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The Rosetta Stone of Payments

Bailey Jarrell

 

Credit card processing lingo sounds like a foreign language to a lot of people. Rather than pulling out your hair trying to interpret payments talk, we’ve uncovered the “Rosetta Stone” of payments processing and put some of the major industry terms and definitions together in one neat little place for easy access when you need it. Don’t worry fam, we got you.

Countertop Terminal

Also known as a Point of Sale (POS) terminal or credit card terminal, is a device which interfaces with payment cards to make electronic funds transfers.

Virtual Terminal

The web version of a physical credit card terminal or Point-of-Sale (POS) machine. A virtual terminal is a software application that is hosted online and can be accessed from any internet connected web browser.

Card-Not-Present (CNP)

A card not present transaction is a payment card transaction made where the cardholder does not or cannot physically present the card for a merchant’s visual examination at the time that an order is given and payment effected.

Issuing Bank

An issuing bank is a bank that offers card association branded payment cards directly to consumers. The name is derived from the practice of issuing payment to the acquiring bank on behalf of its customer.

Cardholder

Person or entity that has a credit or debit card.

Merchant

A commercial entity or person authorized to accept cards from its customers through a secure (encrypted) channel.

Merchant Service Provider

An intermediary between the bank, a person or organization wanting to receive funds and the person or organization looking to purchase goods or services. The merchant service provider will provide businesses and individuals with the necessary requirements to accept credit cards, debit cards, and other forms of electronic payment for the transaction to take place.

Merchant Category Code

A four-digit number used to classify the business by the type of goods or services it provides.

Merchant ID (MID)

A unique code given to a business by payment processors before a merchants begin processing credit cards. A terminal identification number will also be used, in addition to a merchant account ID.

 

Payment Facilitator (PayFac)

A merchant services provider that simplifies the payments lifecycle from enrollment through processing and reporting. PayFacs are able to sign-up merchants underneath their master account as sub-merchants, thus expediting the process.

Payment Gateway

An eCommerce service that processes credit card payments for online and traditional brick and mortar stores. Payment gateways facilitate these transactions by transferring key information between payment portals such as web-enabled mobile devices/websites and the front end processor/bank.

Payment Processor

A payment processor is a company appointed by a merchant to handle transactions from various channels such as credit cards and debit cards for merchant acquiring banks. They are usually broken down into two types: front-end and back-end.

Chargeback

A demand by a credit-card provider for a retailer to make good the loss on a fraudulent or disputed transaction.

3-D Secure (Three-Domain Secure)

A security protocol designed to reduce the ability for fraud during online or “card not present” transactions. It is an industry standard protocol that requires transactions for online shopping to be authenticated by the cardholders during checkout.

Address Verification Service (AVS)

A tool provided by credit card processors and issuing banks to merchants in order to detect suspicious credit card transactions and prevent credit card fraud by validating a cardholder’s given address against the issuer’s records.

EMV (Europay, MasterCard, and Visa) Cards

Smart cards (also called chip cards or IC cards) that store their data on integrated circuits in addition to magnetic stripes (for backward compatibility). These include cards that must be physically inserted (or “dipped”) into a reader, as well as contactless cards that can be read over a short distance using near-field communication (NFC) technology.

End-To-End Encryption (E2EE)

A system of communication where only the communicating users can read the messages by using cryptographic keys to decrypt the conversation.

PCI DSS (Payment Card Industry Data Security Standard)

This is an information security standard for organizations that handle branded credit cards from the major card schemes. The PCI Standard is mandated by the card brands and administered by the Payment Card Industry Security Standards Council.

Tokenization

The process of replacing sensitive data with unique identification symbols that retain all the essential information about the data without compromising its security.

Contactless Payments

A secure method for consumers to purchase products or services via debit, credit or smartcards (also known as chip cards), by using RFID technology or near-field communication (NFC).

Mobile Payment

Payment services operated under financial regulation and performed from or via a mobile device.

Near Field Communication (NFC)

Near-field communication is 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 4 cm of each other.

Quick Response (QR) Code

A machine-readable code consisting of an array of black and white squares, typically used for storing URLs or other information for reading by the camera on a smartphone.

Bitcoin

A cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.

Chip Card

A chip card is a standard-size plastic debit card or credit card which contains an embedded microchip as well as a traditional magnetic stripe. The chip encrypts information to increase data security when making transactions at stores, terminals, or ATMs.

Credit Card

A small plastic card issued by a bank, business, etc., allowing the holder to purchase goods or services on credit.

Debit Card

A card issued by a bank allowing the holder to transfer money electronically to another bank account when making a purchase.

Rewards Card

A credit card carrying an incentive or “reward” for use, typically involving cash back, merchandise discounts or frequent flyer points.

Acquiring Bank

A bank or financial institution that processes credit or debit card payments on behalf of a merchant.

Automated Clearing House (ACH)

The electronic clearing and settlement system used for financial transactions by US commercial banks and other institutions. ACH processes large volumes of credit and debit transactions in batches.

Independent Sales Organization (ISO)

A third-party organization representing a bank or other financial institution that sells and promotes its services, one of which is merchant accounts.

Interchange Fee

A term used in the payment card industry to describe a fee paid between banks for the acceptance of card-based transactions.

Pass-Through Pricing

A form of credit card processing pricing that allows the actual cost of processing (interchange fees & assessments) to be passed and transparently represented to your business.

Processing Fees

Fees charged for every credit card transaction to a merchant based on a percentage agreed upon by the merchant and the payment processor.

Card Reader

An electronic sensor that reads a magnetic strip or bar code on a credit card, membership card, etc.

eCommerce

eCommerce is the activity of buying or selling of products on online services or over the Internet.

Magnetic Stripe Card

A magnetic stripe card is a type of card capable of storing data by modifying the magnetism of tiny iron-based magnetic particles on a band of magnetic material on the card. The magnetic stripe, sometimes called swipe card or magstripe, is read by swiping past a magnetic reading head.

Mail Order/Telephone Order Transaction (MO/TO)

A transaction where a cardholder orders goods or services from a merchant by telephone, mail, or other means of telecommunications where neither the card nor the cardholder are present.

Point-of-Sale (POS)

The time and place where a retail transaction is completed. At the point of sale, the merchant calculates the amount owed by the customer, indicates that amount, may prepare an invoice for the customer, and indicates the options for the customer to make payment.

Transaction

The use of credit card by consumer to purchase goods or services. The purchase price of goods or services is sent through a processor for authorization; if the amount is approved it is automatically submitted to the seller. The amount is listed on the consumer’s credit card statement and must be repaid. A transaction may also refer to a credit made to the consumer’s credit card account, such as when a good or service is returned for a refund.

 

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