3 Domain Service, commonly referred to as 3D Secure and also known as ‘payer authentication’, is an additional fraud prevention tool for card payments. It allows cardholders to create a password for their card that is verified whenever a transaction is processed through a merchant that supports the service. This process was originally created by Visa and MasterCard and is branded as ‘Verified by Visa’ and ‘MasterCard SecureCode’ respectively.
AUTOMATED CLEARING HOUSE (ACH)
The Automated Clearing House (ACH) is a network that co-ordinates electronic payments and automated money transfers. Often referred to as ‘direct payments’, ACH payments facilitate transfers between bank accounts.
The fee paid for using the ACH to transfer funds either from or to a bank account in order to cover the processing cost.
An acquiring bank, sometimes simply referred to as an ‘acquirer’, is a financial institution that processes scheme branded credit and debit cards on behalf of a payment processor which is engaged with customers to provide card acquiring.
ADDRESS VERIFICATION SERVICE (AVS)
The Address Verification Service (AVS) checks the billing address of the cardholder with their card issuer’s records. When an authorisation request is sent to the card issuer, they will send a response code back to the merchant indicating the degree of the address match and whether or not the check has been accepted or rejected.
Anti-money laundering (AML) refers to the laws, regulations and procedures intended to prevent criminals from disguising the proceeds of crime.
APPROVED MONTHLY VOLUME
Approved monthly volume is the maximum number of transactions permitted by a merchant services provider to a merchant account over a one-month period.
AVERAGE TICKET SIZE
Average ticket size is the average amount of a transaction conducted with a merchant. The average ticket size is determined during the underwriting process to ensure it is in alignment with the goods and services being sold.
Authorisation is the first step of processing an online payment. When a card transaction is initiated, the processor contacts the issuing bank either via a card terminal or payment gateway to ensure the cardholder has a sufficient balance for the transaction to be completed. Authorisation does not guarantee that the transaction is not fraudulent, or that it cannot be disputed by the cardholder at a later date. The authorisation process simply confirms that there are sufficient funds to make the purchase and that the card has not been reported as lost or stolen.
The Bankers Automated Clearing Service (BACS) is a central payment network owned and operated by major clearing banks and building societies in the United Kingdom. Direct Debit and Direct Credit payments, that are made via the BACS network, typically take up to 3 days.
Basis points, commonly referred to a bps or ‘bips’, are a form of measurement in finance. One point is 1/100th of a percentage point, which can be expressed 0.01% as a percentage or 0.0001 as a decimal. One basis point would equal £.10 for every thousand pounds sterling.
Batch processing consists of a merchant aggregating and then processing all of its pending payments at a specified time that has been agreed with the account provider. The cardholder’s bank then pays the outstanding balance to the merchant in what is referred to as ‘settlement’ process, which may take up to a few days. Batch processing is used for businesses processing large numbers of transactions that do not occur in real-time, such as recurring bill payments, memberships or subscriptions.
A billing descriptor is the identifier on a customer’s financial statement that identifies the merchant responsible for a transaction. It consists of your website or company name and your phone number, with a maximum length of 25 characters. A descriptor should be as close to your website name as possible to ensure your customers recognise the transaction on their bank statement, reducing the risk of a chargeback.
The card schemes are a payment networks that facilitate credit and debit card transactions. Some of the more common schemes are Visa, Mastercard, American Express and Discover.
A card issuer, sometimes simply referred to as an ‘issuer’, is a financial institution that issues payment cards. Consumers often think that their payment cards are directly issued by the card schemes; however, the schemes are card transaction processors who rely on third party issuers to distribute both physical and digital cards to be used on their network.
CARD NOT PRESENT (CNP)
A card not present (CNP) transaction is a card payment conducted without the card being physically present at the point of sale, such as online, mail order, telephone orders, mobile payments, and electronic payments. CNP transactions are considered higher risk than card present transactions due to the increased difficulty in verifying the payment information and that the cardholder initiated the transaction.
A card present transaction is card payment conducted with the card being physically present at the point of sale.
A card reader, also known as PDQ machine, POS terminal and chip & PIN machine, is a device used to read the payment data stored in a payment card’s magnetic stripe or chip.
A cardholder is the owner of the payment card.
The Clearing House Automated Payment System (CHAPS) is a payment system administered by the Bank of England that provides domestic same day transfers in sterling.
A chargeback, also referred to as a disputed payment, is a term used when a cardholder disputes the validity of a card payment transaction or wishes to cancel their purchase.
A chargeback fee is the fee charged for processing a chargeback on your merchant account.
The chargeback period is the number of days, from the transaction’s processing date or endorsement date, during which the card issuer may initiate a chargeback.
Clearing is the third step in processing a card payment. The Merchant Provider accepts the deposit(s) from the Processor and forwards them to the card networks. The payment networks then distribute the transactions to the corresponding Issuer. The Issuer debits the amount of the transaction from the cardholder’s account.
Only used for Visa and Mastercard.
A credit card is payment card provided by a card issuer to a cardholder that enables them to use a line of credit to purchase goods and services.
CREDIT CARD LIMIT
A credit card limit is the amount of money that can be charged to a credit card.
CROSS BORDER FEES
A cross border fee is charged when a cardholder initiates a card transaction from an issuing bank not located in the same country as the merchant’s processing account.
A currency converter is a software that will convert prices and the checkout procedure into the customer’s local currency. Many merchants will have an automated IP enabled currency converter to localise the payment and checkout. Without a currency converter, a merchant will likely incur a currency converter fee and experience a higher decline rate as issuing banks are more likely to decline transactions that are not in the local currency.
CURRENCY CONVERTER FEE
A currency conversion fee, now commonly known as a foreign transaction fee, is charge applied by the card schemes for any transaction where the issuing bank is not located in the same country as the merchant’s processing account. The card issuer may also add an additional fee which is then passed to the cardholder. It is common practice to use a currency converter to process transactions in local currencies to avoid such fees.
A Card Verification Value (CVV) number is the 3 or 4 digit number on the signature strip of a credit or debit card used to verify that you have access to the physical or virtual card, thereby reducing the likelihood of fraud. CVV2 numbers are a 2nd generation process that makes the number harder to guess.
A discount rate is the rate charged by card processor for processing a transaction.
A data breaches occurs when private information, such as personal details and/or payment card data, is accidentally or unlawfully compromised.
DUES AND ASSESSMENTS*
Dues and Assessments are a secondary fee paid to the card schemes for the use of their card brand and the ability to process card transactions via their network.
An eCommerce platform is a software application that allows businesses to sell their goods and services online. Some of the most popular platforms include Shopify, WooCommerce, Big Commerce, Ecwid and Volusion.
In card payment terms, encryption is the process of encoding card information for secure transmission through processing networks or across the Internet.
The Faster Payments Service (FPS), commonly referred to as ‘Faster Payments’, is a banking initiative in the United Kingdom that allows payments to be made between different banks’ accounts within seconds (or hours if the recipient is not a member of the FPS).
FOREIGN TRANSACTION FEES
A foreign transaction fee, also knows as a foreign exchange fee, is a fee charged by the card schemes to the card issuers when the cardholder initiates a card transaction from an issuing bank not located in the same country as the merchant’s processing account. It is common that the card issuer will pass the fee to the cardholder. To avoid such fees, merchants tend to use a currency converter to convert prices and the checkout procedure into the customer’s local currency.
GENERAL DATA PROTECTION REGULATION (GDPR)
The General Data Protection Regulation (GDPR) is a regulation in the European Union (EU) and European Economic Area (EEA) setting guidelines on data protection and privacy. It also addresses the transfer of personal data outside the EU and EEA areas.
The high ticket is the highest value transaction a merchant expects to charge in a single transaction. This tends to be requested during merchant application process in order to help establish the merchant’s risk profile; the higher the high ticket is for a business the higher risk the business poses in merchant processing.
HIGH-RISK MERCHANT ACCOUNT
A high-risk merchant account is a payment processing account for a business that is considered to be high risk by the acquiring bank due to factors such as a higher likelihood of fraud, geography and/or the reputational risk associated with the provided goods and services. As high-risk merchant accounts tend to have a greater chargeback risk, they usually pay higher merchant fees and are more likely to have a rolling reserve.
Interchange is the fee paid to the card schemes for the cost of accepting card transactions. Every time you accept a card transaction, you pay a fee to a processor. That fee has three parts: interchange, assessments, and processor markup.
Interchange goes to the cardholder’s issuing bank. The fees are non-negotiable and set by the card schemes for the use of their cards. The fee tales are published and include dozens of interchange categories.
A keyed transaction is a card transaction that is not accepted via a card terminal at the time of sale. Instead, keyed in transactions are accepted online or via MOTO.
Limit Exceeded is a response code from the issuing bank stating the cardholder has insufficient funds or credit, and therefore the transaction cannot be accepted, when processing online transactions.
MOTO (Mail Order Telephone Order) is a type of card not present transaction that is taken over the phone and manually keyed into a virtual or card terminal by the merchant.
Member Alert to Control High Risk Merchants (MATCH) is used by acquirers to screen potential applicants, particularly to see if that applicant has been terminated in the past. They do this to assess and control the risk associated with card processing.
A merchant is an online business that is selling goods and/or services.
A merchant account is a type of business bank account that allows businesses to accept online payments. A merchant account is established between issuer and merchant acquiring bank for the settlement of transactions.
MERCHANT CATEGORY CODE (MCC)
A Merchant Category Code (MCC) indicates what type of business you are and what products or services you provide. It usually consists of four-digit numbers and is decided by card acquirer the start of the application process.
MERCHANT IDENTIFICATION NUMBER (MID)
A Merchant Identification Number (MID) is a unique code allocated to merchants when they open a merchant account with an acquiring bank. This code is transmitted along with cardholder information to all relevant parties for transaction reconciliation.
MERCHANT PROCESSING AGREEMENT (MPA)
A Merchant Processing Agreement (MPA) is the legal agreement between a merchant and their payment processor outlining the terms, conditions, rates and fees.
MONTHLY MINIMUM FEE
The monthly minimum fee is the minimum charge a merchant will pay to have their merchant account.
The merchant statement is a report sent to merchants from their payment provider with an overview of all transactions and fees for a specified period. They tend to be issued on a monthly basis, but merchant processors may provide daily reporting to high-risk merchants.
PAYMENT CARD INDUSTRY DATA SECURITY STANDARD (PCI DSS)
Payment Card Industry Data Security Standard (PCI DSS) compliance refers to the technical and operational standards that businesses must adhere to in order to ensure that the data provided by cardholders is protected.
A payment gateway is an eCommerce software that collects, encrypts, transfers and authorises card or direct payment transactions for both online and offline businesses.
PAYMENT GATEWAY FEE
A payment gateway has a monthly fee and a per transaction fee for the use of the gateway’s infrastructure.
A payment processor is a financial institution that settles transactions on behalf of a merchant by transmitting data between the customer, merchant, issuing bank and acquiring bank. If you want to accept card payments, you will need to partner with a processor.
Recurring payments occur when a consumer has provided a merchant permission to automatically deduct a payment for goods or services on a predetermined basis via a specified payment method.
A retrieval fee is charged when a cardholder’s issuing bank requests a copy of all relevant sales documents in order to verify a transaction.
A retrieval request occurs when a card issuer or cardholder request a transaction ticket from a merchant. If a transaction has been disputed, the retrieval request is the first step taken to resolve the issue.
A rolling reserve is a percentage of a merchant’s gross sales that is withheld for a pre-determined amount of time, and then subsequently released, to manage the chargeback risk associated with the merchant’s risk profile. For example, between 5% – 10% of every transaction may be held for a rolling 5-day period.
SECURE SOCKET LAYER (SSL)
Secure Socket Layer (SSL) is a cryptographic protocol that establishes a secure link between a web server and browser, ensuring that data transferred between the two entities is encrypted and secure. A website with SSL encryptions will have a URL that starts with HTTPS:
The Single Euro Payments Areas (SEPA) is an initiative in the European Union and regulated by the European Commission to simplify euro credit transfers by ensuring that cross-border transactions amongst members are as simple, fast and cost effective as domestic transactions. Payments between members typically take 1 – 2 business days.
A shopping cart is a piece of software connected to a merchant’s website to facilitate the purchase of a product or service. It accepts, organises and distributes all of the relevant information to the merchant, payment processor and other parties.
STRONG CUSTOMER AUTHENTICATION (SCA)
Strong Customer Authentication (SCA) refers to the introduction of additional security authentications for “customer initiated” online transactions of more than €30.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a messaging network for financial institutions that provides a standardised and secure manner to transmit information. International wires that are sent via the SWIFT payment network typically take 1 – 5 business days.
A TC40 is a report created by the issuer to assist with chargeback mitigation when a cardholder claims fraud. It is an aggregate file that contains all reported fraud data which is distributed to the card schemes (e.g. Visa & Mastercard), issuing banks and to the merchant’s acquirer.
A transaction fee is the amount charged for each transaction that is processed by the account provider. The transaction fee is separate to other third-party fees that may be incurred, such as the gateway fee.
Underwriting is the process of assessing the degree of risk posed by an applicant in order to determine if the application can be accepted and, if so, what terms can be provided to adequately reflect the actual cost associated with providing service to the individual or business.
A virtual terminal is a web-based software application that allows merchants to enter and process card payments online.
A wire transfer is an electronic funds transfer between a sender and a recipient, which is facilitated by two financial institutions.