Learn about payment industry terms to better understand your service.
ACH: Automated Clearing House (ACH) is a network that facilitates the electronic transfer of funds between institutions. This process is most commonly used to direct deposit payroll, make recurring payments and settle merchant card accounts.
Acquirer: An acquirer is the company that connects merchants to Visa and MasterCard authorization and settlement systems.
Assessments: Assessments are fees paid to MasterCard and VISA to cover their marketing and administrative costs. This is a percentage of the sales you pass through interchange.
AVS: The Address Verification System (AVS) helps protect against fraud by verifying the identity of the person claiming to own the credit card. The system checks the billing address provided by the user with the address on file at the credit card company.
Authorization: An authorization is an electronic check between a card-issuing bank and the merchant-acquiring bank that confirms a cardholder has sufficient credit to cover a pending purchase.
Back End: The back end is the part of an online store where all of the transactions, chargebacks and other information gathered by the front end are processed so that merchants can get paid.
Backbilling: Backbilling is a pricing structure where the qualified discount rate for the current month is detailed on that month’s statement and downgrades, transaction fees, and monthly fees are billed on the following month’s statement.
Basis Point: A basis point is one, one-hundredth of a percent; one basis point is 0.01% or 0.0001; 10 basis points would be 0.10% or 0.0010; 25 basis points would be 0.25% or 0.0025; 100 basis points would be 1.0% or 0.0100.
Batch: A batch is when a merchant submits their transaction data to the company that handles their payments. Batches can be closed automatically or manually. Most terminals can be programmed to batch out automatically at a certain time each day.
BIN: A bank identification number (BIN) is the number assigned to each bank for the purpose of identifying it for the routing of transactions and other business.
Card-Not-Present (CNP): Cards not present are transactions (for example, Internet or mail order) for which the card is not physically presented to the merchant at the POS. Interchange is set higher on these types of transactions because there is an increased risk of fraud with these types of transactions.
Card Type: Card Type is the name of the card – Visa, MasterCard, Discover, AMEX – and what type of card – consumer credit, business, check card, rewards, etc.
Charge Type: Charge type refers to the individual kind of card within each card type. For example, "credit" is a charge type. Charge types also provide a pattern for downgrades—the higher your average ticket, the lower your acceptance rate. Some charge types are only available for certain Merchant Category Codes (MCCs).
Chargeback: A chargeback occurs when a cardholder's bank (the card issuer) reverses all or part of a transaction, leaving the merchant financially liable for the payment. Chargebacks can be initiated by disgruntled customers, or by the bank due to procedural errors.
CVV: CVV is the Card Verification Value—a security feature encoded on the magnetic stripe of a credit or debit card. CVV is used to verify transactions at retail shops.
DBA: DBA is a term for the name under which a business is operating. DBA stands for "Doing Business As". This name may or may not be the same as the corporation's official title.
DDA: The acronym DDA stands for "demand deposit account." This is also known as a checking account.
Debit Card: Debit cards are issued by financial institutions and tied to cardholders' checking accounts. Some cards require the input of a personal identification number (PIN), while others do not.
EBT: EBT is an electronic benefits transfer, also known as food stamp benefits. Merchants must coordinate with their local government office to get set up for EBT acceptance, and provide Redde with their EBT certificate in order to accept EBT transactions.
Gateway: A gateway is a network that connects merchant POS terminals with transaction processing and settlement networks, such as the MasterCard and Visa settlement networks. Gateways can also provide related services, including transaction management and reporting. An Internet gateway, such as Authorize.Net, allows merchants to set up shopping carts or accept transactions when the card is not present.
Interchange: Interchange is a fee paid to the bank that issued your credit card by the bank that processed your credit card sale. It's called interchange because it's where all other fees are added together to come up with your merchant discount rate.
Interchange Plus Pricing: Interchange Plus Pricing is a pricing structure through which the interchange and dues/assessments are passed directly to the merchant. It is also sometimes called cost-plus pricing.
ISO: ISO is an independent sales organization that is registered with Visa and MasterCard to sell and process bankcard transactions, or it is an independent sales organization that works under the name of a registered ISO.
MOTO: MOTO stands for mail order/telephone order, for 100% keyed merchant environments.
PCI DSS: The Payment Card Industry Data Security Standards is a set of requirements for securing payment card information. Failing to adhere to the standards can lead to penalties if you have a breach in your business. To learn more about PCI visit: https://www.reddepayments.com/supportcenter/pci-compliance
PIN: PIN is a four-digit personal identification number. It is used to process PIN-based debit transactions.
POS: Point of sale (POS) is the place where retail payment transactions occur. POS systems are commonly used to describe cash register systems and computer software programs used for electronic payment processing.
Processor: The processor is the company that moves transactions between merchants, banks, and credit card companies.
Settlement: The process by which members exchange financial data and value resulting from sales transactions, cash disbursements, or merchandise credits.
Transaction: A transaction is when a cardholder purchases something from a merchant and the merchant receives payment for the product.