Payment Processing Terms Defined

The terms and phrases used when describing merchant services that are often found in contracts and sales brochures can be a bit confusing. Understanding these credit card processing and merchant services terms will help:

ACH

ACH is short for automated clearing house, which is a network that allows the seamless transfer of money between banks without requiring the issuing of paper checks, wire transfers, cash, or credit card networks.

Acquiring Bank/Merchant Bank

This is the merchant’s financial institution or bank, making it possible for merchants to receive credit card payments from the consumer.

Address Verification System

A system that allows merchants to verify the address of the person claiming to be the cardholder with the billing address listed with the credit card company.

Average Ticket Size

Term referring to the average purchase or transaction size for a particular retailer.

Basis Points

Sometimes referred to as BPS or Bips, basis points are units of measurement financial institutions use to indicate the percentage changes in values or rates. One basis point is equal to 0.01 percent.

Batch/Batch Processing

Processing transactions in groups, or batches. Usually carried out at the end of the day.

Card Issuer

Bank or credit organization that issues the credit card to the consumer.

Card Not Present (CNP)

Card Not Present indicates that the credit card was not swiped, inserted into an EMV chip reader, or scanned at a contactless payment equipped POS at the time of the transaction. This is applicable even if the merchant is able to see the card but manually enters the information.

Chargeback

Essentially, chargebacks are transaction reversals in which consumers demand and receive refunds on their purchases for a variety of grievances. The card issuer, in turn, demands stores make good on their losses from the disputed transaction.

Credit Card Processing

Credit card processing is the procedure followed to allow consumers to pay for items with credit cards and merchants to receive payments for those goods.

Credit Card Processor

Refers to the company or third-party organization that handles the transactions that allow merchants to be paid for items purchased in their establishments with credit cards.

EBT Processing

Electronic benefit transfers (EBT) allow authorized transfers of government benefits to be used to pay for products received through programs like SNAP, the Supplemental Nutrition Assistance Program, that formerly used paper coupons to pay for food.

Electronic Wallet

Often referred to as a digital wallet, electronic wallets utilize electronic devices like mobile phones, to store credit card and banking information allowing consumers to pay for goods and services without having a credit card present. These transactions typically require contactless payment processing equipment.

EMV

Abbreviation for Europay, MasterCard, Visa referring to the current worldwide standard regarding chip-based debit and credit card payment processing.

Interchange

Term referring to the money transferred from acquiring banks to issuing banks in credit card transactions. Interchange fees account for the majority of credit card processing costs. These fees are set rates per transaction established by the card brands (Visa, MasterCard, Discover) and vary based on the brand and what type of card you’re processing (debit, credit, credit with rewards, etc.).

Issuing Bank

Refers to the bank that issues credit cards to consumers on behalf of the card networks (Visa, MasterCard).

Merchant Account

Accounts, owned by merchants, where credit card payments are deposited from issuing banks once the transaction is approved. Once the money is deposited it can be transferred to your normal business bank account.

Merchant Account Provider / Merchant Services Provider / Merchant Acquirer

Merchant services providers allow businesses the benefit of accepting debit and credit card payments in exchange for the goods and services you provide.

Mobile Credit Card Processing / Mobile Payment Processing

Payment processing system allowing merchants to accept credit card payments via mobile devices with the use of a credit card reader that attaches to a mobile device, either via a plug-in dongle or bluetooth.

Monthly Processing Limit

Some merchant services providers or credit card payment processors limit the number of transactions you can process in a month or the total cash amount you can process within a month. They impose hefty fees and penalties for going over the monthly processing limit.

Monthly Processing Volume

Refers to the total amount of funds merchants request to process or authorize within a month.

NFC

NFC stands for near field communication. It is the technology used in processing electronic wallet payments.

Payment Gateway

Refers to an electronic gateway through which payments are processed.

PCI-DSS

Stands for “payment card industry data security standard,” created to reduce credit card fraud by initiating specific standards throughout the industry. PCI compliance is extremely crucial to protect consumers’ data.

Terminated Merchant File (MATCH List)

In a nutshell, this is like a “blacklist” used by credit card processing companies to screen merchants before offering them merchant accounts. Most companies refer to it as a TMF, while American Express and MasterCard refer to it as a MATCH List.

Tokenization

A security measure used in credit card payment processing through which the primary account number is replaced with a one-time use token. The purpose is to protect sensitive data.

Void

A void simply nullifies the transaction and no money is ever actually transferred from the account of the consumer to the account of the merchant. It must be completed before the payment is settled.

Still need something clarified that wasn’t covered in these terms? Contact BankCard Services with any questions or concerns you have about confusing terminology. Our goal is always to make the process as transparent and easy to understand for merchants as possible.