Payment Processing Terms

Feeling a bit overwhelmed with difficult-to-understand payment processing terms on a merchant services agreement? This glossary should help.

An acquiring bank is one that has a relationship with Mastercard and Visa, along with your own bank, and provides credit card merchant services. Also referred to as the clearing bank, acquiring banks are responsible for seeing that transactions are cleared after the cardholder has been charged.

This is in reference to the average dollar amount of your credit card transactions. When setting up a new merchant account, average ticket size will always be asked about. If you aren’t yet processing credit cards you can estimate your average credit card sale, although the average credit card transaction is usually higher than the average cash transaction.

All card-not-present credit card transactions will require AVS. When receiving the transaction you can enter the amount, card number and expiry date along with the street address and ZIP code. The address and ZIP code will be checked against the cardholder’s address and ZIP code when the transaction is submitted.

The information can also be used for fraud control, if the address and the ZIP code weren’t to match, for example.

The batch is a collection of credit card transactions that are captured by a merchant and then submitted for funding and settlement to their Acquirer.

Card present, often also known as a face-to-face transaction, is a transaction where both the cardholder and their payment card are both present.

Card Not Present (CNP) on the other hand is a payment, such as an online or telephone order, where the cardholder and their card are not present.

This is when a dispute procedure is initiated by either the cardholder or the issuer after the Acquirer’s initial presentment has been received. A chargeback is usually initiated to correct a presentment made in error, or to exercise the rights of the cardholder as per the applicable payment card network rules.

The entity that deals with Electronic Funds Transfer (EFT) verification and initiation on behalf of clients to the ACH system.

A set fee from the credit card brands that’s paid to their member banks. Interchange makes up the biggest part of credit card processing fees.

The bank from which the credit card was issued.

The special account set up between your credit card processor and yourself that will allow you to accept your customers’ payment cards.

The entity from which you are provided with the services and products required for payment card processing. They also act as an intermediary between yourself and the credit card networks and the issuing banks.

The amount you’ll be charged by a processor if their transaction fees, discount rate and other account fees do not work out to a pre-determined amount defined by your merchant processing agreement (MPA).

Software built to handle transmissions required to complete an electronic transaction between you and your processor.

Or, Payment Card Industry Data Security Standards, is a set of requirements that the credit card networks establish in order to protect cardholder information and reduce any potential data theft.