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.

See “Merchant Service Provider (MSP).”

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. 

See “Address Verification Service (AVS).”

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).”

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. 

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.

See Cash in Advance: Definition, Benefits, Alternatives.

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. 

See What Is CRM? Customer Relationship Management Defined.

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. 

See Validation Code: What it is, How it Works.

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.

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-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.

See E-commerce Defined: Types, History, and Examples.

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.

See Interchange Definition.