The following is an alphabetical list of terms in merchant services with the definitions for those terms.

Address Verification (AVS)

A merchant service where the merchant verifies the cardholder’s address. This is primarily used by mail/telephone order merchants to combat fraud, but is not a guarantee that a transaction is valid.

Authentication

A data security technique that is designed to ensure that the professed sender of a transaction is actually the person they claim to be.

Authorization

The act of ensuring the cardholder has the adequate available funds against his or her line of credit. A positive authorization results in the generation of an authorization code and the funds being set aside. Then the cardholder’s available credit limit is reduced by the authorized amount.

Average Ticket

The average dollar amount of sale for credit card transactions.

Bank Identification Number (BIN)

A unique series of numbers that are assigned by MasterCard or VISA to a principal member institution that identifies the member in transaction processing. This is the first three to six digits of a standard cardholder account number which can be used by the member’s affiliates, if necessary.

Bank Routing Number

The first nine digits that appear across the bottom of a personal check that identify the associated financial institution.

Batch

A group of approved credit card transactions, typically accumulated during a single business day.

Batch Header Ticket

The identifying form that is used by the electronic submission merchant in order to indicate a batch of sales/credit slips.

Batch Processing

The offline authorization of transactions when immediate approval isn’t required. Transactions are collected in a batch then sent as one transmission for authorization and/or settlement. Batch processing is usually used with mail/telephone order transactions.

Capture

Converting the authorization amount into a billable transaction record within a batch. Transactions can’t be captured unless they have been previously authorized and the goods/services have been shipped or transmitted to the consumer.

CDPD – Cellular Digital Packet Data

Sending data through cellular networks. CDPD is used with wireless credit card terminals for transactions and deposits in mobile environments.

Charge Back

The reversal of a credit card transaction, usually initiated by the card issuer at the request of the cardholder. Charge backs can occur for many reasons, including: customer disputes, potential or actual fraud (by merchants, sales associates and/or customers), processing errors and authorization issues.

Chargeback Fee

The amount assessed by the acquirer for chargeback processing.

Chargeback Period

The number of calendar days during which the issuer has the right to charge the transaction back to the acquirer. The number of days varies from 45 to 180 days, according to the type of transaction.

Check Truncation

Generic term describing the conversion of a paper check to an electronic payment or digitized image. These transactions are governed by paper check or EFT laws.

Code 10 Authorization

If the POS device reads “Lost or Stolen Card,” or “Pick Up Card” or similar message, the merchant should call the authorization center for a Code 10 Authorization. The operator will then ask questions to determine if the transaction is truly valid.

CTMF

Combined Terminated Merchant File

CVC2 – Card Validation Code

MasterCard term for the three digit security code printed next to the card number in the signature panel that is used as part of the authorization process.

CVV2 – Card Verification Value

Visa term for the three-digit security code printed next to the card number in the signature panel that is used as part of the authorization process.

Data Encryption Key (DEK)

A tool used for message text encryption and for the computation of message integrity checks (signatures).

Data Capture (a/k/a Draft Capture)

The collection, formatting, and storage of information in computer memory. Many point-of-sale terminals perform data capture functions.

Debit Switch

A portal that transmits debit data between gateway banks and debit card issuers – also known as “Debit Network.” Only financial institutions can be members of debit switches.

DIP Switches – Dual In-Line Package Switches

A series of connected switches that indicate the proper configuration for a payment card terminal printer.

Digital Certificate

An encrypted attachment to an electronic message, used for security reasons. A digital certificate is most commonly used to verify that a user sending a message is who he or she claims to be. The receiver is then provided with a way to encode a reply.

DUKPT – Derived Unique Key Per Transaction

A method of PIN pad encryption.

EBT- Electronic Benefits Transfer

The automation of government benefits through electronic authorization, data capture and settlement processes.

ECP – Electronic Check Presentment

The transmission of cash letter contents (based on MICR line capture) to a paying bank prior to physical delivery of the (paper) cash letter, or as a result of the truncation of the cash letter items.

ECR – Electronic Cash Register

A cash register that emulates a point-of-sale terminal in order to process credit card transactions.

EDC – Electronic Draft Capture

The use of a point-of-sale device to authorize and settle credit card transactions.

Electronic Check

Term for any payment that starts as a paper check and is then converted to an ACH transaction for electronic clearing and settlement. Also called an E-Check.

Encryption

The scrambling of data automatically in the terminal or computer before data is transmitted for security and anti-fraud purposes.

Entitlement

License or permission to accept a particular type of payment card or payment vehicle.

EPROM – Erasable Programmable Read Only Memory

Industry-initiated standards that are used to identify terminal types and components.

Factoring

When a legitimate merchant processes another merchant’s transactions in return for payment. This is strictly forbidden by the associations.

Floor Limit

A dollar amount set by the acquirer according to MasterCard and VISA rules and regulations. The merchant should obtain authorization for any transaction above the floor limit.

Forced Transaction

The after-the-fact entry of a purchase resulting from a referral (‘call Authorization Center’) message or a downtime interruption from the Network which allows the merchant to enter (as a force/post authorization) the transaction and the approval code into the EDC batch.

Front-End Network

The network provider that’s responsible for authorizing/capturing transactions and forwarding information to the back-end network.

Gateway

Manages the electronic connection between consumers and financial institutions then transfers data.

Gift Card

A stored-value, reusable card that allows merchants to have an electronic alternative to paper gift certificates.

Gross Deposit

Submitting bankcard sales and credits for the face amount. Then the acquirer deducts the discount later.

Hot Card

A card account that has had excessive use, indicating that the card (or account number) has been stolen.

Idle Prompt

The standard display on a payment card terminal while waiting to process the next transaction.

Imprinter

Device used to imprint embossed card information onto a sales draft for payment card transactions. An imprinter is primarily used if the card is present and the POS reader device cannot read the magnetic stripe.

Interchange

A fee that is set by a network operator (such as Visa, MasterCard and debit card networks, like STAR) and paid by the transaction-acquiring bank to the card-issuing bank.

Magnetic Information Character Recognition (MICR)

The imprinted banking numbers (routing/transit number, checking account number, check number) at the bottom of a check.

MCC – Merchant Category Code

A universal four-digit merchant classification code that can identify the merchant by type of processing, authorization and settlement. This is similar to a Standard Industrial Classification (SIC), except more defined.

National Automated Clearing House Association (NACHA)

The national association that establishes the standards, rules and procedures that enable depository financial institutions to exchange ACH payments on a national basis.

Net Payment

The payment to a merchant for sales drafts minus credits less the appropriate discount fee.

Offline Transaction

A transaction that is authorized through a voice authorization then keyed into a POS terminal before settlement.

Point-of-Sale System

An electronic system that accepts financial information at or near a retail location and transmits the data to a computer or authorization network for reporting activity, authorization and transaction logging.

Private Label Card

A card issued by a merchant that can only be used in that merchant’s business, such as a department store credit card.

Processor

A company that is responsible for processing interchange transactions and is operated by an acquirer or acting on behalf of the acquirer.

RAM – Random Access Memory

The short-term memory for a computer or payment card terminal.

RCK – Represented Check Entry

An ACH transaction format for collecting funds represented by a paper check that are returned for insufficient or uncollected funds.

Reason Code

A two-digit code that identifies the reason a chargeback occurred.

Regional Network

A network that processes debit transactions for financial institutions and retailers in a certain geographic area. Regional networks are not part of the national interchange system.

Representment

A transaction presented to the issuer by the acquirer, when the merchant requests a reversal of the chargeback.

Secure Socket Layer (SSL)

A Web-based technology that enables one computer to verify another’s identity and allows secure connections.

Settlement

Refers to the final accounting where debits and credits are posted to the correct financial institution accounts.

SIC – Standard Industrial Code

A universal four-digit code which designates a merchant’s industry type, similar to an MCC code.

Smart Card

A payment card with a built-in microprocessor (chip) which stores information. Smart cards can be utilized for stored-value cards, credit cards or loyalty cards.

Split Dial

The capability of a card terminal to dial various telephone numbers in order to obtain an authorization or settlement of different types of cards.

Summary Adjustment

A correction to a deposit, made by the acquirer, if there is an error in the deposit that has been submitted.

TCS – Terminal Capture System

The process in which transactions are stored in the terminal until the batch is settled to the host. Most commonly used in restaurant applications when tip adjustments must be made.

Terminated Merchant File (TMF)

A file that lists the names of merchants and their principals whose bankcard relationships have been terminated for some reason by an acquirer. Operated jointly by VISA and MasterCard.

Third Party Processor

A company that processes ACH files and transactions on the behalf of banks or other participants to the transactions.

TID – Terminal Identification Number

The number identifying a merchant to the front-end network.

Track One

Track One information, which is stored on the magnetic stripe on the back of a card, has the cardholder’s name and the account number and expiration date stored in it.

Track Two

Track Two information, stored on the magnetic stripe on the back of a card, contains the account number and expiration date.

Voice Authorization

Transactions authorized by a voice operator. Voice-approved transactions must be “forced” into a terminal batch for settlement.