3D SECURE PROCESSING
An added layer of security for online credit and debit card Transactions. It was developed by Visa to improve the security of internet payments and offered to customers as the Verified by Visa service.
3D Secure adds another authentication step for online payments.
ACQUIRER (or Merchant Acquirer)
The Card Scheme member that undertakes the relationship with a Merchant on behalf of a Card Scheme. This normally includes the under-writing, processing and settlement of Transactions. The Acquirer contracts with the Merchant to collect funds from the Card Issuer on their behalf for goods sold that are settled by credit and debit card. Normally the Acquirer would be a financial institution or bank but recently non-banks such as WorldPay have been accepted by the card schemes as Acquirers. Historically, the Acquirer would also own the technology infrastructure used for processing and settlement of Transactions but recently various Acquirers have out-sourced the technology requirements to processing partners (Processors) such as First Data (HBOS), Elavon (Santander) and Global Payments (HSBC).
The process of recruiting new customers, i.e. Cardholders for Issuers and Merchants for Acquirers. It includes marketing, processing applications and agreeing a contract with the customer.
American Express. An international payments systems organisation and one of the main global Card Schemes.
The Association for Payment and Clearing Services – the body responsible for money transmission and payment clearing activities in the UK.
Average Transaction Value (also known as ticket value).
Automated process that a Terminal uses to process a credit or debit card Transaction for a specified amount. The Transaction is either approved, referred or declined by a Card Issuer or an Acquirer on behalf of a Card Issuer. Authorisation will confirm there is available credit on the account and that the card has not been reported lost or stolen. A referral may occur if the Transaction is large or unusual. An authorisation is not a guarantee of payment!
A telephone call, initiated by the Terminal following a “referall” made from the Merchant to obtain authorisation for a Transaction.
A unique authorisation code assigned to each Transaction generated by a Card Issuer or by an Acquirer on behalf of a Card Issuer when an authorisation request is approved. The authorisation code is printed on the receipt and ensures that the Merchant has proof that the Transaction was correctly authorised.
Address Verification Service – verification of the numeric elements in the cardholders billing address. It is used particularly in CNP Transactions to prevent fraud.
Bank Automated Clearing System.
Any day other than a Saturday or Sunday or a Bank Holiday.
A Merchant is allocated a time period (say 16.00 – 19.00) by the Acquirer, during which they may perform their End of Day reconciliation with the Acquirer system. They are automatically “cutover” after the end time (19.00 in the above example) and subsequent
Transactions will be logged on the next trading day.
Chip and PIN Terminal, used from a Bluetooth hub, which is portable but not fully mobile. Typically used in bars, clubs and restaurants.
An individual who owns the card being used in a Transaction
CARDHOLDER TRANSACTION (or Transaction)
The uses of a card by a Cardholder in order to purchase goods or services from a Merchant or obtain cash from an ATM or financial institution.
CARD ISSUER (or Issuer)
Institution who issues the payment card to the Cardholder, eg Barclays, RBS, Capital One, etc.
The network that bridges the gap between the Acquirer and the Card Issuer for authorising and settling Transactions e.g. Visa, MasterCard, AMEX, Diners, etc..
CARD SCHEME RULES
The rules and operating instructions issued by the Card Schemes which govern Transactions undertaken using their branded card. The rules are applicable to Merchants, Acquirers and Card Issuers.
The right, in defined circumstances (usually a disputed Transaction), of a card issuer to charge part or all of the value of a Transaction back to the Acquirer. The Acquirer may subsequently chargeback the value of the Transaction to the Merchant. Chargebacks used to be limited to credit cards but Visa debit cards now carry chargeback rights in certain circumstances.
A payment card linked to an account that has to be settled in full by a stipulated date.
CHIP & PIN
Secure method of undertaking a face to face Transaction – designed to fight fraud and the most widely used card security system in the UK.
CHIP & PIN CARDS
Type of credit and debit cards incorporating integrated circuitry. Replacing magnetic swipe in an effort to combat fraud.
Call Line Identity or Telephone number.
Cardholder Not Present – Transaction undertaken via mail/telephone (MOTO) or online where the cardholder is not physically present and the Merchant does not see the card. In an online Transaction, the cardholder will enter his card details onto an online payments page. For MOTO, the cardholder will verbally (or in writing) provide the card details to the Merchant who will enter the details on a Virtual Terminal. CNP Transactions are less secure than Customer Present Transactions and often require additional security questions or processes. Interchange costs are also higher than equivalent Customer Present Transactions.
Contactless payment systems are credit cards, key fobs, smartcards or other devices which use radio-frequency identification for making secure payments. The embedded chip and antenna enable consumers to wave their card or fob over a reader at the point of sale. The maximum Transaction value is currently limited to £15 and the Transaction does not require Chip and PIN authentication.
A Commercial Card issued to businesses to facilitate corporate, mostly travel and entertainment (t&e) expenditure. Interchange costs are higher for Corporate/Commercial cards than Personal Credit cards and consequently the MSC charged to the Merchant will be higher for these card types.
A payment card (e.g. MasterCard, Visa) linked to an account which, under a revolving credit agreement, may be settled in full by a stipulated date or may be repaid over a period of time, subject to minimum monthly repayments being made. Interest will normally be charged on the outstanding balance by the card issuer.
Card Security code (see also CVV). The last three digits on the signature strip on the back of a credit card.
CUSTOMER PRESENT TRANSACTION
Customer Present Transactions are also known as Face to Face Transactions. A Transaction where the Cardholder is present and the Transaction is processed using a Point of Sale Terminal. These are generally the most secure type of Transaction as Chip and Pin technology is used and therefore interchange costs are lowest.
Cardholder Verification Value (CV2 for Visa) and Cardholder Verification Check (CVC2 for MasterCard). This data is included as the last three digits on the signature strip (CSC) and represents a unique card verification method.
A card (e.g. Maestro/Visa Debit) which is designed to enable a customer of the card issuer to pay for goods and services by transferring money from a current account.
DYNAMIC CURRENCY CONVERSION
Dynamic Currency Conversion (DCC) is a service where a cardholder can have the cost of a Transaction converted to their local currency when making a payment in a foreign currency. The Cardholder is charged a commission (built into the exchange rate) which is usually shared between the Merchant and the Acquirer. If your business frequently sells products/services to overseas cardholders, DCC can be a useful revenue stream.
The supply of goods and services conducted electronically over the Internet.
Electronic Fund Transfer.
END OF DAY
The routine which must be completed on a Terminal to enable it to be polled. Depending upon Terminal type and configuration parameters, many Terminals are configured to perform the End of Day routine automatically.
Electronic Top-Up of prepaid mobile phones.
The general term used to denote facilities for effecting certain Transactions in a situation in which part or all of a Card Scheme system at the point of sale is unavailable for normal processing.
A multi-part document used to record Transaction details when a Transaction cannot be performed electronically on a Merchant Terminal. Information from the card is captured using a card imprinter.
FIXED LINE TERMINAL
A Chip and PIN Terminal that can only be used from a countertop or static environment.
The level agreed between an Acquirer and a Merchant over which Authorisation must be sought for a single Transaction.
The length of time between when a Transaction is charged to a card and the goods or services are delivered. The longer the chargeback period, the higher the risk of Chargebacks due to non-fullfillment (arising from eg appointment of an insolvency practitioner or customer dis-satisfaction with the product) and consequently the riskier the Merchant will be viewed by the Acquirer. Riskier Merchants will often be required to provide a Reserve Account (cash collateral) to the Acquirer to protect against this risk. Fullfillment periods are typically longest in the airline, hotel and furniture retail sectors.
Terminal functionality used for adding tips and service charges to the cardholder Transaction (frequently used in restaurants and taxis).
Interchange is the cost charged by the Card Issuer to the Acquirer for each Transaction processed. For debit cards, the charge is a fixed cost per Transaction and for credit cards the cost is a fixed % of Transaction value. Whilst Interchange is charged by the Card Issuer, the level of Interchange is set by the individual Card Schemes. Interchange is the largest component of an Acquirer’s cost base and is recovered from the Merchant through the MSC. If you want to work out how much profit your Acquirer makes on your Transaction, as a proxy deduct the Interchange from your MSC per Transaction. The Acquirer will have other variable costs but these are very small relative to interchange (see What is Interchange for further details on how Interchange works).
Independent Sales Organisation (also known as Merchant Service Providers or MSP). An organisation which acts as a Reseller of Card Processing and/or Card Acquiring Services. The ISO will not be a Card Scheme Member, nor will it control any of the technology infrastructure used to undertake card Authorisation, processing or settlement. ISO’s are authorised by Acquirers and Processors to recruit Merchants on their behalf.
ISSUER (or Issuing Bank)
The Financial Institution which has issued a credit/debit card to a Cardholder. The Issuer bears the risk of Cardholder default and receives Interchange each time the card is used. The Card Schemes are not Issuers – they sponsor the cards.
Identification Verification Certificate.
Interactive voice response.
Japan Credit Bureau – issuer of the JCB Card, the leading Japanese travel and entertainment card, accepted in over 100 countries world-wide.
KNOW YOUR CUSTOMER (OR “KYC”)
Know Your Customer is the due diligence that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. KYC policies have become increasingly important globally to prevent identity theft fraud, money laundering and terrorist financing. KYC will be undertaken by any Acquirer before offering card acceptance services to a Merchant.
A domestic and international payment (Debit Card) scheme launched in 1993. In the UK, the number of Card Issuers offering Maestro has materially declined such that it is now a minority debit card, with the vast majority of UK debit cards being Visa debit.
An international payments systems organisation and one of the main global Card Schemes.
Merchant Classification Code. Used to group Merchants by trading activity in classifying their business model and risks.
A business that accepts card payment from the Cardholder as settlement for goods and/or services provided to their customers.
A specialist bank account which only accepts settlement in respect of card Transactions. A Merchant Account is necessary to accept card payments. Merchant Accounts can be set up for MOTO and a separate Internet Merchant Account is required for e-Commerce.
Merchant Advance allows Merchants to turn future credit card sales into cash (similar to invoice discounting). A fixed percentage is deducted from the Merchant account automatically through credit card processing receipts for repayment.
Merchant ID. Unique identification number assigned to a Merchant by an Acquirer.
Chip and PIN Terminals that can be operated anywhere using GPRS/GSM mobile data networks.
Mail Order Telephone Order Cardholder Not Present Transactions. Where a Merchant takes Card details over the telephone or in writing.
Minimum Monthly Service Charge is an additional charge levied if the monthly MSC does not reach a minimum level (usually £15 – £25). Most Acquirers will charge a MMSC.
Merchant Service Charge. Charge levied on the Merchant by the Acquirer for each Transaction processed. Debit card Transaction charges are based on a fixed fee per Transaction whereas Credit Card Transactions are are based on a fixed % of Transaction value.
MULTI-CURRENCY PROCESSING AND SETTLEMENT
Service provided by the Acquirer which will allow the Merchant to process Transactions in alternative currencies other than their domestic currency. In multi-currency settlement, the Acquirer will settle to the Merchant in a different currency of the Merchant’s choice than that in which the Transaction was processed.
New to Cards. Merchants that does not currently accept payment services by card.
This term is used to define a connection or data transmission via a data communication link.
This refers to a Transaction that is approved or declined by a Card Issuer or an Acquirer on behalf of a Card Issuer. The Authorisation process includes an on-line dialogue between the Merchant Terminal and the Acquirer’s host system.
A Merchant Terminal that generates an on-line Authorisation request for each Transaction and where data capture of a Transaction by an outlet’s Acquirer occurs during on-line authorisation processing.
A service which may be provided to a Merchant’s Terminal enabling card details to be keyed into the Terminal as opposed to the card being swiped through the Terminal.
A generic term for any plastic card (Credit, Debit, Charge, etc) which may be used on its own to pay for goods and services, or to withdraw cash.
The payment page, also known as a paypage, is a secure web page (signified by https/) in the web address where confidential information such as credit card details are added in order to complete a payment.
Generic term for an organisation which enables a Merchant to accept card payments. This could be an Acquirer, a Processor, a Payment Service Provider or an ISO.
Payment Card Industry Data Security Standard. Industry wide minimum cardholder data security standards. See PCI DSS compliance – the basics.
Process Data Quickly. PDQ is a trademarked brand name for a Terminal.
A Payment Service Provider offers Merchants online services for accepting electronic payments by a variety of payment methods including credit card, bank-based payments such as direct debit, bank transfer and real-time bank transfer based on online banking. A PSP will partner with an Acquirer to facilitate Payment Card acceptance.
Personal Identification Number – a set of characters, usually a four digit sequence, used to authenticate cash withdrawals or instructions initiated by a payment card through a customer activated Terminal such as an ATM or Chip and Pin cards for Transactions on Terminals.
The collection of data stored in a Terminal by a central computer or polling service. Data is collected in batches rather than in real-time.
The period (normally 0.00 – 6.00) during which polling takes place.
Point of Sale (Service) – the physical location at which a Merchant Terminal is sited and where card Transactions are undertaken
Predominantly Off-line Terminal – Merchant point of sale for which electronic authorisations are sought above a pre agreed floor limit.
PROCESSING DAY SETTLEMENT
Transactions performed by a Merchant during non-banking days (i.e. Saturdays, Sundays and Bank Holidays) are consolidated with the Transactions performed during the nearest immediately preceding banking day to produce single credits per Card Scheme.
Owner/Manager of the technology infrastructure (or platform) used for processing and settlement of card Transactions. Banks used to own their own platforms but many have now out-sourced to technology companies (see Acquirer).
Public Switched Telephone Network – the standard voice telephone system which may also be used for data.
Purchase with Cash Back – an optional Transaction type offered within the Maestro and Visa Debit Card schemes allowing a Merchant, with the approval of its Acquirer, to allow a cardholder to draw cash up to a limit agreed with its Acquirer (but maximum £50) within a standard sale Transaction. Also known as “Cash Back”.
The method by which a Merchant compares the business undertaken at his electronic data capture Terminal with that recorded by the Acquirer and credited to his bank account.
A Transaction which the Cardholder has agreed can be debited to their card at agreed intervals or on agreed dates. A typical example would be a magazine subscription.
Where the Merchant agrees to refund to the Cardholder’s card of the whole or part of a sum previously authorised by a Cardholder to be debited to their Card.
An agreed amount of settlement funds withheld from the Merchant by the Acquirer usually to meet credit risk requirements.
A transfer of funds from the Acquirer to the Merchant representing the value of Transactions processed on behalf of the Merchant. Settlement originates with the Card Issuer, to the Card Scheme, to the Acquirer and onto the Merchant.
SET UP FEE
Some Acquirers, Processors and ISO providers will charge a one-off fee to the Merchant for setting up the card processing arrangements. Not all providers will charge a set-up fee and it is important to consider this element of cost alongside the other costs of accepting card payments when choosing your provider.
The monthly invoice provided to the Merchant by the Acquirer which will detail the Transactions undertaken by the Merchant that month (by volume and Transaction type) and the charge per Transaction type levied by the Acquirer. The statement will also detail the non-Transaction charges, for example Terminal hire, chargeback costs, etc. When you consider switching payment providers have your statement to hand to compare the detailed costs from your current and proposed provider.
Transmission Control Protocol.
A hardware device that captures card payment details and submits these for processing by securely transmitting the data over a telephone line or the internet or, in the case of wireless Terminals, over cellular/satellite networks. The device may be static (ie fixed) or mobile or could be a separate PIN entry device.
TRAVEL & ENTERTAINMENT CARDS
(T&E Cards) General term for payment cards, usually charge cards, used primarily by businessmen and women for their travel and entertainment of clients. American Express and Diners Club Cards are often referred to as travel and entertainment cards. Similar to Corporate/Commercial Cards and also carry higher Interchange costs.
Gross value of a Transaction. Annual or Monthly Turnover is the total value of Transactions processed bu a Merchant in a year or month.
An international payments systems organisation and one of the main global Card Schemes.
Authorisation by means of communication between Merchant and Authorisation Centre by normal telephone.
The procedure which may follow an Authorisation request involving the Merchant being requested to contact its Acquirer for further instructions or the communication of further information about the Cardholder or Transaction.