Glossary

A
  • ACH

    Automated Clearing House - group of processing institutions linked by a computer network to process electronic payment transactions between financial institutions.  Also see NACHA.

     

  • ACH Operator

    A central clearing facility operated by a Federal Reserve Bank or a private sector organization on behalf of depository financial institutions in which participating financial institutions transmit or receive ACH entries.

  • ACH Reject_

    An attempted ACH transaction that is rejected by the financial institution that received that transaction.  NACHA has defined a list of ACH Reason Codes that provide more details on why the transaction is rejected.

  • ACH Third-Party Service Providers

    An entity other than the originator, ODFI, or RDFI that performs any function on behalf of the originator, ODFI, or RDFI with respect to the processing of ACH entries.

  • ARC

    An ACH code abbreviation for Accounts Receivable Check.  A consumer check converted to a one-time ACH debit. The original check is destroyed and an image of the check is archived.

  • Accounting Systems

    A software system used to record and report on the flow of money into and out of a business or organization.

  • Accounts Payable (AP)

    The total amount owed by a business or organization as the result of purchases of products or services on a credit basis.

  • Accounts Receivable (AR)

    The total amount owed to a business or organization as a result of a sale made on credit.

  • Acquirer, Acquiring Bank A financial institution that is a member of Visa and/or MasterCard and maintains the merchant credit card processing relationship. The acquirer receives all transactions from the merchant to be distributed to the issuing banks.
  • Acquirer, Acquriting Bank (Seller's Bank)

    A bank or financial institution that processes credit and or debit card payments for merchants.

  • Addresss Verification Service (AVS)

    A service used to verify the address (street number and zip code) of a person claiming to own a credit card.

  • American Bankers Association (ABA)

    The trade association of American bankers. This body also has the registration authority to assign bank specific identification numbers used in check and ACH transactions (see ABA Routing Number).

  • Assets

    The financial value of what a company owns. (e.g., cash, accounts receivable, furniture, equipment, property, etc.)

  • Aurtomated Teller Machine (ATM)

     An unattended terminal that offers basic bank teller services to customers.  Common services include dispensing cash, accepting deposits (cash or checks), and providing an account balance.

  • Authorization

    The process by which a transaction is approved by the issuer. Permission is given to (or denied) the merchant, via the acquirer, to accept a specific transaction from the cardholder’s account. An authorization indicates only that the card is valid and that sufficient funds are available on the cardholder’s credit limit at the time the request is made.

  • Authorization Request

     An authorization to accept a cardholder's sales transaction. An authorization request can occur electronically via a credit card processing terminal or via telephone as a voice authorization.

  • Automated Clearing House (ACH)

    A group of processing institutions linked by an electronic network to process payments.  Examples of transactions that use this electronic network include direct deposit payroll, vendor and consumer payments. Rules and regulations that govern the ACH network are established by NACHA (National Automated Clearing House Association) and the Federal Reserve.

  • Automated Teller Machine (ATM)

    An unattended terminal that offers basic bank teller services to customers.  Common services include dispensing cash, accepting deposits (cash or checks), and providing an account balance.

  • Average Ticket Average Ticket

    The average dollar amount of sale for a payment transaction.

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B
  • Bad Debt

    An account receivable or loan that a business or organization is unable to collect.

  • Balance Sheet A financial statement that lists assets, liabilities and net worth as of a specific date.
  • Bankcard

    A bankcard is a plastic card issued by a bank to its clients that may perform one or more of the following services:

    • ATM card, card used for transactions at automatic teller machines
    • Debit card, card linked to a bank account and used for making purchases
    • Credit card, card attached to a revolving credit line
  • Batch

    As used in the payment industry, batch refers to a group of credit card or check transactions, usually accumulated during one business day.

  • Bill Pay

    A service that enables electronic payment of one-time or recurring bills using a bank account.  Payments are initiated as an ACH.

  • Blanace Sheet

    A financial report that lists assets, liabilities and ownership equity as of a specific date.

  • Business Card

     A payment card typically issued to, and used by, an owner of a small business. 

  • Business-To-Business (B2B) Business-To-Business (B2B) Business-To-Business (B2B)

    The exchange of products and services between businesses, as opposed to between a business and a consumer (Business-To-Consumer (B2C)).

  • Buyer

    The person or organization who purchases a product or service.

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C
  • CCD

    An ACH code abbreviation for Corporate Credit or Debit. Primarily used for business-to-business transactions.

  • Card Brands

    Organizations that perform a variety of card processing services and establish the rules that govern their card brand’s use.   Examples are Visa, MasterCard, American Express, and Discover

  • Card Present (CP)

     A type of credit or debit card transaction in which the card is physically presented and swiped through a card reader.

  • Card Reader

     Input device that translates the information stored on the magnetic stripe on the back of a credit or debit card. 

  • Card Verification Code or Card Verification Value (CVC2 and CVV2)

    The three-digit code printed (not embossed) on the card and is often used as part of the Authorization process.

  • Card-Not-Present (CNP)

     A payment card transaction where the cardholder is not physically present with the card at the time that the payment is effected. The situation is most common for mail-order transactions by mail or fax, over the telephone, or Internet.  Sometimes referred to as MOTO (Mail Order/Telephone Order).

  • Cardholder

     The person to whom a credit of debit card is issued. 

  • Cardholder Account Number

    A sequence of numbers assigned specifically to a cardholder account that also identifies the issuer and type of payment card. The cardholder account number is the embossed number imprinted on the payment card.

  • Cash Flow

    The movement of money in and out of a business or organization.  It is usually measured during a specified period of time.

  • Cash Management

    A broad management area involving the collection, handling, and usage of cash.

  • Chargeback

     The process used when a credit cardholder disputes a purchase made using their card resulting in a refund to the cardholder.

  • Chargeback Fee The amount assessed by the acquirer for processing chargebacks.
  • Chargeback Reason Code

     A 2 digit numerical code which identifies the specific reason for a Chargeback.  MasterCard and Visa each have their own chargeback codes

  • Chargeback Reversal

    When a merchant successfully prevails in the dispute process and funds are returned to the acquirer, and then to the merchant.

  • Check

    A dated and signed document that orders a bank to make the payment of a specified amount to the payee such as an a business or organization.  Most commonly this document is written upon a particular account such as a personal checking account or corporate bank account.

  • Check 21

    Also referred to as the Check Clearing for the 21st Century Act is a federal law that went into effect in 2004 making it legal for an individual or business to use any device that can capture an accurate image of a check and then deposit electronically.

  • Check Clearing

    The process of transferring money among banks to settle the accounts of checks written on one account and deposited into another. Check clearing is facilitated by central clearinghouses, including the Federal Reserve System and a number of private companies.

  • Check Fraud

    A criminal act that includes forgery and counterfeiting of checks

  • Check Fulfillment Services

    Check printing and mailing services that are sometimes bundled with invoice scanning and presentment services.

  • Check Guarantee

    A service that guarantees payment of a check up to a specified amount. Note:  Merchants are required to perform correct authorization procedures.

  • Check Kiting

    A specific type of check fraud that involves opening multiple checking accounts so that checks from one account are written to cover checks from another account.

  • Check Reader

    A device that reads the Magnetic Ink Character Recognition (MICR) numbers (routing number and account number) along on the bottom of paper checks

  • Check Verification

     A service that reduces a merchant's exposure to bad checks. The person writing the check is matched against a national database to see if they have any outstanding or bad checks.

  • Clearinghouses

    Financial institutions that collect  checks from member banks, sorts them, and creates debits and credits accordingly.

  • Closed Payment System

    Type of payment card system in which one organization issues cards to cardholders and acquires merchants.  American Express, Diners Club and Discover are the largest examples of closed payment systems.

  • Collect on Delivery (COD)

    The payment for a product or service received is done at the time of actual delivery

  • Commercial Card

    Payment cards used by businesses to pay expenses.  Balances are typically due within 30 days or less.  Basic product types include corporate cards, fleet cards and purchasing cards.

  • Commercial Prepaid

    A prepaid card given to employees for purchases. Funded by company’s bank account and controls can be put in place to restrict certain types of purchases.

  • Consumer Card

    See Credit Card

  • Corporate Card

    Usually issued to the employees of a large corporation where the corporation assumes all liability for the card's usage.  Also known as a T&E (travel and entertainment) card, this is a commercial card used by employees to manage travel expenses.

  • Credit Card

     A payment card issued to individuals as a form of payment. It allows the cardholder to purchase products and services based on the holder's promise to pay.

  • Credit Score

    A credit score is a numerical value, based on an analysis of a person's credit files, that represents the creditworthiness of that person.  A credit score is primarily based on credit report information typically sourced from credit bureaus.

  • Creditor

    A business or organization to which money is owed.

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D
  • DBA

     An acronym for Doing Business As, which is the legal name a business uses to operate.

  • Debit Card

    Sometimes referred to as a bank card or check card.  A plastic payment card that provides the cardholder electronic access to his or her checking account.  A debit card can be used to purchase products and services and, unlike credit and charge cards, purchases made using a debit card are directly withdrawn from the cardholder's checking account, instead of the cardholder making a payment at a later date.

  • Debit Network

    An electronic network that transfers pin-based debit payment data between the cardholder and merchant banks.

  • Debit Transaction

    An authorized financial transaction in which a business or organization withdraws funds from another business or organization's bank account

  • Debtor

    A business or organization that owes money

  • Demand Deposit Account (DDA) Number

    An account from which deposited money can be withdrawn at any time without any advance notice to the depository institution. Demand deposits can be "demanded" by an account holder at any time.  Many checking and savings accounts today are demand deposits and the DDA number is the account number on the check.

  • Durbin Amendment

    Legislation passed in 2010 that requires the Federal Reserve to limit fees charged to retailers for debit card processing.

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E
  • E-Check (Electronic Check)

    Commonly used to describe an electronic payment made from a checking account that performs the same function as a conventional paper check.

  • E-commerce (Electronic Commerce)

    The buying and selling of products or services over electronic systems such as the Internet and other computer networks.

  • EMV Card (Smart Cards or Chip Cards)

    EMV is an acronym for Europay, MasterCard and Visa, and indicates payment cards with microprocessor chips imbedded in the plastic.  EMV Cards add additional security features to the cards.

  • Electronic Data Interchange (EDI)

    A document standard defining a common interface between two or more computer applications for the purpose of sharing documents. It is commonly used by big companies or organizations for sending orders to warehouses or tracking their order.

  • Electronic Funds Transfer (ETF)

    A generic term for various electronic payment formats including ACH, credit/debit card and wire payments.  ACH and wire transfer are the most common forms of EFT in the U.S..

  • Electronic Invoice Presentment & Payment (EBPP)

    A system in which a company or organization sends its bills over the internet, and buyers pay these electronically.

  • Electronic Invoice Presentment & Payment (EIPP)

    A system of issuing invoices to buyers via the Internet and receiving payment on the invoices electronically.

  • Electronic Lockbox

    A process where EFT payments (wire, ACH, etc.) and accompanying remittance information are captured and delivered to the merchant. Due to the Check 21 Act, the lockbox may wholly convert some checks to electronic data, and the paper checks are shredded and never actually returned to the originating bank.

  • Encyption

    As used in the payment industry, the method of scrambling data to protect a cardholder’s personal information.

  • Enterprise Resource Planning (ERP) Enterprise Resource Planning (ERP)

    Software that integrates departments and functions across a company enabling various departments to share information and communicate with each other.

  • Expense

    Money spent or cost incurred in a business's efforts to generate revenue, representing the cost of doing business.

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F
  • FTP File Transfer Protocol - a protocol used to transfer files over a TCP/IP network (Internet, UNIX, etc.).
  • Federal Reserve

    The central banking system in the United States. Twelve banks belong to the Federal Reserve, each one serving one of twelve districts. The functions of the Federal Reserve include enforcing good banking practices, ensuring compliance with federal regulations, providing loans and money to banks, and determining interest rates.

  • Fleet Card

    Commercial card used to manage fuel and maintenance expenses for a company’s ‘fleet’ of automobiles and trucks.

  • Front End Processor

     Network provider, also known as front end network, responsible for authorizing and capturing transactions and forwarding the information to the back-end processor.

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G
  • Gateway

     Facilitates the transfer of information between a payment portal (such as a website, mobile phone or interactive voice response service) and the front end processor or acquiring bank.  Also commonly referred to as payment gateway.

  • General Ledger

    A company's main accounting records. A general ledger is a complete record of financial transactions over the life of a company.  Commonly abbreviated as GL.

  • Gift

    A reusable prepaid card the enables merchants to provide an electronic version of a paper gift certificate.

  • Good

    A tangible product

  • Graham Leach Bliley Law

    Also known as the Financial Services Modernization Act of 1999.  Protects the disclosure of nonpublic personal information.

     

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H
  • Healh Insurance Portability and Accountability Act (HIPAA)

    Among other things this Act defines policies, procedures and guidelines for maintaining the privacy and security of individually identifiable health information.

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I
  • ISO

    An acronym for Independent Sales Organization, an entity that has an agreement to sell the services of the bank/payment processor and is allowed to mark up rates and fees.

  • ISP Internet Service Provider - an organization that provides access to the Internet.
  • ISV Independent Software Vendor
  • Imprinter

    A device used to imprint embossed card information onto a sales draft for payment card transactions. The purpose of an imprinter is to show proof that a card was present at the time of sale when the electronic POS device cannot read the contents of the magnetic stripe.

     

  • Income Statement

    A summary report generated periodically (e.g., every month) that provides details on a company’s income and expenses and a summary of how a company is performing at generating profits. (Sales Income – Cost of Goods Sold – Expenses = Profits)

  • Interchange

    In the context of payment processing, interchange is the exchange of information, transaction data, and money, among banks and/or credit card associations.

  • Interchange Fees

    Fees paid by the acquirer to the issuer to compensate for card-based transaction costs. MasterCard and Visa establish interchange fee rates. 

  • Invoice

    A formal request for payment of goods or services that have been delivered.  An invoice indicates the types, quantities, and agreed price and usually includes payment terms.

  • Issuing Bank

    A financial institution that is a member of Visa or MasterCard and holds the contractual agreement with, and issues card(s) to the cardholder. The issuing bank extends credit to the cardholder, and receives the cardholder's payment at the end of each billing period.

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L
  • Letter of Credit (LOC)

    A method of payment often used in international trade, a letter of credit serves as a guarantee to the seller that it will be paid regardless of whether the buyer ultimately fails to pay. The risk that the buyer will fail to pay is transferred from the seller to the letter of credit's issuer.

  • Level I Data

    Basic credit card information that is transmitted with the authorization request to include: date, merchant name, and dollar amount. 

  • Level II Data

      Level I data plus sales tax and a variable field (typically the order number).

  • Level III Data

     Level I and Level II data plus: item code, item description, item quantity, item price and item tax.

  • Liabilities

    The financial value of what a company owes. (e.g., loans, accounts payable, accrued expenses, etc.)

  • Lockbox

     A third party collection service, often a bank, to which businesses have customers send payment. The bank collects and processes these payments directly and deposits them to the company's account thus providing the business with faster deposits and better control of money.

  • Loyalty Card

    Allows merchants to provide a branded card to their customers that can only be used in their store allowing the merchant to track the frequency of their shopping and shopping habits.

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M
  • Mail Order/ Telephone Order (MOTO)

    A credit card transaction where the card is not physically presented.  See Card Not Present/CNP.

  • Merchant Agreement

     The written contract between the merchant and acquirer detailing the respective rights and responsibilities.  

  • Merchant Category Code (MCC)

    The Merchant Category Code (MCC) is a four-digit code used by the bankcard industry to classify a merchant's primary business. The MCC describes a merchant's product, service, or nature of business. In cases where a merchant is engaged in more than one type of business, the MCC will reflect the merchant's primary line of business.

  • Merchant ID/MID

     An acronym for Merchant Identification, a unique value used to identify a merchant which assigned by the acquirer.

  • Mobile Check Capture

    Electronic capture and deposit of checks using a mobile device

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N
  • NACHA

    The National Automated Clearing House Association, NACHA manages the development, administration, and governance of the ACH network, the backbone for the electronic movement of money and data.  As a not-for-profit association, NACHA represents nearly 11,000 banks via 17 regional payments associations and direct membership.

  • Net Worth

    The amount by which assets exceed liabilities.

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O
  • Originating Depository Financial Institution (ODFI)

    Any financial institution qualified to originate ACH entries and agreeing to abide by the NACHA operating rules.

  • Originator

    Any person, corporation or other entity that initiates entries into the ACH network.

  • Originator ID

    An alphanumeric code used to uniquely identify an originator.  This field is 10 positions.

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P
  • PCI DSS The PCI Data Security Standard (PCI DSS) represents a common set of industry tools and measurements to help ensure the safe handling of sensitive information. Initially created by aligning Visa's Account Information Security (AIS)/Cardholder Information Security (CISP) programs with MasterCard's Site Data Protection (SDP) program, the standard provides an actionable framework for developing a robust account data security process - including preventing, detecting and reacting to security incidents. The updated version, version 1.1, developed by the founding members of the PCI Security Standards Council, became effective with the launch of the PCI Security Standards Council.
  • POS (Point-of-Sale) Check Conversion

    An opt-in process that allows the use of a check reader to convert a paper check into an electronic payment (ACH).

  • PPD

    An ACH code abbreviation for Prearranged Payment and Deposit. Used to credit or debit a consumer account. Popularly used for payroll direct deposits and preauthorized bill payments.

  • Payee

    The business or organization to which money is to be paid.

  • Payment

    The transfer of money from one party to another party.  The most common forms of payment are cash, check, credit/debit card, ACH, and wire transfer.

  • Payment Card Industry Data Security Standard (PCI DSS)

    A security standard that includes requirements for security management, policies, procedures, network architecture, software design and other critical protective measures. PCI DSS is intended to help companies proactively protect customer account data.

  • Payment Processor

    A company responsible for processing credit and debit transactions.  Operated by an acquirer or acting on the acquirer's behalf.  Also reference Front End Processor and Back End Processor.

  • Payor or Payer

    The person or company that makes a payment to the payee.

  • Payroll

    A prepaid card that a company gives to employees. Employees’ salaries or wages are loaded onto card. Enables employees to get paid faster and enables companies to pay employees that do not have checking accounts.

  • Personal Identification Number (PIN)

     A number used to verify the true owner of an account of a payment card.

  • Point-Of-Sale (POS) Terminal

      See Terminal

  • Preauthorized Payment

    An authorized debit of a bank account often used to pay regular bills or make automatic payments.  Also referred to as ACH Debit.

  • Prepaid Cards

    A reloadable card that a cardholder funds with money from their bank account. No credit line is associated with the card.

  • Procure-To-Pay (P2P)

    Systems that enable the integration of a buyer’s purchasing department with its AP department.

  • Purchase Order (PO)

    A commercial document indicating types, quantities, and agreed prices for Products or Services the Seller will provide to the Buyer.

  • Purchasing Card (P-card)

    A form of company charge card used by administrative staff or purchasing department that allows goods and services to be procured without using a purchase order (PO).

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R
  • Re-Authorization

    To request an additional amount to be authorized on an existing transaction. Used in the lodging industry when the original authorization is not sufficient to cover the charges.

  • Receiver

     Any person, corporation or other entity that has authorized an originator to initiate a credit or debit entry to a transaction account held at an RDFI

  • Receiving Depository Financial Institution (RDFI)

    Any financial institution qualified to receive ACH entries and agrees to abide by the NACHA operating rules.

  • Reconciliation

    The process of accounting for transactions processed and money deposited in the bank account of a business or organization.

  • Recurring Transaction

     A transaction charged to a cardholder’s account, with the cardholder’s permission, on a repeat basis for products or services (e.g., health club memberships)..

  • Remittance Information

    The information needed to accurately post (record) payments received to an accounting system.

  • Remote Deposit Capture

    Ability to scan and deposit a check into a bank account from a remote location, such as an office or home, without having to physically deliver the check to the bank.

  • Remotely Created Check (RCC)

    A merchant initiated electronic draft drawn on a bank account that is created by a person other than the account holder and does not bear the physical signature of the person on whose account the check is drawn. An RCC may contain a statement of customer authorization, the account holder's printed or typed name on the check, or the statement "No signature required" or “signature on file." Also called a "telecheck", "demand draft", or "preauthorized draft.”

  • Routing Number/ABA Routing Number

    A unique nine-digit number assigned to each bank.  This number is used to identify the bank and specify check debits and ACH debits and credits. The ABA routing number is usually found at the bottom of a personal or company check.  (Also referred to as Transit Routing Number)

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S
  • Sales and Use Tax

    Tax charged by each state for property and some services.

  • Settlement

     The process of sending a merchant’s batch to the network for processing and payment. 

  • Statement Statement

    A periodic report that lists all transactions on a single account. A statement can also be an itemized list of charges showing due dates and amounts owed.

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T
  • TEL

    An ACH code abbreviation for Telephone Authorized.  Verbal authorization by telephone to issue an ACH entry such as checks by phone.

  • Taxpayer Identification Number (TINs)

    An identification number issued by the Internal Revenue Service (IRS) to individuals and businesses or organizations.  Employer Identification Numbers (EIN) are used for similar purposes.

  • Telemarketing Selling goods or services over the phone, for payment by credit card.
  • Terminal

    A piece of hardware that is used to enter credit card information either by swiping or key entering the card data to allow transmittal of that information to the processor for approval.  Common types of terminals include POS/Point of Sale terminal, and mobile terminal.

  • Terminal Identification (TID)

    Number identifying a merchant’s terminal.

  • Tokenization

    As used in the payment industry, a “token” is used to replace a payment card’s account number with a surrogate value to help prevent theft or fraud.

  • Transaction Date

    The actual date on which a transaction occurs.

  • Transaction Fee

    The amount a merchant pays per transaction for processing.

     

  • Transit Routing Number

    See Routing Number

  • Travel and Entertainment Expenses (T&E)

    Expenses employees incur for company travel and entertainment that may be tax deductible.

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V
  • Value Added Reseller (VAR)

    A company that adds features or services to an existing product, then resells it (usually to end-users) as an integrated product or complete "turn-key" solution.

  • Virtual Check

    The product name of a service offered by Sage Payment Solutions that enables payments from a consumer or business bank account using ACH.

  • Virtual Terminal

     A computer based terminal that allows merchants to enter in transactions for their customers.  

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W
  • WEB

    An ACH code abbreviation for Web (or Internet) Initiated. Electronic authorization through the Internet to create an ACH entry.

  • Wire Transfer

    A transaction made from one bank account to another bank account or through a transfer of cash at a cash office, such as Western Union.  A wire transfer is real-time settlement therefore faster than ACH but much more expensive, typically $10 -$50 per transaction.

  • Working Capital

    The cash a company has available at any given time.

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