Merchant Processing Terminology

Acquirer
The financial institution that establishes and maintains the merchant's account.

Address verification service (AVS)
A service that verifies the numbers in the cardholder's address. One method of reducing fraud risk.

Authorization
The process of verifying an account and the availability of credit.

Average ticket:
The average amount a merchant processes in a single transaction. A transaction much higher then the average ticket amount is a potential risk flag.

Batching
Sending a group of accumulated transactions for clearing and settlement.

Card associations
Payment networks that act as a consolidation point between acquirers and issuers for authorizing and funding transactions

Chargeback
A transaction that has been disputed by the cardholder or issuer, is sent back through interchange to the acquirer, and must be resolved by either the acquirer or the merchant.

Check conversion
A check is converted into an electronic transaction, and the merchant is paid immediately- similar to debit.

Check guarantee
Guarantees payment for a check, even in the event of insufficient funds.

Check verification
Assures the merchant that the checking account exists and does not have a number of reported bad checks written on it.

Clearing
Posts the transaction and submits it for settlement.

Contactless
Refers to technology used in card processing- does not require a swipe of the card, card information is read using near-field RFID.

Discount rate
The amount charged to a merchant by the acquirer for processing the merchant's daily credit card transactions.

DUKPT
An acronym for 'Derived Unique Key Per Transaction'. A PIN injection scheme used for secure key-management. This encryption technique uses a unique key for each separate transaction.

EBT
Electronic Benefits Transfer - A government-funded cash assistance program that distributes payments such as food stamps and assistance benefits using a stored value card to initialize transactions.

Funding
The payment given to the merchant after the clearing process.

Forced Transaction
Using an authorization code to enter a transaction due to offline or down equipment status.

Imprinter
AKA the knucklebuster. Commonly used to imprint card information onto a sales draft. Used as a backup when a terminal is unable to read data on the card's mag stripe.

Interchange
The process of authorization and settlement of card transactions through VISA or MasterCard. Interchange includes the transmittal of cardholder information, transaction data, and fees.

Interchange fee
The amount card associations charge acquirers for each card transaction they process. The card associations pay the interchange fee to the issuer as compensation for expenses incurred in providing lines of credit to cardholders. The acquirer's cost is passed on to merchants as a part of the discount rate.

Issuer
The financial institution that issues a credit card to a cardholder. The issuer must be a licensed member of MasterCard or VISA. Also called the issuing bank.

Merchant
A business that accepts credit cards as a method of payment.

Merchant account
The contracted account between a merchant and an acquiring bank for providing card processing services.

Message authentication code (MAC)
Similar to a checksum, this identifier can show that a message has not been changed since being transmitted (non-repudiation)

Settlement
Settlement consists of funding the merchant for the transaction and paying any fees due for processing the transaction.