31 Jan An A to Z Guide for Credit Card Processing and Merchant Services
Credit card processing and merchant services are at the intersection of finance, technology, and security. And, because they’re subject to both evolving technology and shifting legislation/regulations, it can be difficult to keep up. Whether you’re a bank employee new to merchant services, a merchant hoping to reduce credit card processing expenses, or a software considering a payment integration, we hope you’ll find this guide helpful.
A | B | C | D | E | F |G | I | L |M | N | P | Q | R |S | T |V
A
Address Verification Service (AVS)
A tool designed to reduce the risk associated with card not present transactions. The billing address provided by the cardholder is cross-referenced with the billing address on file with the cardholder’s issuing bank. Learn more: How to Protect Your Business from Card-Not Present Fraud, Top 5 Security Risks in Credit Card Payments (And How to Conquer Them)
Authorization
The process of an issuing bank approving a transaction for a specified amount. An authorization is typically retrieved from the terminal or point of sale but can also be received via telephone. Learn more: How Does Credit Card Processing Work?
B
Basis Point
1/100th of a percentage point. Used when discussing discount rates. For example, 50 basis points is equal to .5%.
Batch
The transactions stored within a processing device are called an “open” batch. The transactions remain in the terminal until the merchant “batches out,” which submits the transactions for processing. This is called “settlement.” Transactions that are not settled will not be funded. Learn more: How Does Credit Card Processing Work?
Biometrics
Technology based on biology. Biometrics refers to metrics related to human characteristics. Biometric authentication is used as a form of identification and access control. The most common example of biometric authentication is unlocking your phone with a fingerprint or facial recognition. Learn more: What Biometrics Means for Your Business, MasterCard Launches Biometric Card
Buy Rate
A processor’s hard costs to open and maintain merchant accounts. Some processors exaggerate their buy rates as a way to compensate for seemingly generous revenue share agreements. Learn more: The Difference Between Buy Rate and Revenue Share
C
Card Issuer
A bank or credit union that issues credit cards. The card issuer is the institution that sends payments to merchants for credit card purchases made on the bank’s issued cards.
Card Not Present (CNP)
Refers to a card-not-present transaction. This applies to credit and debit payments received over the phone, through mail, or on an e-commerce site. Learn more: How to Protect Your Business from Card Not Present Fraud
Card Present
Refers to a transaction where the card is physically presented at the time of purchase.
Chargeback
A chargeback occurs when a cardholder disputes the legitimacy of a transaction directly with their card issuer. A chargeback can be initiated for a number of reasons, including fraud, dissatisfaction with a purchase, failure to deliver, product failure, etc. Learn more: Your Guide to Chargebacks and How to Shield Your Business from Them
Credit Card Terminal
Usually refers to a traditional countertop payment terminal.
Card Verification Value (CVV, CVV2)
The 3-digit number on the back of a credit or debit card. Also referred to as a security code. Used for security purposes to confirm that a card is within a customer’s possession. Learn more: How to Protect Your Business from Card Not Present Fraud
D
Discount Rate
The percentage charged on each transaction by a credit card processor. Learn more: 4 Ways to Lower Your Rate
Downgrade
Refers to a credit card transaction that is charged an interchange rate higher than standard interchange. Usually occurs due to a business’s processing behaviors. Common reasons for downgrades include infrequent “batching out,” not using AVS, and not providing a customer code when processing a business card. Learn more: How Does Credit Card Processing Work?
E
E-Commerce
Also called electronic commerce or internet commerce. Refers to the buying and selling of products or services online. Learn more: The Risks and Rewards of E-Commerce
Effective Rate
The average of the varying rates a merchant pays for credit card processing. Calculated by dividing total processing fees by total sales volume. Frequently used as a way to assess the competitiveness of rates.
Europay, Mastercard, and Visa (EMV)
Commonly referred to as a chip card. These cards offer increased security over traditional magnetic stripe cards due to data within the chip being tokenized. Learn more: EMV—A Business Owner’s Guide
Encryption
Technology used to codify or tokenize financial information for security purposes.
F
Federal Tax ID (EIN)
A 9-digit number assigned to a business by the IRS. The number is used to track business taxes. Must be provided on merchant processing applications. Sole proprietors may use their Social Security Number in place of an EIN. Learn more: Why You Need to Provide Personal Information When Opening a Credit Card Processing Account
Funding Hold
A scenario where funds are held by a processor to investigate the legitimacy of the transaction. This is usually a result of a merchant processing well outside the processing parameters listed on their application. Learn more: Your Processor is Holding Your Funds—What Now?
Funding Time
The amount of time it takes batched out transactions to be funded to a merchant’s bank account. Typically, 1-3 business days, but next-day funding is available to many merchants, depending on their processor.
G
Gateway
A solution that allows payments to be processed online. This can refer to e-commerce, where a customer enters their own information on a site, or to a virtual terminal or software, where the business processes the payment on their own device (desktop, laptop, tablet, or mobile) Learn more: 5 Reasons to Accept Payments Through a Virtual Terminal
I
Interchange
Transaction fees charged to your merchant services provider by your issuing bank—these rates cover handling costs for a number of card types, and are passed down directly from the card associations. Learn more: What You Need to Know About B2B Payment Processing
Independent Sales Organization (ISO)
Referring to a card-not-present card transaction. An ISO is an individual or organization that is not a card association member, but has a banking relationship with association members, usually involving the signing and maintenance of new accounts. Learn more: 4 Common Misconceptions About ISOs
L
Level II/Level III
Interchange rates available only on B2B and B2G transactions. These rates are much lower than the interchange typically charged on business and purchasing cards but require additional data to be submitted with each transaction. Learn more: A Beginner’s Guide to Level II and Level III Rates
M
Mail Order/Telephone Order (MOTO)
Refers to accepting payments through the mail or over the phone. These types of transactions are considered card not present.
Merchant Category Code (MCC)
A code used by credit card associations to classify businesses by the products/services they offer. Learn more: What You Need to Know About B2B Payment Processing
Merchant Identification Number (MID)
A unique number assigned to a merchant account by a processor and used for identification purposes.
N
Near-Field Communication (NFC)
The technology that allows contactless payments to securely transmit a card’s information to the card reader. When someone pays by tapping their card or device to the card reader, instead of swiping or dipping, that’s an NFC payment. Learn more: Capital One Debuts Contactless Technology
P
Payment Card Industry (PCI) Compliance
Refers to a business’s compliance with data security standards set by the 4 major card brands. These standards apply to all businesses that accept credit cards. Learn more: What is PCI Compliance?
Point of Sale
Can refer to any device used to accept payment at the point of purchase. Can also refer to a point of sale system, which is an all-in-one processing system that can include a receipt printer, cash drawer, app store, and various other features and add-ons. Learn more: 4 Signs You’ve Outgrown Your Point of Sale System
Purchase Card
A type of company charge card that allows organizations to charge business expenses on credit. Unlike a standard credit card, the cardholding organization must pay the card issuer in full each month.
Purchase Return Authorization (PRA)
The authorization a merchant receives when processing a refund. Required by Visa as of October 19th, 2019. Learn more: What Visa’s New Purchase Return Authorization Mandate Means for Your Business
Q
Qualified Integrator and Reseller (QIR)
An organization or person that is authorized by the PCI Security Standards Council to implement, configure, and/or support POS systems. With certain processing methods, working with a QIR is required in order to achieve PCI Compliance Learn more: What Business Owners Need to Know About QIRs
R
Recurring Transaction
Also referred to as “subscription billing.” This functionality allows a user to schedule payments on a specified date for a set amount of time. Common examples of companies that use recurring transactions include subscription services like Netflix and Spotify.
Revenue Share
The portion of profit generated by a merchant account within your portfolio that is received by your bank. This percentage is specified when entering into an agreement with a processing provider. Learn more: The Difference Between Buy Rate and Revenue Share
S
Shopping Cart
Refers to a payment gateway in the e-commerce sector. A shopping cart typically allows shoppers to virtually browse products, add them to the cart, and check out. Learn more: 3 Easy Ways to Increase Sales Online
Surcharging
The practice of charging an additional fee to a customer paying with a credit card. Surcharging is prohibited in a number of states. Learn more: The Dangers of Surcharging on Credit Card Transactions
T
Terminal Identification Number (TID)
A unique number assigned to a processing device and used for identification purposes. This is particularly useful for merchants that utilize multiple processing methods or devices.
Tokenization
The secure storage and replacement of sensitive data. In the payment process, tokenization occurs when a card is swiped, dipped, or keyed. When data is tokenized, it is replaced with a random set of numbers, letters, and symbols. Learn more: Tokenization: What Is It? Why Does it Matter to Your Business?
V
Value Added Reseller (VAR)
A company that adds features to an existing product and resells it as an all-in-one solution. Learn more: The 4 Biggest Time Wreckers in Merchant Services (and How to Avoid Them)
Virtual Terminal
Also referred to as a payment gateway. Allows merchants to access and process payments on a payment portal accessible from any device connected to the internet. Learn more: 5 Reasons to Accept Payments Through a Virtual Terminal
BASYS Processing as a business partner
If your processor isn’t delivering strategies to help grow your program and personal service to your customers, please call BASYS Processing at (800) 386-0711. Let’s talk about creating a business partnership that will help you meet and exceed your goals.
BASYS Processing features:
• A friendly, live voice will answer the phone when you or your customers call; no automated phone systems.
• In-house PCI Compliance team to walk your customers through the process step-by-step, improving security and reducing costs.
• Thorough Market Analysis followed by mutual plans and goals to grow your portfolio.
• In-depth initial training and ongoing bootcamp training for bank staff.
• A full suite of turnkey marketing assets that can be customized with your bank branding.
About BASYS Processing
BASYS Processing provides credit card and debit card processing services, plus solutions that include terminals, virtual terminals, e-commerce, mobile, and point-of-sale, customized to fit any need. Banks, associations, and software partners depend on us to strengthen their reputations and relationships with their customers by providing remarkable service paired with ultimate flexibility and pricing. Merchants depend on us to make accepting credit cards and debit cards convenient, safe and affordable. BASYS was founded in 2002 on one philosophy: to take care of our merchants, partners, and employees so they never want to leave. We are dedicated to working one-on-one with our customers to design the perfect solution. BASYS is Personal Payment Processing.
Learn more at basyspro.com, and connect with us online at: