PayTrace Glossary
Use this list to understand common banking and PayTrace terms.
A
ABA Routing Number™
A nine-digit identification number that specifies a specific U.S. financial institution. (Also known as ABA transit number, ABA routing number, ABA transit routing number, ABA routing transfer number, or check routing number).
Each bank or financial institution recognized by the Federal Reserve has its own ABA transit routing number, making check deposits via mobile phone, check clearing between banking institutions, payroll deposits, and online banking activities possible.
The ABA Routing Number was developed by the American Bankers Association in 1910.
Account Updater
A service from credit card companies that provides automatic subscription customer card data account updates to merchants and acquirers when cardholder information changes or expires.
Accounts Receivable Conversion (ARC)
The ARC process enables paper checks to be scanned and converted to electronic payment through the Automated Clearing House (ACH), saving time and the expense of physically processing mailed-in or drop-box check payments.
This e-check transaction type is a single-entry debit against a customer's checking account. Authorization is obtained by posting required notices before accepting a customer's check.
See Accounts Receivable Conversion (ARC): What it is, How it Works.
ACH
An electronic fund transfer made between banks and credit unions across what is called the Automated Clearing House network.
See “ACH Network.”
ACH Fraud
The malicious practice by untrustworthy persons or fraudsters to use stolen bank account information to purchase merchandise or by a legitimate account holder to purchase merchandise with the intention of returning it used or modified for refund.
ACH fraud also occurs when account holders falsely dispute ACH transactions they authorized. Chargeback or Return Fraud occurs with paper and electronic checks.
ACH Network
An electronic funds-transfer system that facilitates payments in the U.S. and enables most credit and debit transactions to clear on the same business day. ACH transactions make transferring money quick and easy. The ACH Network is governed by ACH Rules as defined by the National Automated Clearing House Association (NACHA).
See What Is the Automated Clearing House, and How Does It Work? and “National Automated Clearing House Association (NACHA).”
ACH Transaction (or Entry)
A payment transaction to or from a Receiver (the customer) that is processed via the ACH Network. The participants in an ACH Transaction are (1) the Originator (the merchant), (2) the Third-Party Processor, (3) the Originating Depository Financial Institution (ODFI), (4) the ACH Network, (5) the Receiving Depository Financial Institution (RDFI), and (6) the Receiver.
See “Automated Clearing House (ACH) Network,” “Originator,” “Originating Depository Financial Institution,” “Receiver,” “Receiving Depository Financial Institution,” and “Third-Party Provider.”
Acquirer
An acquirer is a financial institution or Merchant Service Provider (MSP) that acts as an intermediary between merchants and card payment networks such as Visa and Mastercard to facilitate and manage credit card processing on behalf of the merchant.
Acquiring Bank
The acquiring bank is the bank or financial institution that holds a merchant’s bank account that is used for collecting the proceeds for credit card processing.
Acquiring Processor
The credit card processing entity (or Processor) with which an acquirer partners to provide merchants with transaction clearing, settlement, billing, and reporting services.
See “Processor.”
Address Verification Service (AVS)
A system established by the Credit Card Processing Associations to verify customer billing addresses submitted with e-commerce payment transactions. Card Not Present merchants can use AVS to accept or decline transactions based on the validity of the billing address information provided by the customer, but AVS does not verify the legitimacy of a transaction.
Address Verification Status
A value that indicates the results of an Address Verification Service (AVS) comparison. A code and description are provided by the merchant’s processor.
American Bankers Association (ABA)
A national organization that represents American financial institutions, banks, and other financial entities. Members are assigned an identification number or ABA Transit Routing Number.
See “ABA Transit Routing Number.”
AP
The process of merchants receiving and paying invoices from their vendors.
Application Program Interface (API)
A computer communication protocol that facilitates the transfer of or access to information between two separate software or computer applications.
Approval
Verifying whether a customer has sufficient funds or credit available for a specific transaction. It is also called an authorization.
AR
Accounts Receivable - the process of merchants issuing invoices to their customers.
Authentication
A process of verifying the identity of an individual or organization as the party they claim to be.
Authentication
A process of verifying the identity of an individual or organization as the party they claim to be.
Authorization
Verifying whether a customer has sufficient funds or credit available for a specific transaction. It is also called an approval.
Authorization Amount
The amount of the transaction that is submitted to the authorizer for approval. This amount is reserved against the available balance of a customer’s credit card until the transaction is captured, a subsequent Void transaction is submitted, or the 30-day window for the authorization expires.
Authorization Capture
A credit card transaction request to authorize and capture or settle funds for a purchase. The payment gateway submits the request to the card issuing bank for authorization and will automatically submit the transaction for settlement upon approval.
Authorization Code
A code that is assigned to a credit card transaction by the card issuing bank once the transaction has been approved.
Authorization Only
A credit card transaction request to authorize or to reserve funds for a purchase. The payment gateway submits the request to the card issuing bank for authorization, but no further action is taken. Also called "Auth-Only."
Authorization Request
A transaction request that is submitted by a merchant to verify that funds are available on a customer’s credit card for a purchase. Further action by the merchant depends on whether the transaction request type is an Authorization Capture or an Authorization Only and whether the card issuing bank authorizes the transaction request.
See also: “Authorization Capture” and “Authorization Only.”
Automated Clearing House (ACH) Network
An electronic funds-transfer system that facilitates payments in the U.S. and enables most credit and debit transactions to clear on the same business day. ACH transactions make transferring money quick and easy. The ACH Network is governed by ACH Rules as defined by the National Automated Clearing House Association (NACHA).
See also “National Automated Clearing House Association (NACHA).”
B
B2B (Business-to-business)
Refers to business or transactions conducted between companies rather than between a company and an individual consumer.
B2C (Business-to-consumer)
A retail model where products or services move directly from a business to the end user (individual consumer) who’s purchasing goods or services for personal use.
Back Office Conversion (BOC)
An e-check transaction type that’s a one-time charge transaction against a customer's checking account, BOC allows merchants to collect a check written at a point of sale (checkout counter, an in-person bill payment location, or a service call location) and convert it to an ACH debit during back-office processing. Obtain payment authorization by posting required notices before accepting a customer's check.
Backorder
A retailer's order for a product that is temporarily out of stock with their supplier.
Bank Account Number
The account number that a bank assigns to a checking or savings account holder. To make an electronic check payment, this number must be provided to a merchant by a customer.
Bank Account Type
The type of bank account used for an electronic check transaction.
For example, checking, business checking, or savings.
Bank Card
A payment card that is issued to a buyer or consumer by a financial institution or bank, also known as a credit, purchase card, or debit card.
Bank Card Association
A group of financial institutions or banks that have formed an association for issuing bank cards. Usually, they’ll work with other payment entities to provide certain bank card offers.
Bank Identification Number (BIN)
A unique number to identify processors, acquirers, issuers, and other financial institutions involved in the interchange process. It is the first four to six digits of a cardholder’s account number. Also known as Issuer Identification Number (IIN).
A BIN is the first 4 to 6 numbers on a payment card, identifying the financial institution that issued the card.
See “Issuer Identification Number (IIN)” and What Is a Bank Identification Number (BIN), and How Does It Work?
Basis Point (BP)
Equivalent to .01 percent, or one-hundredth of one percent, and is used to measure fee rates. Rate changes are often expressed in basis points instead of hundredth percent; e.g., a fee rate increase of 1.95 percent to 2.0 percent is expressed as an increase of 5 basis points.
Batch Processing
Submitting a group of transactions for settlement at once, usually at the end of the business day.
Biller
The person who processes bills and is responsible for processing invoices for a company or an organization. A biller often works in the accounting department of an organization.
Brick and Mortar
A term used in the payments industry refers to merchants that operate in storefronts or physical locations.
See “Retail.”
Buyer
In business-to-business finance, a buyer refers to business conducted between companies rather than between a company and a consumer. In B2B commerce, the customer is the buyer.
C
Capture Only
A credit card transaction request to capture funds previously authorized but NOT via the payment gateway. For this type of transaction, the merchant will submit the authorization code previously received from the issuing bank through other means than a payment gateway request, e.g., by telephone.
Card Associations
An organization, such as Visa, Mastercard, American Express, or Discover, establishes and maintains the rules and regulations for card payment systems.
Card Code
A three or four-digit number that appears on the back of a credit card (on the front for American Express). This code is used to validate customer information on file with the credit card association.
Card Code Status
This value is returned to the merchant by the processor, indicating whether the billing information provided by a customer matches the information on file at the credit card association for the cardholder associated with the credit card number and Card Code.
Card Not Present (CNP)
A cardholder’s credit card is not physically presented to a merchant at the time of the transaction. This term is used in the payments industry to distinguish eCommerce merchants from brick-and-mortar retail merchants.
Card Present (CP)
When a credit card is physically presented to a merchant by a cardholder at the time of the transaction, in the payments industry, this term distinguishes brick-and-mortar retail merchants from those that operate from mail order/telephone order (MOTO) locations or online.
Card Reader
A hardware device facilitating the reading and transmission of payment data stored on a credit, debit, or stored-value card.
Cardholder
A consumer to which a credit or debit card is issued by the credit card associations or by the consumer’s bank.
Cardholder Authentication Programs
These are security programs created by the card associations to provide identity authentication for Visa and MasterCard cardholders and transaction protection for merchants. By registering for these programs, merchants can minimize the risk of chargebacks and returns while providing optimal security for their Visa and MasterCard customers.
Cardholder Dispute
A claim made by a cardholder that an unauthorized purchase or transaction was performed on their credit card.
Cart Abandonment
When a potential customer starts a check-out process for an online order but then drops out of the process before completing the purchase.
Cash Concentration or Disbursement (CCD)
This e-check transaction type is a charge or refund against a business checking account. One-time or recurring CCD transactions are fund transfers to or from a corporate entity.
Chargeback
A disputed transaction initiated by the cardholder, where the funds from a previous sale are returned to the cardholder's account. Chargebacks are often due to issues like fraud, billing errors, or dissatisfaction with a product or service.
Chargeback Reason Code
A code provided to a merchant by the card issuing bank indicating the reason for a chargeback transaction.
Check 21
Refers to the Check Truncation Act of the 21st Century, a Federal Reserve Bank law that allows merchants to submit customers’ check, or bank account, information for payment electronically instead of processing paper checks.
Check Verification
A risk management process that verifies the trustworthiness of an electronic check transaction against an extensive high-risk or bad check database.
Cash in Advance (CIA)
A payment term is used in some trade agreements where there is a delay between the sales agreement and sales delivery. It requires that a buyer pay the seller in cash before a shipment is received and oftentimes before a shipment is even made.
COD/POD
Cash on delivery/Payment on delivery.
Consumers
An individual or group of people who purchase goods and services solely for personal use, not for manufacturing or resale.
Credit or Refund
A credit card transaction request to post funds from the merchant’s bank account back to the customer’s credit card account as a refund for a previous charge transaction. Merchants must submit the transaction ID of the original charge transaction to which the refund is applied.
Credit Card Number
The account number assigned by a credit card association or card issuing bank to a cardholder. This data must be provided to a merchant by a customer to make a credit card payment.
Customer relationship management (CRM)
A technology for managing a company's interactions with existing and potential customers to improve relationships and grow business.
Customer ID
A unique identification value assigned to a customer by a merchant which may be associated with the invoicing or billing for a transaction.
Customer IP Address
Indicates the Internet Protocol (IP) address of a customer’s web browser or the IP address from which a transaction is submitted to the payment gateway.
See “Internet Protocol (IP) address,” and “Payment Gateway.”
Cut-Off Time
The time of day that a merchant’s payment transactions are batched and electronically picked up by the payment gateway for processing.
Card Verification Data (CVD)
A three or four-digit code on the back of a payment card is used to authenticate a consumer during a card-not-present transaction.
Card Verification Value (CVV, CV2 or CVV2)
a validation code that provides an extra layer of protection for the buyer. A series of three or four numbers located on the front or back of a credit card. For credit card transactions that take place online or over the phone, it’s an extra level of protection against fraud.
Cash with order (CWO)
A payment method for goods in which cash is paid at the time of order, and the transaction becomes binding on both buyer and seller.
D
Demand Deposit Account (DDA)
A bank account with deposited funds that can be withdrawn at any time without advance notice. Checking and savings accounts are types of DDAs.
See Demand Deposit Definition, Account Types, and Requirements.
Declined
Transactions not approved by the card issuing bank are marked as declined. No further action may be taken for declined transactions.
Depository Financial Institution (DFI)
A bank participating in the ACH Network, also known as an Originating Depository Financial Institution (ODFI) or Receiving Depository Financial Institution (RDFI).
See “Originating Depository Financial Institution (ODFI)” and “Receiving Depository Financial Institution (RDFI).”
Digital Certificate
An electronic file containing unique information that is used to verify an organization's or individual's trustworthiness. Issued by a Certificate Authority and used with the Secure Sockets Layer (SSL) protocol. Also known as Digital Fingerprint.
Discount Fee
The percentage of each credit card or e-check transaction and batch settlement process billed to the merchant.
Days Sales Outstanding (DSO)
The length of time since an AR invoice has been issued before payment is received.
E
e-check
An electronic check payment solution allowing merchants to post, charge, and refund transactions directly to a customer's bank account.
eCommerce
Stands for electronic commerce, which is business by companies and individuals that buy and sell goods and services over the internet.
Electronic data interchanges (EDI or EDIs)
is the physical transfer of digital information from one computer to another, allowing businesses to process and transmit documents that previously appeared only in paper format.
Electronic Funds Transfer (EFT)
The electronic transfer of money from one bank account to another, within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of bank staff.
Electronic Invoicing Presentment and Payment (EIPP)
A type of software used by finance teams for accounts receivable management and e-invoicing.
See Electronic Invoicing.
Electronic bill payment and presentment (EBPP)
A process that companies use to collect payments electronically through systems like the Internet, direct-dial access, and Automated Teller Machines (ATMs).
See Electronic Bill Payment & Presentment (EBPP): Definition, Types and What Is an ATM and How Does It Work?
Electronic Check
Describes a check or bank account payment submitted and/or processed electronically.
Electronic Funds Transfer Act
A federal law governing the use and administration of electronic funds transfer services. It protects consumers when they transfer funds electronically through debit cards, automated teller machines (ATMs), and automatic withdrawals from a bank account. It provides a way to correct transaction errors and limits liability from a lost or stolen card.
See Electronic Fund Transfer Act (EFTA): Definition and Requirements and What Is an ATM and How Does It Work?
Electronic Signatures in Global and National Commerce Act (E-SIGN)
A United States federal law that defines and governs the use of digital signatures and records in electronic commerce.
Embedded Finance
When a non-financial company offers financial products and services through APIs and platforms, it allows companies to access and utilize financial services provided by third parties.
Embedded Payments
A convenient checkout experience for buyers through payment solutions built natively into a SaaS company’s product – allowing customers to complete transactions without leaving the non-financial institution platform’s website or mobile app.
EMV
Stands for Europay, Mastercard, and Visa. It refers to the global standard for chip-based credit and debit card transactions that offer enhanced security compared to magnetic stripe cards.
Encryption
A secure way for individuals and companies to protect sensitive information from hacking. An important security measure for any FinTech application to ensure user data and financial accounts are kept secure.
See Encryption.
End of the Month (EOM)
The abbreviation "EOM" means that the payer must issue payment within a certain number of days following the end of the month.
Enterprise resource planning (ERP)
refers to a type of software that organizations use to manage day-to-day business activities such as accounting, procurement, HR, etc.
See Enterprise Resource Planning (ERP): Meaning, Components, and Examples.
Expiration Date
The date on which the validity of a credit card expires. Transactions will only be approved for credit cards that have not yet expired.
F
Federal Reserve Bank (FRB)
The governing financial institution of the United States of America.
Fraud
The malicious practice by untrustworthy and dishonest persons to use stolen personal information, credit card information, and/or compromised bank account information for personal gain. Financial fraud can take on many forms, including making false insurance claims and identity theft, leading to unauthorized purchases.
See What Is Fraud?
Funding
Occurs when monetary proceeds for a merchant’s e-check transactions are deposited to the merchant's bank account.
G
Gross Monthly Discounting
With a monthly discount, a processor pays interchange fees throughout the month on behalf of the business. They tally all monthly charges and deduct fees in one lump sum at the beginning of the following month. This allows you to receive gross deposits from sales throughout the month and makes reconciling processing charges easier since all fees are deducted at one time vs. daily discount, in which your processor deducts fees daily throughout the month and at the end of the month.
H
High-Risk Merchant
A merchant is judged by a processor or bank to present an increased level of risk for chargebacks and fraud – perhaps because the merchant operates in a high-risk industry, sells products or services that experience a high level of chargebacks or is prone to fraudulent transactions.
Hosted Payments
A web page hosted by a 3rd party that provides secure checkout capabilities for business websites.
I
Independent Sales Organization (ISO)
An organization that sells business products or services to merchants and/or acquires merchants on behalf of various types of merchant service providers.
Integration
Software integration is the process of connecting one software application with another, typically through their application programming interfaces (APIs).
Interchange or Credit Card Interchange
Also known as Credit Card Interchange, this is the process by which all parties involved in a credit card transaction (i.e., processors, acquirers, issuers, etc.) manage the processing, clearing, and settlement of credit card transactions, including the assessment, and collection and/or distribution of fees between parties.
Interchange Fee
This is a fee paid by the acquiring bank to the card issuer for each credit or debit card transaction. The fee is typically a percentage of the transaction amount and helps cover the costs of card issuance and maintenance.
Internet-Initiated Entry (WEB)
This e-check transaction type is a charge against a customer’s checking or savings bank account. Payment authorization is obtained from the customer via the Internet.
Internet Protocol (IP) Address
An IP address is an identifying number associated with a specific computer or network.
Invoice Number
A unique identification value that is assigned to a transaction by a merchant it may be associated with order fulfillment and billing for a transaction.
Issuer
See the entry for “Issuing Bank” below.
Issuer, Issuing Bank, or Card Issuing Bank
A financial institution that issues credit or debit cards to consumers on behalf of the card associations.
Issuer Identification Number (IIN)
Sometimes referred to as a bank identification number (BIN), the issuer identification number (IIN) found on credit, debit, and other types of payment cards indicates which bank or other financial institution issued that card and is responsible for it.
See “Bank Identification Number (BIN)” and “Issuer Identification Number (IIN).”
L
Level 2 Data
Levels refer to the amount of transaction data submitted for a card; the higher the level is, the more data needs to be reported. Examples for Level 2 include shipping and tax information, product codes, and other order-specific information like PO number and invoice number.
Level 3 Data
Levels refer to the amount of transaction data submitted for a card; the higher the level is, the more data needs to be reported. For interchange fee incentives, more transaction data needs to be reported. Examples for Level 3 include additional information beyond shipping and tax information to include product description, unit price, quantities, line items, and product codes, plus Level 2 requirements.
M
Mail Order/Telephone Order (MOTO)
A business or merchant that sells merchandise or services to consumers via mail or telephone orders. MOTO merchants operate from call or fulfillment centers.
Manual Entry
The submission of payment information for a transaction by keying the customer’s payment information into a hardware terminal or Virtual Terminal. For example, any transaction that is not submitted by allowing an organization or business to “swipe,” or read payment information directly from a payment card.
Additionally, for e-commerce merchants, a manual transaction might be considered any transaction that is not entered at their e-commerce Web site by a customer.
MasterCard® SecureCode™
A security program created by MasterCard® to provide identity authentication for cardholders and transaction protection for merchants. By registering, merchants can minimize transaction risks while providing additional security for their MasterCard customers.
MasterCard® Site Data Protection (SDP) Program
A program created by MasterCard® stating its technology and sensitive data security requirements for merchants and merchant service providers. Compliance is required of its member institutions. CISP evolved into the current PCI DSS standards.
Monthly Active Users (MAU)
A key performance indicator (KPI) used to count the number of unique users who have visited a website within the past month.
Merchant
The person or business entity that sells goods or services to a customer.
Merchant Account
A financial institution or bank account that is used by a merchant specifically to collect proceeds from consumer bank accounts or credit card payment transactions.
Merchant Account Provider
A financial institution or bank that provides a financial account to a merchant to collect proceeds from consumer bank accounts or credit card payment transactions.
Merchant Identification Number (MID)
An identification number assigned to each member merchant of an acquiring organization, such as a financial institution, Independent Sales Organization (ISO), Merchant Service Provider (MSP), or Processor.
Merchant Service Provider (MSP)
A company or sales organization that provides transaction processing solutions to its merchant clients.
Merchant Services
Financial services and solutions provided to businesses – enabling them to accept electronic payments from customers, such as credit card or debit card transactions.
Middleware
Software that acts as a bridge between an operating system or database and applications, especially on a network, provides a method of communication and data management.
See Middleware.
Mobile Payments
Payment transactions are conducted using a mobile device, such as a smartphone or tablet, often using mobile wallets, payment apps, or a mobile-optimized web checkout form.
Mobile payments may sometimes refer to in-person payments made through a mobile device with an attached card reader dongle as a mobile point-of-sale transaction.
N
National Automated Clearing House Association (NACHA)
NACHA is a non-profit national trade association that establishes the rules, standards, and procedures governing the exchange of ACH transactions between participating banks.
See Originating Depository Financial Institution (ODFI) and Receiving Depository Financial Institution (RDFI).
Non-Disclosure Agreement (NDA)
Also known as a confidentiality agreement, is a legally binding contract in which one party agrees to give a second party confidential information about its business or products, and the second party agrees not to share this information with anyone else for a specified period of time.
Net Daily Discounting
A credit card processor deducts the qualified rate or interchange plus markup throughout the month and then deducts all other fees at the end of the month. Businesses billed via daily discount receive net deposits from sales because the processor deducts their fees from batch totals at daily settlement.
Near Field Communication (NFC)
It is a wireless technology that allows two devices to communicate in close proximity, commonly used for contactless payments.
North American Industry Classification System (NAICS)
A classification of business establishments by type of economic activity based on their process of production and business activities. These six-digit numerical codes have mostly replaced the earlier four-digit Standard Industrial Classification (SIC).
See North American Industry Classification System (NAICS), Industry classification, and Standard Industrial Classification.
Not Sufficient Funds (NSF)
A type of ACH return indicating that a customer’s bank account does not have sufficient funds to cover a specific e-check transaction.
Notification of Change
Notification to a merchant from a customer's bank indicating that bank account information provided with a specific e-check transaction was incorrect.
O
Open-Looped System
A credit card interchange system that allows multiple card-issuing financial institutions or banks to share a credit, debit, or payment card brand.
Originating Depository Financial Institution (ODFI)
A term used when referring to the clearing of ACH, or e-check, transactions to describe the merchant’s bank. The merchant’s bank handles the submission of e-check transactions received by the merchant to the ACH Network for clearing.
Originator
A term used when referring to the clearing of ACH, or e-check, transactions to describe the person or corporate entity that has received authorization from a customer to refund or charge their bank account. For an e-check transaction, the merchant is the “Originator.”
P
Platform as a service (PaaS) PaaS
A cloud computing model where a third-party provider delivers hardware and software tools to subscribers over the internet, usually for app development.
Payment Gateway
A system of technologies and processes enabling merchants to electronically submit payment transactions to payment processing networks (i.e., Credit Card Interchange and ACH Network).
A payment gateway securely authorizes and processes online transactions between merchants, customers, and acquiring banks while providing merchants with transaction management, reporting, and billing services.
Payment Card Industry Data Security Standard (PCI-DSS)
A set of security standards developed by major credit card companies to protect cardholder data during payment transactions.
Personal Identification Number (PIN)
A unique number issued to an individual or organization by a financial organization or related service—or other service provider—to authenticate user identity and grant secure access to accounts or information.
Per-Transaction Fee
The flat fee is charged to a merchant by the payment gateway for each transaction and batch settlement processed, including charges, refunds, voids, and declines.
Payment in Advance (PIA)
A payment must be made in full before the goods or services are delivered.
Point of Sale (POS)
The location or device where a customer makes a payment for goods or services, typically a cash register or payment terminal for Card Present retail transactions.
Point of Sale (POS) Device
A piece of electronic equipment a merchant uses to submit credit card payment information to the processing network. Like payment terminals, these devices are connected to the credit card processing network via an internet connection.
Point of Sale (POS) Solutions Provider
A POS device, system, software manufacturer, or distributor that provides POS products or services to Card Present retail merchants.
Prearranged Payment and Deposit Entry (PPD)
This e-check transaction type is a charge or refund against a customer’s checking or savings account. PPD transactions may only originate when payment and deposit terms between the merchant and the customer are prearranged, for example, with subscription transactions.
Prior Authorization Capture
A credit card transaction request to capture funds for a separate, previously authorized authorization-only transaction. With this type of transaction, the merchant will submit an authorization code that was received from the issuing bank at the time of the original authorization-only transaction.
Processor
An entity in the credit card processing network that handles the posting of transactions (for authorization, clearing, and settlement to consumer credit card accounts at the card associations) and the settlement of funds to merchant bank accounts.
Processors may also provide merchants with billing and reporting services.
Front-end processors route transactions from a merchant to a cardholder's bank for authorization, ensuring enough credit or funds are available to make a purchase.
Back-end processors receive and forward settlement batches to issuing banks in a scheduled time frame.
R
Receiver
A term used when referring to the clearing of ACH, or e-check, transactions to describe the person or corporate entity that has authorized a merchant to initiate a refund or charge transaction to their bank account. In an e-check transaction, the customer is the “Receiver.”
Receiving Depository Financial Institution (RDFI)
A term used when referring to the clearing of ACH, or e-check, transactions to describe the customer's bank. The RDFI receives a request from the ACH Network to provide funds for the customer’s e-check transaction.
Reconciliation
The process of comparing transaction activity or account statements from multiple financial organizations or service providers involved with transaction processing to reconcile or align transaction or account activity. The purpose of reconciliation is to confirm that no transaction activity is being unaccounted for by any one party.
Recurring Billing Transaction
A payment model where a merchant charges a customer's credit card or bank account at regular intervals for a subscription or ongoing service.
Reference Transaction ID
The transaction ID that links, or associates, a subsequent transaction to a separate, original transaction. In the case of refund transactions, a reference transaction ID must be entered to identify the original charge transaction against which the refund is being submitted.
Refund
A credit card transaction request to post funds from the merchant’s bank account back to the customer’s credit card account as a refund for a previous charge transaction. Merchants must submit the transaction ID of the original charge transaction to which the refund is applied.
Regulation D
As established by the Federal Reserve Board, part of the Reserve Requirements of the Depository Institutions Act deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. Regulation D defines the types of deposits handled by financial institutions or banks.
Regulation E
Regulation E defines electronic funds transfers as part of the Electronic Funds Transfer Act established by the Federal Reserve Board in 1978 (due to the increase in ATMs) to protect consumers when transferring funds electronically.
See Electronic Fund Transfer Act (EFTA): Definition and Requirements.
Reseller
A Merchant Service Provider (MSP) or Independent Sales Organization (ISO) that acquires merchant customers for payment processing services.
See “Merchant Service Provider (MSP)” and “Independent Sales Organization (ISO).”
Response Code
A code provided to the merchant by the card issuing bank that indicates the results of a transaction request and, if declined, the reason why the transaction was rejected.
Retail
The business of selling merchandise or services to consumers. PayTrace uses this term to refer to merchants that operate in a brick-and-mortar storefront or physical location and accept Card Present payments—meaning credit cards are “swiped” into a card reading device.
Return or Returned Item
An e-check transaction that could not be completely processed for reasons such as NSF, invalid account number, account closed, or other rejection reasons provided by the customer's bank. A chargeback is a type of return.
See “Chargeback.”
Return Fraud
A return scam where the fraudster purchases an item with a stolen credit card, returns the item, and gets the refund in another account.
Reversal
A reversed chargeback or refund transaction occurs when a merchant produces sufficient proof that disputes a chargeback or the customer rescinds the chargeback.
See “Chargeback.”
Real-Time Payment (RTP)
Any account-to-account fund transfer that allows for the immediate availability of funds to the beneficiary of the transaction.
S
SaaS
Software as a service.
Sandbox
An isolated testing environment that lets developers run programs or open files without affecting the application, system, or platform on which they run. Developers use sandboxes to test programming code; cybersecurity pros use them to test potentially malicious software.
Software Development Kit (SDK)
A set of platform-specific building tools for developers with components like debuggers, compilers, and libraries to create code that runs on a specific platform, operating system, or programming language. Developers use SDKs to build apps without having to write everything from scratch.
Settlement
For credit card transactions, settlement occurs after transaction processing between the involved financial institutions and processing entities and funds for the credit card transaction have been successfully deposited into the merchant’s bank account.
For an e-check transaction, settlement is when the payment gateway submits a request to the ACH Network on behalf of a merchant to collect bank account funds for a purchase.
Settlement Amount
The transaction amount is sent to the credit card processor or the ACH Network for settlement. This is the amount that will be posted as a charge or refund against the specified method of payment. For credit card transactions, it may be less than or equal to the amount originally authorized for the transaction.
Shopping Cart
An Internet or software company that provides e-commerce tools and payment form solutions for merchant websites.
SIC (Standard Industrial Classification) Code
Standard Industrial Classification (SIC) codes are four-digit numerical codes that categorize the industries companies belong to based on their business activities. They were mostly replaced by the six-digit North American Industry Classification System (NAICS).
See Standard Industrial Classification and North American Industry Classification System (NAICS).
Sponsoring Bank
A federal or state-chartered bank that is a member of the Visa and/or MasterCard card associations (or another Approved Bank Card System); sponsoring banks process credit and debit card transactions and provide related services on behalf of the Credit Parties.
Stored-Value Card
Gift credit cards are a type of stored-value card. Similar to a debit card, they are payment cards with a limited monetary value, held either in an account by a card issuer, or in an electronic chip embedded within the card.
Surcharging
A surcharge is an additional fee that a merchant can add to a transaction when a consumer uses a credit card for payment. A credit card surcharge is a fixed percentage fee at checkout (paid by the B2B buyer) on eligible credit card transactions. Surcharge fees are typically added to the final transaction total and itemized at checkout.
T
Telephone-Initiated Entry (TEL)
This e-check transaction type is a one-time charge against a customer’s checking or savings account. TEL transactions may only originate when a business relationship between the merchant and the customer already exists, or if no relationship exists, only when the customer initiates the telephone call to the merchant.
Terminal
A physical device used to accept credit and debit card payments at the point of sale. It may be a countertop terminal or mobile terminal. See also Point-of-Sale Device.
Terminal Identification Number (TID)
An identification number assigned to each POS device by a merchant’s processor, which provides the processor with information about the device’s configuration and capabilities.
Third-Party Provider
An organization or business that is not directly associated or involved with transaction processing or necessary for the exchange of a transaction between two parties but that provides merchants with business-enhancing services.
Third-Party Solution
A hardware or software manufacturer or distributor that provides transaction-enhancing products or processing solutions to merchants.
Tokenization
The process of replacing sensitive cardholder data with a unique identifier or "token" during payment transactions to enhance security and protect cardholder information.
Transaction
The exchange of information, goods, or services in which all participating parties benefit, as in the exchange of a consumer’s payment or payment information for merchandise or services provided by an organization or business.
Transaction ID (Trans ID)
A unique identification value assigned to each transaction processed through the payment gateway. This ID may be used to search for or sort transactions.
Transaction Type
The type of credit card transaction taking place. For charge transactions, a consumer is allowing a merchant to collect payment for merchandise or services rendered. With refund transactions, a merchant is returning funds to the consumer for a previous charge transaction.
For more information about credit card transaction types, see also “Authorization Only,” “Authorization Capture,” “Capture Only,” “Prior Authorization Capture,” “Refund,” and “Void.”
Transport Layer Security (TLS)
TLS is a network protocol that safeguards electronic communications between two or more computers. When transmissions are sent over a TLS connection, data is encrypted and cannot be modified in transit by other parties on the Internet. Earlier versions of this protocol were called Secure Sockets Layer, or SSL.
U
Underwriting
The process of evaluating a service applicant’s financial history and credit trustworthiness to determine whether to grant a service account. In some cases, underwriting may also determine an applicant’s financial obligations, such as service pricing.
V
Value-Added Reseller (VAR)
An independent or other sales organization that provides merchants with various services and/or solutions for enhancing their business practices or transaction management.
Vendor
A vendor is a general term for anyone who sells goods or services. In the supply chain, a vendor makes goods and services available to B2B buyers or consumers. Usually not the manufacturer of the goods, a vendor can operate as both a supplier (or seller) of goods and a manufacturer.
Virtual Terminal
A software-based system to accept payments in person, online, or via mobile devices.
Visa Cardholder Information Security Program (CISP)
A program created by Visa stating its technology and sensitive data security requirements for merchants and merchant service providers. Compliance is required of its member institutions. CISP evolved into the current PCI DSS standards.
Visa Secure
Visa Secure (formerly Verified by Visa) provides advanced security so you can make secure online payments and enjoy safe shopping online. A security program created by Visa created it to provide identity authentication for cardholders and transaction protection for merchants. Merchants that implement Verified by Visa Secure can minimize the risk of chargebacks and returns while providing additional security for their Visa customers.
Void
Transactions of this type cancel original charge transactions that have not yet been submitted for batch settlement. For Voids, a merchant must submit the transaction ID of the original charge against which the Void is being submitted. No further action may be taken for Void transactions. To cancel a transaction that has already been settled, a refund must be submitted.
W
WEB
Internet-initiated Entries (WEB) can be either a single entry or a recurring ACH debit that takes place when a consumer’s authorization for a transfer of funds is received via the Internet.
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