes secret data that helps validate the card.
A method of transmitting data in which the data elements are sent at a specific rate so that start and stop characters are not needed. Used by older modems, AmEx PIP terminals, etc.
Compare to Asynchronous.
T &E Card
See Travel and Entertainment Card.
The type of “money” to be used when processing a transaction: credit card, check, ACH, Purchase Card, etc.
Third Party Processor
A non-member agent, employed by an acquiring bank, which provides authorization, settlement and merchant services to the bank’s merchant.
The action between a cardholder and a merchant that results in financial activity between the merchant and cardholder’s account.
A per transaction charge incurred by merchants who are on scale pricing. This is in addition to the percentage discount fees.
A reference number that is assignsed to every transaction that is processed. It is a 12-character alphanumeric string.
Travel and Entertainment Card
Credit cards that typically require payment in full each month, e.g. American Express, Diner’s Club, and Carte Blanche.
All transactions must be settled before any money changes hands. Signio automatically settles captured transactions on a daily basis. Please note that authorization transactions are not captured until they are completed by a delayed capture transaction. Transaction types which are automatically flagged for capture include sale, delayed capture, voice authorization, and credit.
Value Added Reseller
This is a third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer.
This is an application that allows merchants to manually key in customers’ credit card information. The information is then securely transmitted and authorized by the payment gateway.
An association of banks that governs the issuing and acquiring of Visa credit card transactions.
See Voice Authorization.
A transaction type supported by the Signio Manager Transaction Terminal that enables capture of a voice authorization transaction. Sometimes processing networks decline transactions with a referral message indicating that the merchant must call the cardholder’s issuing bank to complete the transaction. The payment information is then submitted over the phone. If the transaction is approved, the merchant is provided with an authorization code (AUTHCODE) for the transaction. This AUTHCODE must then be sent to the Signio server as part of a voice authorization transaction. In Payflow Pro this transaction is specified with an F.
The reversal of an approved transaction, one that has been authorized but not settled. Settled transactions require processing of a credit in order to be reversed. A void does not remove any hold on the customer’s open-to-buy.