A Comprehensive A-Z Glossary of Merchant Services and Payments Definitions

Navigating the world of merchant services and payment processing can be complex, with a myriad of terms and definitions that are crucial for businesses to understand. Whether you're a seasoned professional or new to the industry, having a solid grasp of these terms is essential for ensuring smooth and secure transactions. This comprehensive A-Z glossary offers clear and concise definitions of key terms, making it an invaluable resource for anyone involved in the payments industry. Dive in to demystify the language of merchant services and empower your business with the knowledge needed to thrive in today’s digital economy.

A

Account Number
A unique sequence of numbers assigned to a cardholder account, identifying the issuing bank or financial institution and the type of financial-transaction card.

Accounts Receivable Conversion (ARC)
A process by which paper checks submitted for payment are electronically converted into data for processing through the Automated Clearing House (ACH).

ACH (Automated Clearing House)
A U.S.-based electronic network facilitating the transfer of funds between banks, typically processing large volumes of transactions in batches.

ACH Rules
The NACHA Operating Rules and Operating Guidelines governing the interregional exchange and settlement of ACH transactions.

Acculynk
A suite of payment solutions by First Data that includes True Debit™ gateway, PaySecure®, and Payzur, enabling secure and cost-effective eCommerce transactions and peer-to-peer disbursements via Electronic Funds Transfer (EFT) networks.

Acquirer/Acquiring Bank
A financial institution that processes payment transactions, such as credit or debit card payments, on behalf of a merchant, underwriting the merchant account and providing necessary hardware and software.

Acquiring
The process by which a bank or financial institution (the acquiring bank) enables a merchant to accept card payments for goods or services.

Address Verification Service (AVS)
A security system allowing merchants to verify a cardholder's billing address with the issuing bank during card-not-present transactions, such as online purchases, to reduce fraud.

Adjustments
Corrections made by the acquirer or processor to address discrepancies, such as disputes or duplicate charges, in payment transactions.

Affinity Card
A credit card issued in conjunction with an organization, such as a professional group or alumni association, where the issuer pays a royalty to the organization for marketing the card to its members.

Alipay™
A mobile and online payment platform developed by Alibaba Group®, facilitating payment transactions both online and in stores.

Alternative Payments/Local Payments
Payment types that bypass traditional card associations, offering alternatives to credit card transactions, such as debit cards, prepaid cards, bank transfers, and mobile payments.

American Express® (AMEX)
A multinational financial services corporation headquartered in New York City, offering payment, travel, and expense-management solutions for individuals and businesses.

Arbitration
A process used by credit card companies to determine whether the acquirer (or entity processing payment transactions for a merchant) is responsible for a chargeback.

ATM Interchange Fee
A fee paid by the issuer member to the acquirer member for processing an ATM transaction through the STAR® Network or similar networks.

ATM Terminal Driving
Maintaining the connection and software between an Automated Teller Machine (ATM) and relevant parties, ensuring proper transaction processing.

Authorization
The initial request by a merchant for a customer’s card issuer to release funds, verifying that the card has sufficient funds to cover the transaction.

Authorization Approval Code
A code indicating that a transaction is approved and the card may be honored by the merchant.

Authorization Response
The response from the issuer indicating whether a transaction is approved, declined, or requires additional verification.

Authorization Code
A unique identifier provided by the issuing bank, confirming the approval of a transaction during the authorization process.

Automated Teller Machine (ATM)
An electronic banking terminal that allows customers to complete basic transactions, such as cash withdrawals, without the presence of a bank representative.

Authentication
The process of verifying the identity of a credit card user, typically through a Personal Identification Number (PIN) or other secure means.

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B

B2B Payments (Business-to-Business)
Transactions between two or more businesses, such as payments made by a manufacturer to a wholesaler, facilitated by a wide range of commercial payment solutions.

Back-End Processor
A data company contracted by an acquirer to provide processing services, including routing payments from the issuing bank to the merchant to complete transactions.

Bank Identification Number (BIN)
The first four to six digits on a payment card that identify the bank or financial institution that issued the card, as well as its location and type.

Bank Routing Number
The nine-digit number appearing at the bottom of a check that identifies the financial institution responsible for the account.

Basis Point
A unit of measurement equal to one hundredth of one percent, often used to express differences in interest or interchange rates.

Batch
A group of captured transactions awaiting settlement, typically processed multiple times throughout the day.

Batch Processing
The grouping and processing of related transactions at the same time, usually by the same computer application, to improve efficiency.

Big Data
Large and complex data sets analyzed to identify patterns of behavior, often used to develop business strategies.

Bitcoin
A decentralized digital currency that is not backed by any central bank or government, used for transactions with vendors accepting it as payment.

Blockchain
A digital ledger that records cryptocurrency transactions in chronological order, ensuring transparency and security without central bookkeeping.

Breach
An incident in which security measures are compromised, leading to unauthorized access to sensitive cardholder data.

Business Day
A standard day for conducting business, excluding weekends and holidays, during which most retail locations and financial institutions are open.

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C

Capture Date
The date on which a payment transaction is processed by an acquirer.

Card Account Updater
A service that updates card information, such as expiration dates and card numbers, ensuring uninterrupted recurring payments.

Card Association
An organization that licenses bank credit card programs, manages transaction processing, and performs operational functions for its members, such as Visa® or MasterCard®.

Card Issuer
A financial institution, such as a bank or credit union, that issues payment cards (credit or debit cards) to consumers and manages billing and payment collection.

Card Verification Value Code (CVV/CVC)
A security code printed on a payment card, used during the authorization process to verify that the cardholder possesses the card during card-not-present transactions.

Cardholder
The individual to whom a payment card is issued or an authorized user of the card.

Card-Not-Present Transactions
Transactions where the physical card is not present, such as online or phone purchases.

Cash Advance
An amount withdrawn by a cardholder against their credit line, usually subject to fees and higher interest rates.

Cash Back
An amount of money returned to a cardholder as part of a loyalty program or added to the purchase total during a debit card transaction.

Chargeback
A reversal of a transaction by the card issuer on behalf of the cardholder, typically due to a dispute or fraud.

Chargeback Period
The time frame during which a card issuer can charge back a transaction, varying from 45 to 180 days depending on the transaction type.

Check Verification
A service that verifies the validity of a check writer's account to prevent acceptance of bad checks.

Chip Cards
Payment cards embedded with a smart chip designed to enhance transaction security, now the global standard for credit and debit cards.

Closed Loop
A payment card or system limited to a specific retailer or group of retailers, as opposed to an open-loop system usable anywhere that accepts payment cards.

Commercial Card
A payment card issued to businesses for employee use, covering expenses such as travel, entertainment, and supplies.

Connected Home/Connected Car
The concept of integrating internet access into everyday devices, such as home appliances or vehicles, enabling enhanced functionality and interconnectivity.

Consumer Authentication
Tools and processes used to verify the identity of a cardholder during a transaction, particularly in card-not-present scenarios.

Contactless Payments
A secure method of payment using RFID or NFC technologies, enabling transactions through mobile devices or contactless cards by tapping or waving them near a payment terminal.

Counterfeit Card
A fraudulent card created to appear legitimate, often using stolen cardholder information.

Credit Card
A payment card that allows the cardholder to purchase goods and services on credit, with the issuer billing the cardholder later.

Cryptocurrency
A digital currency that uses encryption for security, operating independently of a central bank, and used for transactions or as an investment.

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D

Dark Web
A part of the internet intentionally hidden from search engines, often used for illicit activities, including the trade of stolen credit card data.

Data Breach
An incident where sensitive data, such as credit card information, is accessed or stolen by unauthorized individuals.

Data Encryption
The process of transforming sensitive information, such as credit card data, into an unreadable format to prevent unauthorized access.

Debit Card
A payment card that deducts funds directly from the cardholder's bank account to complete a transaction.

Decline/Declined
A refusal by the card issuer to authorize a transaction, often due to insufficient funds, suspected fraud, or other issues.

Discount Rate
A fee charged to merchants for payment processing services, calculated as a percentage of the transaction amount.

Digital Wallet
A software application that stores payment card information for electronic transactions, often used in conjunction with mobile payment systems.

Doing Business As (DBA)
A secondary name legally associated with a business, allowing it to operate under a different name than its registered legal entity.

Dynamic Currency Conversion
A service that allows international cardholders to pay in their home currency while the merchant still receives payment in the local currency.

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E

EBT/Electronic Benefits Transfer Cards
Payment cards issued by state governments to distribute benefits electronically, replacing traditional paper-based welfare programs.

eCheck
An electronic version of a paper check, used to make payments online or via electronic funds transfer.

eCommerce
The buying and selling of goods and services over the internet.

Electronic Check Acceptance (ECA)
A system that captures banking information from a paper check, converting it into data for electronic processing through the ACH network.

Electronic Funds Transfer (EFT)
The electronic transfer of funds between bank accounts, used for transactions such as direct deposits and online bill payments.

EMV®
A global standard for credit and debit card security, utilizing embedded microchips to protect against fraud during transactions.

Encryption
The process of encoding data to protect it from unauthorized access, particularly in payment transactions.

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F

Financial Institution
An organization involved in the business of moving, investing, or lending money, including banks, credit unions, and savings institutions.

FinTech
A sector encompassing emerging technologies that enhance or compete with traditional banking and financial services.

Fraud
Illicit activities designed to deceive and unlawfully gain financial benefits, including identity theft, card counterfeiting, and unauthorized transactions.

Fraud Score/Fraud Scoring
A predictive analytics tool used by payment processors to assess the risk of a transaction being fraudulent, assigning a score that determines if further verification is needed.

Front-End Processor
A payment processor that provides connections to card associations, handling authorization and settlement services for merchants.

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G

Gateway
An eCommerce service that processes credit card transactions and direct payments for online and brick-and-mortar businesses.

Gift Cards
Prepaid cards issued by retailers or banks, allowing the cardholder to purchase goods or services up to the value stored on the card.

Global PFAC™ Program
A payment facilitator program enabling payment processing for sub-merchants through a single platform, supporting compliance with Card Brand rules.

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H

Hard Credit Pull
A credit check performed with the consumer's consent, typically during a credit application process, affecting the consumer's credit score.

Hosted Checkout
A third-party service that facilitates secure online payments, ensuring faster transactions and enhanced security.

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I

In-App Payments
Payments made within a mobile application, allowing consumers to purchase goods or services without leaving the app.

Interchange
The system operated by Visa® and MasterCard® for authorizing, settling, and exchanging fees and transaction information between issuers and acquirers.

Internet of Things (IoT)
The interconnectivity of everyday devices via the internet, enabling enhanced functionality, including payment processing capabilities.

Issuer/Issuing Bank
A financial institution that provides payment cards to consumers and is responsible for billing and collecting payment for transactions made with those cards.

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J

JCB (Formerly Japanese Credit Bureau)
A Japanese payment card brand offering international acceptance, particularly in Japan and Asia, and providing credit, debit, and prepaid cards.

Joint Credit
Credit issued to two or more people based on combined income, assets, and credit histories, with all parties sharing responsibility for repayment.

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K

Knuckle-Buster
An old-style manual device used to imprint credit card details onto a carbon copy sales slip, rarely used in modern transactions.

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L

Late Payment Fee
A fee charged to a cardholder or borrower for not making the minimum required payment by the due date.

Local Payments/Alternative Payments
Payment methods that bypass traditional card networks, including direct debits, bank transfers, mobile payments, and prepaid cards.

Loyalty Program
A program offered by card issuers or merchants to reward customers for using specific payment methods, encouraging repeat business.

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M

Merchant
A business or individual that sells goods or services and accepts payment via credit or debit cards.

Merchant Acquirer
A financial institution that processes credit or debit card transactions on behalf of a merchant, providing the infrastructure to accept card payments.

Merchant Agreement
The contract between a merchant and an acquirer outlining their rights, responsibilities, and terms related to payment processing.

Merchant Identification Number (MID)
A unique identifier assigned to a merchant by the acquirer, used for processing and tracking payment transactions.

Mobile Payments
Payments made using a mobile device, such as a smartphone, through apps, contactless systems, or digital wallets.

Money Network®
First Data’s electronic payroll delivery service, offering employees access to funds via prepaid cards and checks.

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N

NFC (Near Field Communications)
A technology enabling short-range wireless communication between devices, commonly used for contactless payment transactions.

Net Settlement
The actual transfer of funds between banks to settle the net effect of multiple transactions.

Network Fee: A network fee is a charge imposed by payment networks (e.g., Visa, Mastercard) on transactions processed through their networks. This fee is typically paid by the acquiring bank and is part of the overall cost structure that includes interchange fees and other processing fees. Network fees contribute to the cost of maintaining and upgrading the payment network infrastructure.

Network Token: A network token is a digital identifier issued by a payment network (such as Visa or Mastercard) that replaces a cardholder's primary account number (PAN) with a unique token. This token is used during payment transactions to enhance security by preventing the exposure of the actual card number. Network tokens can be specific to a merchant, device, or transaction, adding an additional layer of protection against fraud.

Non-Bank
An organization providing some financial services but not holding a banking license, such as a company offering credit cards without accepting deposits.

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O

OfferWise®
A platform that simplifies offer redemption and card-linked services, enabling consumers to attach promotions to their payment cards for automatic redemption.

Omnichannel
An integrated sales approach combining multiple channels (e.g., online, in-store) to provide a seamless customer experience.

Open Loop
A payment system where a card can be used at any location accepting the card network, as opposed to a closed-loop system restricted to specific merchants.

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P

PCI DSS (Payment Card Industry Data Security Standards)
A set of security standards ensuring that all entities handling credit card information maintain a secure environment.

PIN (Personal Identification Number)
A confidential code used by cardholders to verify their identity during transactions, especially with debit cards.

Point-of-Sale (POS)
The time and place where a retail transaction is completed, typically involving the use of a POS terminal or system.

Prepaid Cards
Cards with a pre-loaded value, allowing the cardholder to spend up to the amount stored on the card, often reloadable.

Processor
A third-party company that handles credit and debit card transactions on behalf of a merchant, including authorization and settlement services.

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Q

QR (Quick Response) Code Mobile Payments
Payments made by scanning a QR code displayed on a mobile device, facilitating quick and secure transactions.

QSR (Quick Service Restaurants)
Restaurants that offer fast, convenient service with minimal table service, often utilizing advanced payment technologies.

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R

Reason Code
A code used to explain the reason for a chargeback or other transaction-related event, such as a decline or reversal.

Recurring Billing Transaction
A transaction charged to a cardholder's account on a periodic basis for recurring goods or services, such as subscriptions.

Retrieval Request
A request from a card issuer for additional information regarding a specific transaction, often preceding a chargeback.

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S

Secure Payment Page
A web page secured with encryption, designed to protect sensitive payment information during online transactions.

Settlement
The process of exchanging funds between the acquirer and issuer to complete a payment transaction.

Shopping Cart Software
Software that allows online shoppers to select and purchase items from an eCommerce site, maintaining a list of selected items and facilitating checkout.

Smart Card
A payment card embedded with a microprocessor chip, enabling secure transactions by storing and processing data on the card itself.

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T

Terminal Identification Number (TID)
A unique identifier assigned to a POS terminal, used for tracking transactions and identifying the terminal's location.

Tokenization
A security process that replaces sensitive card information with a unique identifier (token) to protect data during transactions.

Transaction
An agreement between a buyer and seller involving the exchange of goods or services for payment.

Transaction Date
The date on which a transaction occurs, used for recording and tracking the transaction.

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U

Under Review
The status of a transaction being examined for potential fraud or other issues before it is processed.

Unauthorized Transaction
A transaction made without the cardholder's consent, often due to fraud or identity theft.

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V

Voided
A transaction that has been canceled by the merchant after authorization but before settlement, preventing the transfer of funds.

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W

Wallets
Digital or mobile wallets store payment card information, enabling secure electronic transactions via smartphones or other devices.

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X

XML (Extensible Markup Language)
A flexible text format used to create structured documents, often used in data transfer between different systems.

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Y

Yield
The return on an investment, often expressed as a percentage of the amount invested.

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Z

Zip-Zap Machine
An old-style manual device used to capture credit card information by imprinting the card details onto a carbon copy receipt.

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This comprehensive glossary serves as a valuable resource for anyone navigating the world of merchant services and payment processing. By familiarizing yourself with these terms, you can better understand the complexities of payment transactions and make informed decisions in your business or personal financial activities.

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