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PAYMENTS DICTIONARY Terms worth knowing

1 Table of contents Terms to put on your radar

Terms to put on your radar ...... 3 Card not present (CNP) Card acceptance terms...... 4 Transaction in which merchant honors the account number associated with a card account and does not see or swipe terms ...... 7 a physical card or obtain the account holder’s signature.

International terms...... 8 Customer lifetime value Prediction of the net profit attributed to the Fraud & security terms...... 9 entire future relationship with a customer.

Integrated payment technology terms...... 12 Omnicommerce Retailing strategy concentrated on a seamless consumer terms...... 13 experience through all available shopping channels.

Payment types...... 15 intelligence The ability to better know and understand Payment processing terms...... 18 customers through data and information uncovered from the way they choose to pay. Regulatory & financial terms...... 23

Transaction terms...... 25

Index...... 27

References...... 31

2 3 Card acceptance terms

Acceptance marks number Merchant Sub-merchant Signifies which payment brands are accepted at a Unique number assigned to a credit card account. Bank that has an agreement with a merchant to accept A merchant that, pursuant to an agreement merchant location; provides the cardholder with (acquire) deposits generated by card transactions. with a payment facilitator, is authorized to information on where his or her card can be used. Discover accept cards when properly presented. Major credit card, issued primarily in the US; most cards with Merchant category code (MCC) Account holder the Discover brand are issued by Discover Bank; payment A code designating the principal trade, profession, or line of Third-party presenter agreement Person to whom a credit and/or debit account is issued or transactions are processed through the Discover Network. business in which a merchant is engaged. The MCC is used Separate agreement between an acquirer and a who is authorized by such person to use the account. by , Discover, Mastercard, and Visa. presenter authorizing the presenter to act as an Expiration date agent of a merchant; presenter agrees to comply Account issuer The date embossed on a credit or Merchant identification number (MID) with the applicable terms of this agreement. Bank that offers card brand (Visa, Mastercard, beyond which it becomes invalid. A unique number assigned to a merchant account to identify etc.) payment cards directly to consumers. it through the course of payment processing activities. Third-party processor “Honor All Cards” rule Entity that contracts with a member to provide processing Account number A network brand acceptance rule, which requires Payment facilitator services such as authorization clearing and settlement services. The unique identifier (typically a number) that merchants that accept one of a major card network’s A merchant registered by an acquirer to facilitate an account issuer, as part of providing a credit or cards to accept all of the network’s cards regardless transactions on behalf of sub-merchants. Third-party settlement debit account, issues to an account holder. of card issuer or specific card program. Service where payment is made to a third party Payment gateway according to instructions from a merchant as described American Express Master Merchant Facilitates the transfer of information between a payment by a separate, three-way agreement between the Multinational corporation best known for Payment facilitator that becomes the “Merchant of Record” portal and the front-end processor or . merchant, the third party, and the processor. its credit card, , and Travelers business. on behalf of a network of smaller merchants (sub-merchants) or billing companies that regularly collect payments; key Payment processor Visa Association markets for Master Merchant networks include government, Company appointed by merchants to handle card An American multinational financial services corporation Group of card-issuing or organizations that set common education, utilities, and nonprofit organizations. transactions for merchant acquiring banks. facilitating electronic funds transfers throughout the transaction terms for merchants, issuers, and acquirers. world, most commonly through Visa-branded credit, Mastercard debit, and prepaid cards; Visa-branded payments Card acceptor business code American multinational financial services corporation; its An operational network governed by laws, rules, and products are processed on VisaNet, the world’s largest A four-digit numerical representation of the type of principal business is to process payments between the banks standards that links bank accounts and provides the retail electronic payments processing network. business in which the card acceptor (merchant) engages. of merchants and the card-issuing banks or credit unions of the functionality for monetary exchange using bank deposits. purchasers who use Mastercard debit, credit, and prepaid cards Card brands to make purchases; a publicly traded company since 2006. Primary account number (PAN) Member-based corporations that connect consumers, The number that is embossed and/or encoded on a plastic businesses, and banks to transact through electronic Merchant card that identifies the issuer and the cardholder account. payments instead of cash and check; also establish and A commercial entity or person authorized to accept enforce rules amongst members and promote the brands cards and devices when properly presented; an Recurring services merchant (popular card brands include Visa and Mastercard). organization that uses credit cards to receive payments from A merchant that provides services of an ongoing its customers pursuant to agreement with card brands. nature to a cardholder (club membership, magazine Card issuer subscription, etc.) and uses recurring transactions Any association member , bank, Merchant agreement to bill the cardholder for these services. , or company that issues (or causes A written agreement between a merchant and a bank that to be issued) plastic cards to cardholders. contains their respective rights, duties, and warranties with Standard industrial classification (SIC) respect to acceptance of payment cards and matters related to A system for classifying industries by a four-digit code; Cardholder card activity. historically used by the IRS and the banking industry. Person or entity that receives an account from a card company or issuer.

4 5 Chargeback terms International payment terms

Acceptance marks Credit card number Bank identification code (BIC) Regulation (IFR) Signifies which payment brands are accepted at a Unique number assigned to a credit card account. Similar to a routing number in the US, a BIC uniquely Also known as the EC MIF Regulation, IFR refers merchant location; provides the cardholder with identifies financial institutions globally. Mainly to the regulation of the European Parliament and information on where his or her card can be used. Discover used when transferring money between banks (e.g., of the Council on multilateral interchange fees Major credit card, issued primarily in the US; most cards with SEPA payments). Also known as SWIFT code. (MIFs) for card-based payment transactions. Account holder the Discover brand are issued by Discover Bank; payment Person to whom a credit and/or debit account is issued or transactions are processed through the Discover Network. Cross-border fees Local acquiring who is authorized by such person to use the account. Fees associated with cross-border transactions. The ability to acquire in country/region in which acquiring Expiration date and issuing banks reside. Generally drives higher approvals Account issuer The date embossed on a credit or debit card Cross-border transaction and lower issuer and network assessment fees. Bank that offers card brand (Visa, Mastercard, beyond which it becomes invalid. A transaction for which the country/region of etc.) payment cards directly to consumers. the payment card’s issuing bank and that of the Local entity “Honor All Cards” rule merchant’s acquiring bank are different. An organization or business that has a legal and separately Account number A network brand acceptance rule, which requires identifiable existence within a given jurisdiction. The unique identifier (typically a number) that merchants that accept one of a major card network’s Domicile an account issuer, as part of providing a credit or cards to accept all of the network’s cards regardless See local entity. Purchase debit account, issues to an account holder. of card issuer or specific card program. The currency in which an issuer bills a Dynamic currency conversion cardholder for transactions. American Express Master Merchant Conversion of the purchase price of goods or services from Multinational financial services corporation best known for Payment facilitator that becomes the “Merchant of Record” one currency to another, as agreed to by the cardholder SEPA its credit card, charge card, and Travelers Cheques business. on behalf of a network of smaller merchants (sub-merchants) and merchant; that currency becomes the transaction Stands for Single Euro Payments Area. Refers to an initiative or billing companies that regularly collect payments; key currency, regardless of the merchant’s local currency. within the European Union to streamline Euro-denominated Association markets for Master Merchant networks include government, bank transfers across the EU. Now serves as the infrastructure Group of card-issuing banks or organizations that set common education, utilities, and nonprofit organizations. Foreign currency supporting all payments in the EU. transaction terms for merchants, issuers, and acquirers. A currency other than local currency. Mastercard Settlement currency Card acceptor business code American multinational financial services corporation; its IBAN (International Number) The currency in which the merchant will be paid in. A four-digit numerical representation of the type of principal business is to process payments between the banks An internationally agreed system of identifying business in which the card acceptor (merchant) engages. of merchants and the card-issuing banks or credit unions of the bank accounts across national borders to facilitate purchasers who use Mastercard debit, credit, and prepaid cards the communication and processing of cross-border Card brands to make purchases; a publicly traded company since 2006. transactions with a reduced risk of transcription errors. Member-based corporations that connect consumers, businesses, and banks to transact through electronic Merchant payments instead of cash and check; also establish and A commercial entity or person authorized to accept enforce rules amongst members and promote the brands cards and access devices when properly presented; an (popular card brands include Visa and Mastercard). organization that uses credit cards to receive payments from its customers pursuant to agreement with card brands. Card issuer Any association member financial institution, bank, Merchant agreement credit union, or company that issues (or causes A written agreement between a merchant and a bank that to be issued) plastic cards to cardholders. contains their respective rights, duties, and warranties with respect to acceptance of payment cards and matters related to Cardholder card activity. Person or entity that receives an account from a card company or issuer.

6 7 Fraud and security terms

3-D Secure Discover ProtectBuy PCI DSS ( Two-factor authentication XML-based protocol designed as an additional security layer for Discover’s version of 3-D Secure, an online authentication Data Security Standard) Process involving two subsequent but dependent online credit and debit card transactions; initially developed by process used to decrease online Set of requirements designed to ensure all stages to check the identity of an entity; both of Visa, the protocol has been adopted by Mastercard, American fraud and increase consumer confidence. companies that process, store, and/or transmit card the factors are required and must be correct. Express, and other card brands under various names. information maintain a secure environment. Duplicate checking Velocity checks Address verification service (AVS) The policy and procedures that prevent identical PIN (Personal Identification Number) The number of times an account number is processed The process of validating a cardholder’s given address against sales records from being processed. A numeric password entered by a user to over a predetermined amount of time; rejects multiple the issuer’s records to determine authenticity and deter authenticate their identity to a system. transactions against the same credit card during a specified unauthorized use; a code is returned with the authorization EMV time to help prevent double clicking by cardholder, result that indicates the accuracy of the address match. Stands for Europay, Mastercard, and Visa; global standard Quality Security Assessor (QSA) fraud, and internal merchant processing issues. American Express SafeKey for inter-operation of integrated circuit cards (chip cards) Designation conferred by the PCI Security Standards and integrated circuit card capable POS terminals and ATMs, Council to those that meet specific security education Verified by Visa American Express’ version of 3-D Secure, an online for authenticating credit and debit card transactions. requirements, have taken the appropriate training from Visa’s version of 3-D Secure, an online authentication process used to decrease online the PCI Security Standards Council, are employees of authentication process used to decrease online fraud and increase consumer confidence. Encryption a PCI-approved security and auditing firm, and will fraud and increase consumer confidence. Authentication The process of encoding sensitive information be performing PCI compliance assessments as they for secure transmission across the internet. relate to the protection of payment card data. Virtual account number The process of assuring that data has come from An alias for a card number, generated through either a its claimed source, or a process of corroborating end-to-end encryption (E2EE) Tokenization web application or a specialized client program, that the claimed identity of a communicating party. Uninterrupted protection of the confidentiality and Replacement of sensitive data with a unique identifier interacts with the card issuer’s computer and is linked Card control integrity of transmitted data by encoding it at its (token) that cannot be reversed mathematically; to the actual card number; typically has a limit and an starting point and decoding it at its destination. commonly used in payments to replace card data. expiration date between two and 12 months from the Mobile application powered by Ondot Systems that allows use date chosen by the account owner; the user’s real cardholders to decide when and where their cards can or Friendly fraud Truncation card number is never revealed to the merchant. cannot be used based on a series of preference settings. When a consumer makes a purchase with their own credit When only some digits of a customer’s card number appear (CSC) card and then issues a fraud coded chargeback through on a sales draft or receipt to provide better security while the card provider (after receiving the goods or services) still enabling identification (for the cardholder) of the card A three- or four-digit code printed on charge, credit, and debit cards for the purpose of establishing the owner’s to cancel the transaction and refund the money. used; it’s required by federal law (since 2006) that no more than the last five digits of a card may be shown on a receipt. identity and minimizing the risk of fraud. On Mastercard, Malware Visa, and Discover cards, the three-digit CSC is printed in the signature panel on the back following the account number. Software that is intended to damage or disable On American Express cards, the four-digit CSC appears on computers and computer systems. the front of the card above the account number. The CSC is also known as the card identification number (CID), card Mastercard SecureCode verification code (CVC), and card verification value (CVV). Mastercard’s version of 3-D Secure, an online authentication process used to decrease online Check verification fraud and increase consumer confidence. Process that screens checks and check writers against a “negative database” at the POS when PA-DSS (Payment Application DataSecurity Stan- the customer presents a check as payment. dard) Global security standard created by the Payment Card Industry Data breach Security Standards Council, formerly referred to as the Unintentional release of secure information to an Payment Application Best Practices. entrusted environment which often times refers to payment card details or sensitive account information.

8 9 Integrated payment technology terms Mobile payment terms

Application programming interface (API) Android Pay Mobile commerce A set of routines, protocols, and tools that are used for Android Pay is a platform developed by Google Business that is conducted on the internet with smartphones building software applications. A company releases to power in-app and tap-to-pay purchases on mobile devices. or other wireless, handheld electronic devices. its API to the public so that software developers can design products that are powered by its service. Apple Pay Mobile payment A mobile payment and digital wallet service offered by Apple Payment services operated under Integrated payments that allows users to make payments through NFC technology. and performed from or via a mobile device in When payment processing solutions are integrated with other a face-to-face transaction environment. business functions such as accounting, customer relationship Cloud-based mobile payments management, and inventory management systems. Stores payments information “in the cloud” or on a Mobile payments acceptance remote server and not on the mobile device. Ability for merchants to accept payments via a mobile Integrated Software Vendor (ISV) device in a face-to-face transaction environment. A company specializing in developing or selling software that Contactless payments runs on one or more operating system; ISVs often embed Devices that use radio-frequency identification for making Mobile (mPOS) payment technology into POS systems for merchants. secure payments; embedded chip and antenna enable Smartphone, tablet, or dedicated wireless device that performs consumers to wave a device over a reader at the POS. the functions of a cash register or electronic POS terminal. Middleware Software that acts as a bridge between an operating CurrentC Near field communication (NFC) system or database and applications. Free mobile wallet deployed by the Merchant Set of standards for smartphones and similar devices Customer Exchange (MCX) that allows customers to establish radio communication with each other point of sale (POS) developer to securely save, earn loyalty rewards, and pay by touching them together or bringing them into A person concerned with researching, designing, across MCX’s growing network of merchants. proximity (usually no more than a few inches). implementing, and testing software; POS developers embed payment technology into POS systems. Digital wallet Quick Response Code (QR Code) A digital wallet refers to an electronic device (e.g., Matrix barcode readable by QR scanners, Software as a service (SaaS) smartphone) that allows an individual to make smartphones with a camera, and smartphones; Software delivery model in which software is licensed eCommerce transactions. Examples of a digital wallet can be used to make mobile payments. on a subscription basis and is centrally hosted. include Android Pay, Apple Pay, and Samsung Pay. Samsung Pay Software development kit (SDK) Dongle Samsung Pay is Samsung’s digital wallet and mobile A set of software development tools that allow the Provides electronic copy protection and content payment service that lets users make payments creation of applications for a certain software package. protection which, when attached to a computer or other using higher-end compatible Samsung phones electronic appliance (such as a smartphone), unlocks and other Samsung-produced devices. Value added reseller (VAR) software functionality or decodes content; commonly A company that adds features or services to used with smartphones to accept payments. Touch ID an existing product and then resells it as an Fingerprint recognition feature, designed and released integrated product. In-app payments by Apple; Touch ID allows users to unlock their device The ability to sell digital content in mobile applications. as well as make purchases through Apple Pay.

Merchant Customer Exchange (MCX) Company created by a collaboration of leading US retail companies looking to offer a new platform for smartphone-based transactions.

10 11 Payment types

Affinity card store or an airline; cardholders may get benefits from checking or ; transaction is processed in Purchasing card the sponsoring merchant, such as discounts or free the same manner as any other Mastercard or Visa card. A card offered by two organizations, one a card issuer A form of company charge card that allows goods and services merchandise, based on account usage and terms. and the other a non-financial group such as a university, Online debit to be procured without using a traditional purchasing process. sports franchise, or nonprofit organization; cardholders Commercial card Card account tied to a consumer’s checking or savings typically receive special discounts or deals for using Reward card General name for cards typically issued for account; transaction is processed in a single online their cards issued in partnership with a major bank. A credit card carrying an incentive or “reward” for business use; may include corporate, purchase, message and a PIN is required for authentication; use, typically involving cash back, merchandise business, travel, and entertainment cards. clearing and settlement happens simultaneously. Alternative payments points, or frequent flier points. Payment methods that are used as a substitute to traditional Corporate card Open loop card payment; these third-party payment brands use the Secured credit card Credit card typically issued to corporate Prepaid gift card issued by banks or credit card companies; traditional payment systems of Visa, Mastercard, ACH, etc. Credit cards that require collateral (such as a house, executives or business owners to keep business can be redeemed at different establishments. for settlement of transactions and are typically used in an car, or deposit of money) for approval; generally expenses separate from personal charges. eCommerce environment. Some examples of alternative Payment card designed for people with no credit or poor credit who payments include eCheck and PayPal, among others. are trying to build or rebuild their credit history. Credit card Financial tools that allow customers to make Biometric payment A credit card is a payment card issued to users (cardholders) purchases without having cash on hand; includes as a method of payment. It allows the cardholder to pay credit, charge, debit, and prepaid cards. The identification of humans by their characteristics or Plastic card containing a computer chip with memory for goods and services based on the holder’s promise traits; in payments, a POS technology that uses biometric capabilities; may be used for identification or to store to pay for them. The issuer of the card (usually a bank) Payment type authentication to identify the user and authorize the payment. information, financial amounts, or other forms of data; creates a revolving account and grants a to Method of payment that a merchant, either now or in also called an integrated circuit card or a chip card. Bitcoin the cardholder, from which the cardholder can borrow the future, honors from account holders as payment money for payment to a merchant or as a . for their purchases; payment types may include, but A decentralized . Stored-value card are not limited to, credit, debit, or prepaid cards. Debit card Credit card-sized device implanted with a computer chip Charge card that contains stored money value; a reloadable stored- A payment card that provides the cardholder electronic access PayPal A type of payment card; charges to these cards must be value card can be reused by transferring a dollar value to his or her bank account at a Payment processing service that allows payments paid in full each month that a statement is issued. to it from an or other device; financial institution; payments using a debit card are and money transfers to be made through the however, a disposable card cannot be reloaded. Check guarantee immediately transferred from the cardholder’s internet, via a mobile device, and in-store. designated bank account. Program in which the merchant is guaranteed payment on PayPal Credit a check; fee is charged to the merchant in exchange for the Method of electronic funds transfers from one person Digital wallet A proprietary payment method (formerly named Bill Me service of paying the merchant on any checks that are returned. or institution to another; funds typically transfer on A digital wallet refers to an electronic device (e.g., Later) that offers consumers a line of ; allows the same bank day the wire transfer is initiated. Chip card smartphone) that allows an individual to make purchases to be made online without using a credit card. eCommerce transactions. Examples of a digital wallet A card with an embedded EMV-compliant chip include Android Pay, Apple Pay, and Samsung Pay. Peer-to-peer payment containing memory and interactive capabilities Online technology that allows customers to transfer used to identify and store additional data about a eCheck funds from their bank account or credit card to another cardholder, the cardholder’s account, or both. Electronic version of a paper check, used to individual’s account via the internet or a smartphone. Closed loop gift card conduct transactions over the internet. Prepaid credit card Prepaid gift card only accepted by the Gift card A type of secured credit card that is tied to a previously merchant who issued the card. Type of stored-value payment card commonly deposited cash balance, where purchases are checked for Co-branded card issued by retailers and banks. approval against existing funds; essentially a stored-value card that usually carries major card brand logos. A co-branded card is sponsored by both the issuing Offline debit bank and a retail organization, such as a department Mastercard or Visa card that is linked to a consumer

12 13 Payment processing terms

Account updater Batch processing Hard decline Level 3 Data Card product, available through a payment processor, that A type of data processing and data communications A decline response on a credit card due to reasons Information provided by the card brands for all purchases; provides updated account numbers, expiration dates, account transmission in which related transactions are grouped including account closed or card stolen. includes ship-from zip code, destination zip code, invoice status, and cardholder contact information to merchants. together and transmitted for processing, usually by the number, order number, item product code, item commodity same computer and under the same application. Independent Sales Organization (ISO) code, item description, item quantity, item unit of measure, Acquirer Third-party company that is contracted by a card member item extended amount, freight amount, and duty amount. Bank or financial institution that processes credit Billing descriptor bank to procure new merchant relationships; also and/or debit card payments for a merchant. Description of the sale or refund transaction that process online card transactions for small businesses, Match file appears on the account holder’s account statement. usually in exchange for a fee or percentage of sales. Database that identifies specific merchants who have Assessments been terminated for cause by other acquirers. Fees paid directly to the card-brand networks to offset the Clearing Interchange brands’ costs to operate and regulate the networks; these Process through which a card-issuing bank exchanges Fee paid between banks for the acceptance of card-based Member Information Processor (MIP) fees are passed along in some form to the merchant. transaction information with the merchant acquiring bank. transactions; typically a fee that the merchant’s bank (acquiring Mastercard’s electronic interface for members bank) pays to a customer’s bank (issuing bank); fees are set and processors to facilitate authorizations, Authorization Deposit by the card networks and are usually the largest component clearing, and messaging between members. Verification of the validity of a credit card and the The submission of a transaction receipt by a merchant or of the various fees most merchants pay for card acceptance. balance allowable on the purchaser’s credit line. a payment facilitator to an acquirer, resulting in a credit or NACHA debit to the merchant’s or payment facilitator’s account. Interchange rate Manages the development, administration, and Authorization codes Amount paid by acquirers to issuers to compensate for the governance of the ACH Network, the backbone for Codes that an issuer or its authorizing processor provides to Depository account processing and maintenance of the transaction and cardholder. the electronic movement of money and data. indicate approval or denial for an authorization request. Account owned by a merchant into which funds due to the merchant are deposited. Interchange system Originating Depository Authorization recycling The computer hardware and software operated by Financial Institution (ODFI) The process of retrying previously failed authorization Discount rate and on behalf of the card brands for the routing, Acts as the interface between the Federal Reserve or attempts to receive an authorization approval. Fee paid by merchants to credit card processors processing, and settlement of transactions. ACH network and the originator of the transaction. associated with accepting general-use credit cards (like Authorization request Visa, Mastercard, etc.); all applicable fees are bundled Issuer Partial authorization A merchant’s request for an authorization to into a single percentage rate which typically includes Any association member financial institution, bank, An authorization response sent by an issuer approving accept a cardholder’s sales transaction; can occur interchange, assessments, and processor fees. credit union, or company that issues (or causes an amount less than the merchant’s requested electronically via a credit card processing terminal to be issued) plastic cards to cardholders. amount; the merchant must participate in the or via telephone as a voice authorization. Downgrade fees partial authorization service to be eligible. Surcharges added to the discount rate of the total processing Level 1 Data Authorization response fee for each transaction; can be assessed on a merchant Information provided by the card brands for all Pass-through pricing The issuer’s reply to an authorization request. for reasons including type of card used, the bank that purchases; includes account number, transaction Form of card processing pricing that allows the actual cost issued it, and how the transaction was entered. date, purchase amount, supplier, category code, of processing (interchange, assessment, and processor Automated account updater supplier name, city, state, and ZIP code. fees) to be passed directly to the merchant; benefits of Card-brand product, available through a payment Enhanced data this pricing model include transparency and potentially processor, that automatically provides updated Transaction-level data required for select interchange Level 2 Data lower costs when compared to discount rates. account numbers, expiration dates, account status, programs, card products, or merchant categories; Data provided by the card brands along with Level 1 data and cardholder contact information to merchants. examples include airline itinerary data, fuel on some purchases; includes merchant name, transaction Payment indicators transaction data, and itemized purchase data. amount, sales tax amount, transaction date, customer code, Codes returned in authorization responses that specify (ACH) and merchant zip code. certain attributes associated with the card used; may include A system of the US Federal Reserve Bank that provides Fines affluence, prepaid, corporate, and/or international. electronic funds transfer (EFT) between banks; used for transfer Fees levied by the card brands on merchants for violations of of funds transactions, including direct deposit of paychecks network regulations. and monthly debits for routine payments to vendors.

14 15 Regulatory and financial terms

Processing fees original authorization amount. Bank identification number (BIN) Know Your Customer (KYC) Fees charged to a merchant for services agreed upon Settlement The first four-to-six digits of a card that identifies Due diligence activities that financial institutions between the merchant and the payment processor. the institution issuing the card. and other regulated companies must perform to Buying and selling of transactions among merchants, ascertain relevant information from their clients processors, acquirers, and card-issuing entities; Purchased for the purpose of doing business with them. begins when the merchant submits a transaction to Settlement service where an acquirer i) provides The amount established by the issuer that a their processor and ends with the transfer of related authorizations; ii) facilitates acquirer settlement transaction cardholder may carry as a balance. Marketplace fairness act funds to a depository or liability account. purchases; iii) provides chargeback adjudication services on Proposed legislation pending in the US Congress that Durbin Amendment behalf of the merchant; and iv) initiates funds transfers. Settlement bank would enable state governments to collect sales and Part of the Dodd-Frank Wall Street Reform and Consumer use taxes from remote retailers (i.e., online and catalog Bank that holds liability accounts and executes funds Receiving depository Protection Act (introduced in 2010) that limits transaction retailers) with no physical presence in their state. transfers among these and the depository accounts. financial institution (RDFI) fees imposed upon merchants by debit card issuers. Non-regulated (Exempt) Financial institution qualified to receive ACH entries. Soft billing descriptors Federal Trade Commission (FTC) A card-issuing bank with assets less than $10 billion that is Billing descriptors that change within a reporting Reconciliation Independent agency of the US federal government exempt from the limits set forth by the Durbin Amendment. entity; these changes can help clarify the sale Process by which two entities become in balance: i) merchants that maintains fair and free competition and enforces federal or refund transaction description. reconcile their accounts with their processor via financial antitrust laws; also educates the public about identity theft. Regulated (Nonexempt) reporting; ii) merchants balance the number and dollar value of Soft decline A card-issuing bank with assets greater than the transactions they sent to their processor with the amount Fiscal period $10 billion; maximum interchange fee an issuer A decline response on a valid card due to reasons that their processor settled into their local checking account; Accounting period designation by a person or corporation may receive for an electronic debit transaction is including the credit card already exceeds the iii) payment processor reconciles with the acquiring bank; iv) that may be a variation from the calendar equivalent. $0.21 per transaction, 5 basis points. credit line, the issuer is unavailable, etc. processor confirms the number and amount of transactions FTC regulations Regulated with fraud sent to the networks with the amount that was settled into Universal Cardholder their account and then distributed to the merchant accounts. Authentication Field (UCAF) Rules or guidelines of the FTC (including the Mail An additional $0.01 adjustment toward an issuer’s or Telephone Order Merchandise Trade Regulation debit card fee if the issuer develops and implements A standard, global method of collecting cardholder Reference number Rule) that govern the shipment of products and policies and procedures designed to achieve fraud- authentication data at the point of interaction across Assigned number to each monetary transaction in a charges/refunds related to consumer orders. prevention standards; debit with fraud adjustment is all channels, including the internet and mobile devices; descriptive billing system; each reference number is $0.22 per transaction, plus 5 basis points for regulated used to communicate authentication information among printed on the monthly statement to aid in retrieval of the Funds delivery date transactions under the Durbin Amendment. cardholders, issuers, merchants, and acquirers. document, should it be questioned by the cardholder. The date that funds are deposited via ACH or wire in Regulation E Valid authorization a merchant’s designated depository account. Retrieval request services Federal regulation governing all electronic funds transfers. Authorization for the correct amount of a sale Where a processor: i) receives retrieval requests; ii) Funds transfer and obtained within a specified number of days displays them to the merchant via its online user interface; ACH transfer of funds between accounts, unless Regulation Z before the sale transaction is submitted. iii) counsels the merchant, when needed, about the a merchant has specifically requested to have Under Regulation Z, credit card issuers are required to disclose information requirements and appropriate responses; Virtual terminal all of its funds transfers delivered by wire. the terms and conditions to potential and existing cardholders iv) collects the relevant information from the merchant, at the point of account opening and at regular intervals; upon An application service that allows users to access information the processor, and other sources; v) forwards properly Interchange Fee Regulation (IFR) soliciting and opening new credit card accounts, credit card from another host processor for transaction processing. formatted response data to the requestor; and vi) acts as A regulation adopted by the European Parliament in 2015 (and issuers must generally disclose key information relevant to a liaison between the merchant and the requestor during Voice authorization effective December 2015) that caps interchange fees on Visa the costs of using the card, including the applicable interest the time that such retrieval request is outstanding. and Mastercard consumer credit and debit cards issued in the rate that will be assessed on any outstanding balances and An approval response obtained through interactive EU. several key fees or other charges that may apply, such as communication between an issuer and an acquirer Reversal the fee for making a late payment; in addition, issuers must or the International Automated Referral Service via Authorization message that reverses a previous authorization provide consumers with an initial disclosure statement, telephone, facsimile, or telex communications. by a merchant; can be the full or which is usually a component of the issuer’s cardholder partial amount but cannot exceed the agreement, before the first transaction is made with a card.

16 17 Transaction terms

Regulations Automatic bill payment Magnetic stripe Rules, applicable law, operating procedures, etc., that An arrangement between a merchant or service provider A stripe of magnetic information affixed to the back of a govern the operations of merchants, processors, acquirers, and a customer that allows recurring automatic charges plastic card; contains customer and account information that account issuers, and account holders with respect to a for a service to an agreed-upon card account. is required to complete electronic financial transactions. payment type; determined by the related acquirer, FTC, or other relevant administrative or governmental body. Card reader mail order/telephone order A device that is capable of reading the (MO/TO) transaction Reserve encoding on plastic cards. Transaction where a cardholder orders goods or Amount in a liability account owned by the acquirer at the services from a merchant by mail, telephone, or settlement bank; it is funded by the merchant and used by the Cross-border transaction other means of telecommunications; neither the card processor, through directions to the settlement bank, to satisfy A transaction for which the country/region of nor the cardholder is present at the merchant. liabilities and any potential losses attributed to the merchant. the payment card’s issuing bank and that of the merchant’s acquiring bank are different. Online bill presentment and payment Rolling reserve Process that allows consumers to receive, view, and pay Reserve funding method that transfers a specific percentage Deferred billing certain bills online by transferring money from their of a fiscal day’s gross purchased sales into a reserve liability A transaction completed in a card-not-present environment for checking accounts or charging bills to their credit card. account; after a specified period of time, the remaining fiscal which the cardholder is billed day’s original transfer amount after appropriate adjustments is once no more than 90 days after the first shipment Point of interaction (POI) automatically reversed by a transfer from a liability account to of merchandise. A hardware and/or software component in POS equipment the then-current fiscal day’s daily proceeds as a reserve surplus. (e.g., a magnetic stripe reader) that enables a card purchase eCommerce transaction at a retailer (can be attended or unattended); the new Truth in Lending Act (TILA) Transaction between a merchant and a cardholder over the generation of POI systems allows devices other than US federal law designed to ensure more accurate disclosure internet and other networks using a cardholder access device. credit cards to make payments (i.e., smartphones). of credit terms so that consumers can: i) compare the various credit terms available in the credit marketplace; ii) electronic funds transfer (EFT) point of sale (POS) avoid the uninformed use of credit; iii) protect themselves Any transfer of funds that is initiated through an electronic Location in a merchant establishment at which against inaccurate and unfair credit billing and credit card terminal, telephone, computer, or magnetic tape for the the sale is consummated by payment practices; regulation that implements TILA’s requirements is purpose of ordering, instructing, or authorizing a financial for goods or services received. Regulation Z, which is administered by the Federal Reserve. institution to debit or credit a consumer’s account. Receipt Imprint A hardcopy document that records when a transaction An impression of a customer’s card made on the draft; proves took place at the POS; the receipt contains a description that the card was present when the sale was made; imprint of the transaction, which usually includes the date, the can be created electronically by using a magnetic stripe- merchant name/location, a portion of the primary account reading terminal that includes the correct POS entry code. number, the amount, and the reference number.

Imprint machine Recurring transaction A manual credit card impression machine that creates Charge to the cardholder (with prior permission) on multiple receipts by sliding a handle to record the raised a periodic basis for goods and services (health club numbers on the front of a card onto carbon paper copies. memberships, book of the month clubs, etc.).

Installment transaction Refund The single purchase of goods or services billed to an The creation of a credit to a cardholder account, usually due to a account in multiple segments over a period of time product return or to correct an error. agreed to between a cardholder and a merchant.

18 19 Index

Remote transaction Sales draft # Billing descriptor...... 18 Biometric payment...... 15 A non-face-to-face transaction performed partially A paper record that evidences the purchase 3-D Secure...... 9 or wholly by means of electronic communication of goods or services by a cardholder. Bitcoin...... 15 (phone, internet, text messaging, facsimile, etc.). A Shopping cart software C Sale A piece of eCommerce software on a web server that Acceptance marks...... 4 Card acceptor business code...... 4 Transaction of products or services made by a merchant allows visitors to select items for eventual purchase; these Account holder...... 4 Card brands...... 4 to a customer that is facilitated by the use of a supported applications typically provide a means of capturing a Account issuer...... 4 payment type; a sale relating to the shipment of goods client’s payment information in conjunction with a payment Card control...... 9 Account number...... 4 does not occur until the product is shipped to the gateway in order to conduct secure transactions online. Card issuer...... 4 account holder; the merchant is solely responsible for the Account updater...... 18 Card reader...... 25 accuracy of the information presented for processing. Transaction Acquirer...... 18 Card security code (CSC)...... 9 Submission to a processor seeking payment Address Verification Service (AVS)...... 9 Sale date under a supported payment type. Cardholder...... 4 Affinity card...... 15 The date that: i) goods are shipped for a sale that Card not present (CNP)...... 3 requires the shipment of goods, or ii) the card account holder Alternative payments...... 15 Charge card...... 15 expects to be charged based on the terms of a service sale; American Express ...... 4 Chargeback...... 7 an installment or recurring payment occurs on a sale date American Express SafeKey...... 9 (after an interval of time from a prior sale date) where the Chargeback adjudication services...... 7 Android Pay...... 13 interval is understood and agreed to by the account holder. Chargeback advice...... 7 Apple Pay ...... 13 Chargeback period...... 7 Application programming interface (API) ...... 12 Chargeback reduction service...... 7 Arbitration...... 7 Check guarantee...... 15 Arbitration committee...... 7 Check verification...... 9 Assessments...... 18 Chip card...... 15 Association...... 4 Clearing...... 18 Authentication...... 9 Closed loop gift card...... 15 Authorization...... 18 Cloud-based mobile payments...... 13 Authorization codes...... 18 Co-branded card...... 15 Authorization recycling...... 18 Commercial card...... 15 Authorization request...... 18 Contactless payments...... 13 Authorization response...... 18 Corporate card...... 15 Automated account updater...... 18 Credit card...... 16 Automated clearing house (ACH)...... 18 Credit card number...... 4 Automatic bill payment...... 25 Credit limit...... 23 Cross-border fees...... 8 Cross-border transaction...... 8, 25 B CurrentC...... 13 Bank identification code (BIC)...... 8 Customer lifetime value...... 3 Bank identification number (BIN)...... 23 Batch processing ...... 18

20 21 D G Marketplace fairness act...... 23 Payment facilitator...... 5 Master Merchant...... 5 Payment gateway...... 5 Data Breach...... 9 Gift card ...... 16 Mastercard...... 5 Payment Indicators...... 20 Debit card...... 16 H Mastercard SecureCode...... 10 Payment processor...... 5 Deferred billing...... 25 Match file...... 20 Payment system...... 5 Deposit...... 19 Hard decline...... 19 Member Information Processor (MIP)...... 20 Payment type...... 16 Depository account...... 19 “Honor All Cards” rule...... 4 Merchant...... 5 Payments intelligence...... 3 Digital wallet...... 13, 16 I Merchant agreement...... 5 PayPal...... 16 Direct arbitration...... 7 IBAN (International Bank Account Number)...... 8 ...... 5 PayPal Credit...... 17 Discount rate...... 19 Imprint...... 25 Merchant category code (MCC)...... 5 PCI DSS...... 10 Discover ...... 4 Imprint machine...... 25 Merchant Customer Exchange (MCX)...... 13 Peer-to-peer payment...... 17 Discover ProtectBuy...... 9 In-app payments...... 13 Merchant identification number (MID)...... 5 PIN (Personal Identification Number)...... 10 Domicile...... 8 Independent Sales Organization (ISO)...... 19 Middleware...... 12 Point of interaction (POI)...... 26 Dongle...... 13 Installment transaction...... 25 Mobile commerce...... 13 point of sale (POS)...... 26 Downgrade fees...... 19 Integrated payments...... 12 Mobile payment...... 13 point of sale developer...... 12 Duplicate checking...... 9 Integrated Software Vendor (ISV)...... 12 Mobile payments acceptance...... 13 Prepaid credit card...... 17 Durbin Amendment...... 23 Interchange...... 19 Mobile point of sale (mPOS)...... 14 Presentment...... 7 Dynamic currency conversion...... 8 Interchange rate...... 19 Primary account number (PAN)...... 5 N E Interchange Fee Regulation (IFR)...... 8, 23 Processing fees...... 20 NACHA...... 20 eCheck...... 16 Interchange system...... 19 Purchase currency...... 8 Near field communication (NFC)...... 14 eCommerce transaction...... 25 Issuer...... 19 Purchased...... 21 Non-regulated (Exempt)...... 23 Electronic funds transfer...... 25 K Purchasing card...... 17 EMV...... 10 Know Your Customer (KYC)...... 23 Q Encryption...... 10 Quality Security Assessor (QSA)...... 10 end-to-end encryption (E2EE)...... 10 O Quick Response Code (QR Code)...... 14 Enhanced data ...... 19 Offline debit...... 16 Expiration date...... 4 L Omnicommerce...... 3 R Level 1 Data...... 20 Online bill presentment and payment...... 25 Receipt...... 26 Level 2 Data...... 20 Online debit...... 16 Receiving depository financial institution...... 21 Level 3 Data...... 20 F Open loop gift card...... 16 Reconciliation...... 21 Local acquiring...... 8 Federal Trade Commission (FTC)...... 23 Originating Depository Financial Institution Recurring services merchant...... 6 Local entity...... 8 Fines...... 19 (ODFI)...... 20 Recurring transaction...... 26 Fiscal period...... 23 M P Reference number...... 21 Foreign currency...... 8 Refund...... 26 Friendly fraud...... 10 Magnetic stripe...... 25 PA-DSS...... 10 Regulated (Nonexempt)...... 23 FTC regulations...... 23 Mail order/telephone order (MO/TO) Partial authorization...... 20 Transaction...... 25 Regulated with fraud...... 24 Funds delivery date...... 23 Pass-through Pricing...... 20 Funds transfer...... 23 Malware...... 10 Regulation E...... 24 Payment card...... 16 22 23 Acronym list

Regulation Z ...... 24 Truncation...... 11 3DS – 3D Secure HDC – Host Data Capture SDK – Software Development Kit Regulations...... 24 Truth in Lending Act (TILA)...... 24 AAU – Automated Account Updater HSA – Health Spending Account SET – Secure Electronic Transaction Remote transaction...... 26 Two-factor authentication...... 11 ACH – Automated Clearing House HVT – High Value Token SOAP – Simple object Access Protocol Re-presentment...... 7 U Reserve...... 24 APM – Alternative Payment Method ISO – Independent Sales Organization SMB – Small Medium Business Retrieval request services...... 21 Universal Cardholder Authentication Field (UCAF)...... 22 AVS – Address Verification Service ISV – Integrated Software Vendor SSL – Secure Socket Layer Reversal...... 21 BCMA – Merchant Agreement IVR – Interactive Voice Response STP – Single Transaction Processing Reversed chargeback...... 7 (contract for large merchants) Reward card...... 17 KIT – Key Injection Facility TDES – Triple Des V BEI – Back End Integration Rolling Reserve...... 24 LVT – Low Value Token TID – Terminal ID Valid authorization...... 22 BIN – Bank Identification S MAT – Merchant Terminal Activations TIN – Tax Identification Number (Tax ID) Value added reseller (VAR)...... 12 BOPIS – Buy Online Pickup In Store Sale...... 26 Velocity checks...... 11 MCC – Merchant Category Code VAP – Value Added Platform (fka Sale date...... 26 BORIS – Buy Online Return In Store eComm Platform, Lowell, Litle) Verified by Visa...... 11 MCP – Multi Currency Pricing Sales draft...... 26 Virtual account number...... 11 BP – Basis Point VAR – Value Added Reseller MDS – Master Data Systems Samsung Pay...... 14 Virtual terminal...... 22 CDB – Centralized Deal Boarding VTP – Verishield Total Protect Secured credit card...... 17 Visa...... 6 MID – Merchant Identification or Virtual Terminal Plus SEPA...... 8 CID – Cryptogram Information Data Voice authorization...... 22 Method of Payment MOP – WPG – Worldpay Gateway Settlement...... 21 CP – Card Present MOTO – Mail Order Telephone Order (overseas gateway) Settlement bank...... 21 W CRC – Chargeback Reason Code Settlement currency...... 8 Wire transfer...... 17 MST – Magnetic Stripe Transmission DBA – Doing Business As Shopping cart software...... 26 NDF – Next Day Funding Smart card...... 17 DDA – Demand NFC – Near Field Communication Soft billing descriptors...... 21 References EBT – Electronic Benefits Transfer Soft decline...... 22 NPS – Net Promoter Score Chargebacks911.com Mastercard.com EIRF – Electronic Interchange Software as a service (SaaS) ...... 12 Reimbursement Fee P2PE – Point to Point Encryption Software development kit (SDK) ...... 12 CreditCardProcessing.com Paylosophy.com PAN – Primary Account Number Standard industrial classification (SIC)...... 6 EMD – Electronic Merchant Deposit Stored-value card...... 17 PCD – Petro Convenience Device Dictionary.com Visa.com EMV – Euro MasterCard Visa Sub-merchant...... 6 Payment Card Industry EPR – Exception Pricing Request PCI – InvestingAnswers.com Wikipedia.org Qualified Security Assessor T FANF – Fixed Acquirer Network Fee QSA – Third-party presenter agreement...... 6 Quick Service Restaurant FTPS – Fifth Third Processing Solution QSR – Third-Party processor...... 6 Request for Proposal FEP – Front end processor RFP – Third-Party settlement...... 6 RAFT – Reliable Automated Funds Tokenization...... 10 FTPS – Fifth Third Processing Solutions Transfer ( aka Core, fka IBM, Cincinnati ) Touch ID...... 14 GR2 – Grand Rapids 2 (new data center) Transaction...... 26 SAQ – Self Assessment Questionnaire

24 25 WFEC138 09.19

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