Small Business Dictionary

A

ABA/RT

The bank routing number of the bank where the merchant has their Direct Deposit Account (DDA) or where payments are automatically withdrawn (such as ABA/RT/IBAN).

Account Executive

The person at a company who is in charge of overseeing a particular account -- also called an account manager. This person should be a single point of contact for a customer to ensure a good customer experience with the company.

Acquirer

A member of MasterCard and/or Visa (Bankcard association) who maintains merchant relationships and processes all Bankcard Transactions for the merchant. Basically, an acquirer is an organization licensed as a member of Visa/MasterCard as an affiliated bank or bank/Processor alliance that is in the business of processing credit card Transactions for businesses and is always acquiring new merchants. Acquirers:

• Develop relationships and programs that attract/retain merchants
• Perform credit risk appraisals of merchants
• Sets up merchant on its systems to process Bankcard Transactions
• Provides information and assistance to merchants
• Pays the merchant for Cardholder txns & settles txns w/issuing banks through Visa & MasterCard
• Posts debits/credits to merchant accounts
• Generates & mails statements to merchants
• Collects payment for services from merchants
• Adheres to Bankcard association guidelines; ensures vendors and Processors do also.

Acquiring Financial Institution

An acquiring financial institution (or Acquirer) contracts with the bank and merchants to enable credit card Transactions. The Acquirer deposits the daily credit card totals and debits the end-of-month processing fees from the merchants' accounts.

Address Verification Service (AVS)

The process of validating a Cardholder's given address against the issuer's records, to determine accuracy and deter fraud. This service is provided as part of a credit card authorization for mail order/telephone order Transactions. A code is returned with the authorization result that indicates the level of accuracy of the address match and helps secure the most favorable Interchange rates.

Adjustment

An adjustment is initiated by the Acquirer to correct a processing error. The error could be a duplication of a Transaction or the result of a Cardholder Dispute. The Acquirer debits or credits the merchant DDA account for the dollar amount of the adjustment.

Associations

Any entity formed to administer and promote credit and cards. The best known examples of Associations are MasterCard and Visa.

Authorization Code

A code that a credit Card Issuing Bank returns in an electronic message to the merchant's POS equipment that indicates approval of the Transaction. The code serves as proof of authorization.

Authorization Response

An Issuing Financial Institution's electronic message reply to an authorization request, which may include:

• Approval—Transaction was approved
• Decline—Transaction was not approved
• Call Center —response pending more information and the merchant must call the toll-free authorization phone number

Auto Close

A Terminal feature that allows an end-of-day Batch closing to occur automatically at a specified time, without having to be initiated by the merchant.

Automated Clearing House (ACH) File

A file with instructions for the exchange and Settlement of electronic payments passed between financial institutions. It represents debits and credits to be deducted from an account automatically as they occur.

Average Ticket (Average Sale)

The average dollar amount of a merchant's typical sale. The average ticket amount is calculated by dividing the total sales volume by the total number of sales for the specified time period.

B

Bankcard

A credit card issued by a Visa or MasterCard-sponsored financial institution. (American Express, Discover, Diners Club, JCB, and so on, are issued directly from their respective operations, rather than through banks.)

Batch

The accumulation of Captured credit card Transactions in the merchant's Terminal or POS awaiting Settlement.

C

Capture

The submission of an electronic credit card Transaction for financial Settlement. Authorized credit card sales must be captured and settled in order for a merchant to receive funds for those sales. Also see Settlement.

Card Issuing Bank

An EFT Network Member-Bank that runs a credit card or Debit Card purchasing service for their account holders. An example is Citibank and the Citibank Visa Card that they issue.

Cardholder

Any person who holds a payment card account (Bankcard or otherwise). Person that uses a credit card to purchase goods and services.

Chargeback

A credit card Transaction that is billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on behalf of the Cardholder.

When a credit card Transaction is Disputed, the Dispute is handled through a chargeback. A chargeback causes the Disputed amount and sometimes a chargeback fee to be deducted from the merchant’s account. The chargeback process allows the Cardholder to send a Disputed Transaction back to the Acquirer. Chargebacks occur after the Transaction under scrutiny has been completed, cleared, and settled.

Typical Cardholder Disputes involve product delivery failure or product/service dissatisfaction. Cardholders are urged to try to obtain satisfaction from the merchant before disputing the bill with the credit card issuer.

Comma Separated Value (CSV)

CSV is an acronym for (Comma Separated Value) and the result is the same as comma-delimited. This is also called a flat file because it's just data (no formatting like bold print or colors). The result is a record layout that separates data fields with a comma and usually surrounds character data with quotes, for example:

Pat Smith,Main St.,New Hope,PA,18950

K. Jones,34 8th Ave.,Syosset,NY,11724

Programs like Excel and Microsoft Access can open and read a CSV file.

Commercial Cards

Credit or charge cards issued to businesses to cover expenses such as travel and entertainment and procurement. Includes the multiple payment card brands of purchasing cards, business cards, Corporate Cards and multi-utility fleet cards. Visa and MasterCard now have special procedures for passing billing information back to the Card Issuing Bank so that it can be displayed on card holder statements; this is a program for promoting the use of credit cards for business purchases by providing purchase tracking to business users. New regulations require that this billing information be passed back with the Transactions, otherwise a higher pass through fee will be incurred.

Corporate Card

Charge card designed for business-related expenses, such as travel and entertainment. Please see Commercial Card.

Credit (Reversal)

Nullification of an authorized Transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately undo an authorization and return it to the open-to-buy balance on a Cardholder's account. Some card issuers do not support reversals.

Cycle

When a merchant is configured for fee assessments for Transaction processing. Depending upon a merchant’s accounting periods, this can be monthly, daily, weekly, every 2 weeks, and so on A merchant can have fees assessed at any time, which is why the generic cycle term is used.

D

Debit Card

Payment card whose funds are withdrawn directly from the Cardholder's checking account at the time of sale (online debit on a Debit Network) or after Batch Settlement (off-line debit on a Credit Card Network).

Discount Rate

The percentage of sales amounts that the Bankcard Acquirer or T&E card issuer charges the merchant for the Settlement of the Transactions. This value appears in reports and varies, depending upon the report type. For details on specific report discount rate, refer to the corresponding Help topic for the report.

Dispute

When a Cardholder challenges a purchase on their credit or Debit Card because it is a duplicate charge, is unauthorized, involves a merchant problem, or is otherwise disputed. In general, the term dispute refers to both retrieval requests and Chargebacks.

E

Electronic Date Capture (EDC)

Process of electronically authorizing, capturing and settling a credit card Transaction.

F

Funding

Funding (Settlement) represents all of the Transactions paid to a merchant.

H

HTML

Acronym for HyperText Markup Language, the predominant markup language for the creation of web pages.

I

Independent Sales Organization (ISO)

An ISO is an Independent Sales Organization that represents a Bank or Bank/Processor alliance. The ISO has an agreement to sell the services of the Bank or Bank/Processor alliance, and is allowed to mark up the Fees and sign up merchants.

Interchange

The money paid from the Acquirer to the debit or credit card issuer for every Transaction. In certain cir, Interchange may be paid from the issuer to the acquirer. The level of interchange is determined by many different factors according to the way the Transaction occurred and the type of card used.

Interchange fee

A term used in commerce to describe fees charged to retailers and other merchants by an acquiring bank each time credit or Interchange fee" onclick="showDialog('Debit Card');">Debit Cards, such as those issued by Visa or MasterCard affiliated banks are used to pay for a purchase. The interchange fee is a percentage applied, according to Visa/MasterCard regulations, to the currency value of each Transaction. There are multiple categories of interchange, and Visa and MasterCard each have their own criteria for their own categories. A Transaction must meet the specified criteria for a category in order for that category's rate to be applied. Each Transaction is evaluated individually, so various interchange rates may apply within one Interchange fee" onclick="showDialog('Batch');">Batch of merchant Transactions.

Internet Service Provider (ISP)

Internet Service Providers (ISPs) are the Web Site Hosting companies that provide a home for merchant’s Web sites.

Issuing Financial Institution

The bank or other financial institution that extends credit to a Cardholder through Bankcard accounts. The financial institution issues a credit card and bills the Cardholder for purchases against the Bankcard account. Also referred to as the Cardholder's financial institution. Simply put the Issuer is a bank or other institution that issues a credit card or Debit Card to an individual.

M

Magnetic Stripe

A strip of magnetic tape affixed to the back of credit cards containing identifying data, such as account number and Cardholder name.

Mail Order/Telephone Order (MOTO)

Credit card Transactions initiated via mail, email or telephone. Also known as card-not-present Transactions.

MCC/SIC

Merchant Category Code identifies the type and the line of business of the merchant who accepts cards for Transaction. This code is especially important in clearing and Settlement since it is one of the criteria that authenticate the Transaction.

Merchant ID (MID)

Each merchant account in the system has its own unique, numeric identifier generated by the system. This ID is tied both to a business name and a specific venue.

Merchant Identification Number (MID)

This is the unique number generated by a Processor/Acquirer and is specific to each individual merchant location. This number is used to identify the merchant during processing of daily Transactions, rejects, Adjustments, Chargebacks, end-of-month processing fees, and so forth.

N

Non-Qualified Transaction Fees (NON-Qual)

Transaction Fees (NON-Qual)" onclick="showDialog('Bankcard');">Bankcard sales transactions that do not meet set Visa/MasterCard criteria for that particular merchant and are processed at a higher Transaction Fees (NON-Qual)" onclick="showDialog('Interchange');">Interchange rate. An example of this is a merchant that is retail (card present) that processes a card-not-present transaction (or manually enters card data rather than swiping the Transaction Fees (NON-Qual)" onclick="showDialog('Magnetic Stripe');">Magnetic Stripe through the Transaction Fees (NON-Qual)" onclick="showDialog('Terminal');">Terminal). The merchant will pay the difference between what they should have paid on retail and what they actually qualified for (card not present). This difference is called non-qualified Transaction Fees (NON-Qual)" onclick="showDialog('Interchange');">Interchange fees.

P

Point Of Sale (POS)

A location where credit card Transactions are performed with the Cardholder present, such as a retail store. 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.

Portable Document Format (PDF)

An open file format created and controlled by Adobe Systems; requires Adobe Reader (available free from adobe.com) to view.

Processing Network (Vendor)

The medium of data transport between the merchant application and the Processor. This company authorizes and Captures credit card Transactions. Some examples of processing networks are Tsys and Chase Paymentech

Processor

A Processor is the company that actually routes an Authorization Request from a Point of Sale device (such as a credit card Terminal) to Visa or MasterCard, and then arranges for Fund Settlement to the merchant. Such processors are traditionally accessed via direct dial out modems connecting to their system.

Q

Quick Ratio

Current assets minus inventory divided by current liabilities. Also know as the "acid test" it is a measure of whether a company has the cash and cash equivalents on hand to meet its near term liabilities. If the number is less than 1, the company has a potential cash flow problem.

R

Rebuttal

Associated with Chargebacks only. When a merchant’s rebuttal is accepted, the Remedy to the merchant is a Representment. A Chargeback that has been remedied is also known as dispositioned.

Remedy

Associated with Chargebacks only. When a merchant’s Rebuttal is accepted, the remedy to the merchant is a Representment (the Transaction is presented again for Settlement). A Chargeback that has been remedied is also known as dispositioned.

Representment

When a merchant’s Rebuttal is accepted, the Remedy to the merchant is a representment, the process of sending a Chargeback to the association because the acquiring bank believes that the Chargeback is invalid. In a representment the merchant may be debited or sent a pre-note. Then based on the merchant’s response, they are successful in their Rebuttal, the Chargeback is dispositioned as a representment and the merchant would be credited (if they had been debited).

Reserve Account

One method that ACH Processors use to mitigate risk, is to require that merchants maintain a Reserve Account at the Processor's Sponsoring Bank. This allows the Processor to issue a Hold on funds in this account when fraud has been detected or an excessively large number of returns is received. Merchants with good credit and history can usually meet the expectations of ACH Processors for covering returns and so are not always required to keep a reserve account. In cases where a reserve is required, the minimum-reserve-balance in the account is set at about 20% of the anticipated processing volume. New merchants are usually allowed to build up their reserve by sending in Transactions which are not withdrawn until the minimum reserve balance is achieved; after that, the merchant is allowed to withdraw the excess funds for transfer to their home town bank.

S

Secure Payment Gateway

Secure Payment Gateway companies help other Processors conduct secure business on the internet using Secure Sockets Layer (SSL) technology.

Secure Payment Software/Software Module/Payment Module

In order to conduct secure business on the Web, the Secure Gateway Provider runs a Secure Host System, and sells/licenses software modules that allow Shopping Carts and other applications to request and receive Credit Card Authorizations via their system using encrypted communications. (This is called Real Time Authorization.)

Settlement

The process of sending a merchant's Batch to the network for processing and payment. For non-Bankcards, the issuer pays the merchant directly (less applicable fees) and then bills the Cardholder. For Bankcards, the Acquirer pays the merchant (less applicable fees) with funds from Visa/MasterCard. The Bankcard issuer then bills the Cardholder for the amount of the sale.

Settlement (Funding) represents all of the Transactions paid to a merchant.

Settlement Charges

The amount charged to the merchant for processing Transactions.

Shopping Cart Software

These applications typically provide a means of capturing a client’s Credit Card information, but they rely on the Software Module of the Secure Gateway Provider, in conjunction with the Secure Payment Gateway, in order to conduct secure Credit Card Transactions online.

Sponsoring Bank

A Sponsoring Bank is a Chartered Bank or S & L that has obtained membership in Visa or MasterCard in order to allow a Processor access to the Visa and MasterCard networks ( in order to process these types of Transactions).

T

Terminal

Equipment used to Capture, transmit and store credit card Transactions.

Terminal ID

Unique identifier used to identify the Terminal where the Transaction originally occurred (for example, card swipe, phoned in, and so on).

Terminal Identification Number (TID)

A unique number assigned to each POS Terminal IDentification Number (TID)" onclick="showDialog('Terminal');">Terminal.

Terminal Software

Programming that determines the characteristics and features of the Terminal.

Third-Party Processor

A Third Party Processor is an independent processor that is contracted with by a Bank or Processor to conduct some part of the Transaction processing process.

Transaction

There are two meanings of the term. Generally, transaction refers to purchase and return activity taken at a merchant/client site that is sent for processing. However, in regards to Retrieval and Chargeback data, ADRP uses the term transaction to refer to each stage within a case’s lifeCycle. For example, a case may go through many stages such as a retrieval stage, a first chargeback stage, and a second chargeback stage. ADRP creates a transaction record for each of these stages. So, cases may contain multiple transactions.

TXT (text file)

A text file (or plain text file) is a computer file which contains only ordinary textual characters with essentially no formatting.

V

Value Added Reseller (VAR)

Third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the Processor or Acquirer.