CPP Study Deck Flashcards
NABU; APF and FANF
MasterCard implemented a new fee; the Network Access and Brand Usage fee (NABU). And following right on the heels of the MasterCard announcement; on July 1; 2009 Visa implemented their U.S. Acquirer Processing Fee (APF).
Card brand dues and assessments
In addition to Interchange; each card brand includes additional fees based on the transaction amount and per transaction. These fees are called dues and assessments and typically range from 0.105% - 0.45% on the transaction amount [ $0.0025 - $0.04.] Like interchange; assessments are exactly the same for all credit card processors and no processor can give you a lower rate or a better deal on assessments.
AVS and switch fees
The fee is charged when your business utilizes the Address Verification Service to check that the address provided by a cardholder matches the address on file with the credit card company.
Authorization fee
The voice authorization fee applies when you use a telephone dial-up service for transaction authorization. A fee is charged for each call that is made. Voice authorization is useful in the event your terminal or software malfunctions or your internet connection isn’t working.
Batch fee
A fee that is charged when you settle your daily transactions (also known as the batch) with your credit card processor. If you have no credit card transactions to settle on a particular day; you are not charged this fee.
Clearing and settlement fees
clearing denotes all activities from the time a commitment is made for a transaction until it is settled.
Chargeback and representment fees
In short; a chargeback is a reversal of funds transferred.
Statement or reporting fees
Fees that are charged for receiving statements or reports.
Rewards Cards
A cashback reward program is an incentive program operated by credit card companies where a percentage of the amount spent is paid back to the card holder.
Card Not Present transactions
A card not present transaction (CNP; MO/TO; Mail Order / Telephone Order; MOTOEC) is a payment card transaction made where the cardholder does not or cannot physically present the card for a merchant’s visual examination at the time that an order is given and payment effected.
Quick Service Restaurants (QSR)
a specific type of restaurant that serves fast food cuisine and has minimal table service.
Emerging Markets
countries in the process of rapid growth & industrialization
Level 1 Data
Level I purchasing card data includes the same information captured during a traditional credit card purchase transaction. This includes: total purchase amount; date; merchant category code and supplier/retailer name.
Level 2 Data
Level II purchasing card data includes the same information captured at Level I; plus the following: sales tax amount; customer’s accounting code; merchant’s tax ID number; applicable minority - and women-owned business status and sales outlet ZIP code.
Level 3 Data
Level III purchasing card data includes the same information captured at Levels I and II; plus the following: quantities; product codes; product descriptions; ship to ZIP; freight amount; duty amount; order/ticket number; unit of measure; extended item amount; discount indicator; discount amount; net/gross indicator; tax rate applied; tax type applied; debit or credit indicator and alternate tax identifier.
Discount Rate (Credit/Debit)
The discount rate is the fee paid by merchants to credit card processors as a fee associated with accepting general-use credit cards (such as Visa; MasterCard; American Express and Discover). Typically this fee runs between 1 percent and 3 percent; depending on the nature of the transaction.
Daily or monthly discount
With monthly discount; your processor deducts fees from your account in one lump sum once a month. With daily discount; your processor charges fees daily throughout the month as well as at the end of the month.
Surcharge
A charge added to the usual cost
Billback
Billback or bill back is an accounting service and/or suite of software that is used for cost recovery.
ERR Rates
Enhanced Rate Recovery Pricing. As a merchant business with an ERR rate of 1.69% for your merchant account; you will be charged 1.69% for any transaction that qualifies on The Interchange Table at 1.69% or below.
Interchange Plus
Interchange Plus pricing gets its name based on the fact that the rate charged for the transaction comes straight from the Interchange table “plus” a surcharge amount.
Tiered
Tiered pricing gets its name from the fact that there are multiple tiers set up to determine the price associated with the transaction.
Sales Volume
The quantity or number of goods sold or services sold in the normal operations of a company in a specified period.
Transaction Counts
the total number of transactions that are processed within a merchant account.
Average Ticket
Average ticket is a metric that provides details on the average amount of sales by a given customer. It is used by a range of businesses when analyzing business performance and sales activity.
Authorization Fees
The amount of money that is charged directly to an individual merchant account each time communication is made between credit card processing software (when the sale transaction is processed online; etc.) or point of sale (POS) terminal (when the sale transaction is processed physically in person) and the authorizing network.
Effective rate
The effective rate of a credit card processing statement is the total processing fees divided by total sales volume.
Batches
Batch credit card processing is the practice of a merchant processing all of its authorized credit card transactions for the day after the close of business or at a time determined by the credit card processor.
Chargeback Activity
A chargeback is a transaction reversal meant to serve as a form of consumer protection from fraudulent activity committed by both merchants and individuals.
PCI Compliance
The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure that ALL companies that accept; process; store or transmit credit card information maintain a secure environment.
Internet Gateways
a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses; online retailers; bricks and clicks; or traditional brick and mortar. The payment gateway may be provided by a bank to its customers; but can be provided by a specialized financial service provider as a separate service; such as a payment service provider.
Virtual Terminals
the web version of a physical credit card terminal or Point-of-Sale (POS) machine
Dial-up POS System
Uses a dial-up connection to process payments
Gift and/or Loyalty cards
Loyalty programs are structured marketing strategies designed by merchants to encourage customers to continue to shop at or use the services of businesses associated with each program.
Check conversion
Check conversion is a reformatting service offered by banking merchants. Check conversion allows banks to convert paper checks into electronic ones and then send them to the appropriate receiving bank. The electronic check is forwarded on via the automated clearing house (ACH).
Cash advances
A cash advance allows you to use your credit card to get a short-term cash loan at a bank or ATM. Unlike a cash withdrawal from a bank account; a cash advance has to be paid back ‚Äî just like anything else you put on your credit card. Think of it as using your credit card to “buy” cash rather than goods or services.
ACH
Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches.
The following information must be provided on the merchant application:
- business name (DBA)
- physical location address
- business telephone number
- Tax Identification Number (TIN)
- Employer Identification Number (EIN)
- Contact information
- Cardholder Storage
- Copy of the merchant’s voided check or bank letter with account name, account number and routing number
- A bank contact name and phone
Retail
the selling of goods directly to the customer; face-to-face transaction
Restaurant
an eating establishment where food and drink are being sold to customers
Mail Order/Telephone Order (MOTO) or Internet
the selling of goods online; non-face-to-face transaction (ANY Card Not Present environment)
Supermarket
large self-service retail store selling food and household goods
Lodging
sleeping accommodations; furnished rooms to rent for the night
Landline terminal
the card is swiped through a magnetic strip on the terminal; which connects to the processor’s computer.
Dial UP Terminal
A terminal that can read the track data on a magnetic stripe and communicate transaction information to the frontend platform and receives authorization instructions via the merchant’s phone line usually by dialing a toll free number.
IP Terminal
does the same thing as a dial terminal except that the terminal communicates transaction information to the frontend platform and receives authorization instructions by utilizing the merchant’s connection to the internet.
EMV Terminal
has the ability to take cardholder data from a chip embedded within the card and communicate transaction information to the frontend platform and receives authorization instructions by utilizing the merchant’s phone line or Inter- net connection.
Wireless terminal
provides the ideal solution for businesses seeking the most effective way to complete credit card transactions off-site. Most wireless credit card terminals support credit and debit transactions and are equipped with an internal PIN pad. Wireless terminals can be used on the countertop or in a mobile environment.
Sale
for a sale; swipe the customer card or manually enter the credit card number; input sale amount; then press enter. The terminal will then transmit information through the network for approval; and a merchant receipt will be printed.
Mobile solution
allows a merchant to accept credit cards using a cell phone with or without a card swipe mechanism.
Internet solution
a processing method using a secure web server that provides an interface for merchant websites and shopping carts that require real-time transaction processing. Depending on the merchant’s software they can connect to a frontend via either an SSL server or payment gateway to get a real-time credit card authorization.
PIN pad
an electronic device used in a debit or smart card-based transaction to input and encrypt the cardholder’s PIN (personal identification number). The PIN pad is required so that the customer’s card can be accessed and the PIN can be securely entered and encrypted before it is sent to the transaction manager of the switch or the bank.
Check reader
a payment automation device that reads the MICR (Magnetic Ink Character Recognition) information on checks.
Contactless reader
any pocket-sized card with embedded integrated circuits that can process and store data and communicate with a terminal via radio waves.
Void Last Sale
to void the last sale; press the screen button next to void; choose last; verify transaction information on the display screen; then press enter. The transaction will be voided and a receipt showing the void will be printed.
Credit / refund
to credit a refund; press the screen button next to refund; swipe the customer card; input return amount; press enter; and print merchant receipt.
Header Information
merchant’s business information
Deposit Information
daily account of the month’s transaction information
Deposit Item Summary
a summary of the month’s transactions
Settlement/Discount
the month’s transactions sorted by card type and fees associated
Surcharges
downgraded transactions
EBT
electronic acceptance of government benefits (e.g.; food stamps and/or cash). These cards are generally accepted at grocery stores.
Debit
an ATM bankcard; also known as a check card; that allows a merchant to deduct money directly from a consumer’s bank account. The use of a true debit card requires the cardholder to enter a PIN to complete the transaction.
Gift card/loyalty programs
a magnetic-stripe or smart (chip) card that replaces traditional paper gift certificates. The program is based on gift card usage that generates points in exchange for products and services.
Split Funding
A merchant may receive a capital advance from a third party and direct the processor to repay the third party with a % of their daily credit/debit card processing deposited into the third party’s bank account and the remainder deposited into the merchants bank account.
Checks
a negotiable paper document drawn against deposited funds exchanged with a merchant for payment of products or services.
Check Guarantee
this is the process of issuing approval codes for check acceptance for merchants. With Check Guarantee; if a check is returned to a merchant for any reason and they followed the proper acceptance procedures; they are automatically credited for the ‘bad’ check and collection efforts are pursued directly with the check writer. While this process is better than regular check verification; the cost is higher.
Check Verification
this is the process of issuing verification codes for check acceptance for merchants. With Check Verifica- tion; if a check is returned to a merchant; they are typically not reimbursed by the processor. Collection efforts will be made on behalf of the merchant at an additional cost; however there is no ‘guarantee’ of payment on uncollected items. Therefore; this service is less expensive than Check Guarantee.
Check 21
this is the process of capturing a check at the point of entry (can be point of sale scanner or a picture on a mobile phone). The check image is transmitted to the issuer and paid through the settlement process.
ACH Debit
this is the process whereby the consumer gives a pre-approval to have funds debited from either their checking or savings account. This is not a real-time transaction and can be subject to non-sufficient funds rejection.
cardholder
an end user or consumercard issuer is any banking institution that provides credit or debit cards to a consumer. Examples of card issuers include Chase; Capital One; Bank of America and credit unions.
acquiring bank (or acquirer)
the bank or financial institution that processes credit and/or debit card payments for a mer- chant. Examples of acquirers include HSBC and Wells Fargo.
payments processor
a company (often a third party) appointed by a merchant to handle payment card transactions for acquiring banks. There are two types of processors: front-end and back-end. Front-end processors have connections to various card issuers and supply authorization and capture services to the acquiring banks’ merchants. Back-end processors accept settle- ments from front-end processors and; via The Federal Reserve Bank; move the money from the issuing bank to the merchant bank. Examples of payments processors include Global Payments; First Data; Chase Paymentech; TSYS; and Elavon.
merchant
any business that accepts credit or debit cards for payment in exchange for goods or services. Examples include Amazon; Target and Best Buy.
card brand
a network of issuing banks and acquiring banks that processes brand-specific payments. The best known card brands are Visa; MasterCard; American Express; Discover; JCB and China UnionPay.
Independent Sales Organization (ISO)
an organization or individual registered with a card brand (Visa or MasterCard); and has a payment card relationship with an acquirer or issuer to perform functions on behalf of the acquirer or issuer (i.e.; the ISO soliciting merchant accounts; arranging for terminal purchases or leases; providing customer service; and soliciting cardholders). Examples of ISOs include Total Merchant Services and North American Bankcard.
service provider; more commonly known as a merchant service provider (MSP)
a company or organization that provides transaction processing solutions to merchants; any sales office that offers payment services to merchants.
debit car
provides the cardholder electronic access to his or her bank account(s) at a financial institution.
credit card
allows the cardholder to buy goods and services based on the cardholder’s promise to pay for these goods and ser- vices at a later date
Point of Sale (POS) terminal
a device that processes transactions with a debit or a credit card; via a telephone line or Internet connection; typically powered by a power cord.
wireless terminal
a device that processes transactions with a debit or a credit card via a cellular (wireless) data network; typi- cally powered by battery pack.
mobile payment solution
consists of a device and software application (typically a smart phone application and card reader) that process transactions with a debit or a credit card via a cellular (wireless) data network. Examples include Payment Jack and Square.
virtual terminal
a payment gateway service provider allowing merchants to accept credit card and electronic check pay- ments through their website over an IP (Internet Protocol) connection.
PIN Pads / PIN Entry Devices (PEDs)
electronic devices used in debit or smart card-based transactions to input and encrypt the cardholder’s Personal Identification Number (PIN)
Authorization
The cardholder presents the card as payment to the merchant; merchant submits the transaction to the acquirer (acquiring bank) through the payment processor. The acquirer verifies the credit card number; the transaction type and the amount with the issuer (card-issuing bank) and reserves that amount of the cardholder’s credit limit for the merchant by use of an authoriza- tion code. An authorization will generate an approval code; which follows the life of the transaction through the processing systems.
Batching
Authorized transactions are stored in batches; either in the terminal or on the processor’s host; which are sent to the acquiring clearing processor on a predetermined schedule; also know as “auto batch”. If a transaction is not submitted in the batch; the authorization will stay valid for a period of time; determined by the issuer; after which the held amount will be returned to the cardholder’s available credit (see authorization hold). Some transactions may be submitted in the batch without prior authorizations; these are typically seen where the authorization was unsuccessful but the merchant still attempts to force the transaction through. (Such may be the case when the cardholder is not present but owes the merchant additional money; such as a hotel stay extension or car rental.)
Clearing and Settlement
The acquirer sends the batch transactions through the card brand; which debits/credits (if charge- backs and returns exceed sales for the day) the issuer for payment and credits/debits the acquirer. Essentially; the issuer pays the acquirer for the transaction.
Funding
Once the acquirer has been paid; the acquirer pays the merchant. The merchant receives the amount totaling the funds in the batch in total or less the discount fees charged.
Chargeback
A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. Chargebacks are initiated by the cardholder or the issuing bank. In the event of a chargeback; the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant; who must either accept the chargeback or contest it.
Maximum ticket
risk systems must monitor the average ticket and a maximum ticket. Transactions above the maximum ticket may be an indicator of misinformation during the application process; a change in the merchant product; cardholder fraud; a bust-out scheme; or perhaps collusion and should be reviewed and possible investigated.
Average ticket of the merchant
if the application shows a $30 average ticket and you see an average ticket of $400; you should investigate to ensure they are selling what the application stated. Alternately; it could be a fraudulent cardholder transaction.
Monthly volume
applications typically request the average monthly volume and a peak season volume. Sales beyond these volumes may indicate risk problems or may warrant adjustments in account set up to off set merchant growth. Larger than expected volumes in the first month may be an indicator that the merchant has past sales they are trying to process; a bust-out scheme; or that the application was erroneous or false. The volume should also be balanced against similar merchants. Larger volumes than similar merchants may be an indicator of risk and should be investigated.
Large dollar or excessive credits
monitoring credits is a good way to gauge the satisfaction of your merchant’s customer with the products and/or services sold. Excessive credits may indicate money problems at your merchant. Large dollar credits may be an indicator of a merchant utilizing the card schemes to layer money amongst their various accounts. It is required that all credits have an offsetting sale. Credits without an offsetting sale may be an indicator of employee theft; merchant system hack; or a fraudulent merchant. Frequent credits for large amounts may be an indicator of money laundering.
Chargeback monitoring
if your merchant is receiving a lot of chargebacks; you should quickly evaluate the reason codes behind the chargebacks and question the merchant’s practices. Increased chargebacks may mean your merchant’s business is in financial distress; is experiencing supplier issues; or has gone rogue and is committing fraud; potentially against the consumer. This is especially the case if the chargebacks are for unauthorized charges; services not received; or duplicate transactions.
Percentage keyed vs. swiped
monitoring the percentage of swiped transactions vs. keyed transactions is a simple way to tell whether your merchant has shifted from retail to MOTO (mail or telephone order) or internet. If you see more keyed transactions than indicated and subsequently approved on the application; you should talk with your merchant to understand why transactions are being keyed. Increased key-entered transactions may also be an indicator of factoring or money laundering where the cards are not present.
Repeat or excessive authorizations
evaluate authorization logs to help determine whether your merchant has software problems that cause repeated authorizations or whether your merchant is being targeted by a fraudster seeking to find good card numbers. Monitoring excessive authorizations is also a way to help your merchant avoid brand fees associated with non-settled transactions.
Merchant information changes
another area to monitor is when merchants change checking accounts; contact information; or websites. It is important to understand why the changes are being made; how often; who is authorizing the changes; and what impact the changes might have on the business.
Financial strength of the business
Periodically checking the financial health of your merchant and watching trends in processing volume can help protect against unexpected financial loss. If the merchant is struggling to cover their costs of goods it is possible owed fees may be returned as NSF (non-sufficient funds).
Future delivery
The risk with transactions dependent on the future delivery of goods and services is that the chargeback period may be quite lengthy. Examples include household furniture and/or appliances; membership dues; home renovation/ remodeling; or service contracts. If the merchant goes out of business prior to delivery or completion of services and is not capable of covering the returns/chargebacks; the acquirer will absorb loss.
PIN debit transactions
The regulations for PIN debit and the PIN debit network rules allow for cardholder disputes in certain instances. You should be aware of these regulations and understand the potential impact on your business.
Data security
With the increase in merchants using point of sale systems (not just a terminal) comes an increase in the likeli- hood that you will experience a data breach at a retail merchant. Diligence should be used in ensuring software and hardware in use is PCI compliant and that your merchant follows proper procedures and guidelines for protecting cardholder data.
EMV Chip Card
If a consumer presents a chip card and the merchant is not able to accept the card AND the consumer claims fraud; the liability is now held by the merchant. This is a new risk not previously faced by card present merchants. The details of this shift are below.
Address Verification Service (AVS)
The Address Verification System (AVS) is a system used to verify the address of a person claiming to own a credit card.
A2A (Account-to-Account)
The automatic transfer of funds from one account to another. An example is the Fedwire or wire transfer transaction.
ABA Transit Routing Number
The unique number devised by the American Bankers Association (ABA) in 1910 that identifies the bank issuer of depository accounts. It is a 10-digit number (nine digits and a verification digit) issued by the Federal Reserve Bank to identify each bank by a bank identification number. This number (also called the ABA number and the routing transit number) has changed over the years to accommodate such things as the Federal Reserve System; the advent of MICR; and the implementation of the Expedited Funds Availability Act (EFAA). It is used both in check processing and in the ACH (Automated Clearing House) routing of electronic checking account debits. The number is usually the first sequence of numbers preceding an account number at the bottom of a check.
Access Card
A plastic card used in an automated teller machine (ATM) to complete deposits; cash withdrawals; account transfers; and other related account functions.
Access Control System Format
In the smart card industry; a term referring to the bit pattern that the reader transmits to the control panel. The format specifies how many bits make up the data stream and what these bits represent. For example; the first few bits might transmit the facility code; the next few the unique ID number; the next few parity; and so on. (Source: Smart Card Alliance).
Access Device
A card; code; or other means of access to a consumer’s account that may be used to initiate an electronic funds transfer. This term does not include the terminal; telephone; or personal computer.
Access Provider
A company that provides its customers access to the Internet. The user normally connects to the access providerπs server by a modem using a dial-up connection or a broadband connection.
Access Point
A telecommunication term referring to a device or point where connections may be made for testing or using particular communications circuits.
Access Time
The amount of time needed to obtain information from; or place information into; computer storage.
Account-Based Stored Value Card
A consumer prepaid payment card; with monetary value stored in an account that is accessed and its value updated when the consumer uses the payment card. (Source: Smart Card Alliance)
Account Data Compromises (ADC)
The term used by MasterCard to describe security violations to card and account data.
Account Funding Transaction
A term used by Visa to indicate an electronic commerce purchase transaction for the purpose of adding funds to a Visa prepaid account that is posted to a Visa card and includes the transmission of the Account Funding Transaction Indicator.
Account History
The payment history of an account over a specified period; including the number of times the account was past due or over the credit limit.
Accountholder Authentication Value (AAV)
One type of security used in the smart card industry to describe a value on the chip that is used to authenticate the accountholder. (Source: Smart Card Alliance)
Account Maintenance
For both the card issuer and the card acquirer; the operation involving nondollar changes to the database; such as name; address; and checking account changes; product profiles; billing information; and rate changes.
Account Mask Information
Editing criteria used to verify the accuracy of a seller’s account number in certain electronic payment transactions.
Account Number
Issuing: An issuer-assigned number that identifies a cardholder’s account; the issuer; and the type of financial transaction card (e.g.; commercial card or debit card). Acquiring: An acquirer-assigned number that identifies a particular merchant or group of merchants. Note: The first six digits of each number identify the issuing and acquiring institutions. See BIN.
Account-Number-Verifying Terminal
A point-of-transaction terminal that may be required by Visa at specified high-locations. This terminal reads the account number encoded on the magnetic stripe or embedded in the chip (smart card); compares the last four digits of the encoded account number to the keyentered last four digits of the embossed account number; and transmits the full; unaltered contents of the magnetic stripe or chip in the authorization message.
Accounts Payable (A/P)
Debts a business owes its creditors.
Accounts Receivable (A/R)
Debts owed to a business.
Account Receivable Entry (ARC)
A single-entry debit initiated by an automated clearinghouse (ACH) originator to a consumer account of an ACH receiver pursuant to a source document provided by the receiver via postal mail; or at a drop box location or via electronic means. When a paper check payment is converted to an ACH electronic payment and with ARC; the check is destroyed after conversion; in POP; the check is returned to the check writer at the time of payment. These transactions flow through the ACH Network. (Source www.NACHA.org)
ACH Fraud
Utilizing the automated clearinghouse network to access funds illegally. Some ACH fraud categories include: unauthorized transactions; returns/60-day right of recredit; consumer fraud against merchants; fraudulent use of stolen bank accounts; transaction-level fraud; and merchant-level fraud.
ACH Network
The Automated Clearing House (ACH) Network facilitates commerce; electronically; by serving as an efficient; reliable and secure payments system. NACHA; led by member depository financial institutions and payments associations; fulfills this purpose by managing the development; administration; and governance of the ACH Network; and by providing superior services and value to its members as the industry association responsible for ACH payments. The ACH Network connects the originating depository financial institutions with the receiving depository financial institutions.
ACH Operator
The 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 Regional Associations
The 36 regional governing bodies of the Automated Clearing House Network rules and regulations.
Acquirer
The financial institutions that directly or indirectly enter into contractual relationships with merchants for the acceptance of plastic cards as a form of payment and for maintaining and servicing such relationships.
Acquirer Monitoring Program
or
Acquirer Fraud Activity Level
A program that monitors an acquirer’s fraud activity level and provides reports to the acquirer when its level exceeds established thresholds. Advices and/or Alerts are sent at predefined volumes of fraudulent activity; when the fraud amount exceeds a set dollar amount per month; or when the acquirer’s fraud activity to sales ratio exceeds a calculated average.
Acquirer’s Processing Date
The date upon which the transactions are submitted into interchange for clearing and settlement.
Acquirer’s Reference Number (ARN)
A 23-digit or 24-digit identification number specified by the Visa and MasterCard rules and submitted with the clearing records by the backend processor. It includes the bank identification number (BIN) and the acquirer’s processing date.
Acquiring Bank
The bank that contracts with a merchant; as required by card association rules enabling the merchant to accept the association-branded bank cards. These cards may be consumer and/or corporate and credit and/or debit or prepaid. The merchant has an account with this bank and each day deposits the value of the dayπs credit card sales. Acquirers buy (acquire) the merchantπs sales slips and credit the ticketsπ value to the merchantπs account. See Merchant Bank.
Acquiring Member
The member of MasterCard or Visa that holds the liability for merchant relationships and in return receives all bank card transactions from the merchant. This term can also be used to describe the disburser of funds in a cash disbursement.
Acquiring Processor
A third party contracted by an acquirer to provide credit card acquiring services; such as clearing; billing; reporting; settlement; and operational services. Some acquirers outsource this processing activity to gain cost-effectiveness.
Acquisition
One organization’s purchase of another or the merger of two or more organizations. Acquisition has different consequences under corporate and tax law depending on whether it involves the assets or the capital stock of the target company.
Activation
A card fraud prevention mechanism used by issuers. To activate a bank card received by mail; the cardholder must call a toll-free telephone number. Operators or automatic prompts verify certain cardholder information; after which the card is activated and may be used by the cardholder.
Activity
The transactions that appear on a cardholder’s bill or a merchant’s monthly statement.
Activity File
Used by Visa’s VisaNet Integrated Payments system (VIP) or MasterCard’s BankNet system to track an issuer’s stand-in-processing approval responses within a four day period.
Activity File Parameters
Issuer-stablished maximum limits on the number and value of transactions that the Association may authorize on the issuer’s behalf.
Activity Limits
The maximum dollar amount; maximum transaction count; or both that can be authorized against a card.
Addenda Record
An electronic record attached to an ACH payment entry; used for the purpose of transmitting payment-related information.
Addendum
A supplemental part or section added to a book or contract. Also called an appendix or schedule.
Additional Commercial Card Data
Data required as part of a bank card transaction in addition to the normal data such as cardholder’s name and billing address. Additional data‚Äîalso called enhanced data or level 2 data‚Äîcan include information relating to sales tax; accounting code; and fuel consumption for fleet cards as required by the card companies on business; corporate; purchasing; and fleet cards.
Address Verification Service (AVS)
Visa and MasterCard service through which a merchant can verify a cardholder’s billing address before completing a transaction. This service is typically used in “card-not-present” transactions such as mail order/telephone order (MOTO) and Internet transactions. AVS helps verify the legitimacy of the cardholder but does not guarantee that the transaction is valid. Responses to the AVS request are:
Adjudication
In the health care field; the administrative procedure used to process a claim for service according to the covered benefits. The POS industry has implemented some programs to work directly with insurance companies and HMOs to process claims electronically and manage the co-payment process.
Adjustment
A transaction used to correct an incorrect or out-of-balance situation. An adjustment can be made either at the time a terminal is balancing or during the reconciliation of the settlement data after a transaction has been cleared.
Advanced Encryption Standard (AES)
A federal information processing standard (FIPS) outlined in FISPA Publication 197 that specifies a cryptographic algorithm for use by U.S. government agencies to protect sensitive; unclassified information. AES uses keys that are 128; 196; and 256 bits to encrypt and decrypt information in blocks of 128 bits. It can encrypt data much faster than 3DES (Triple DES); which it replaces.
Advance-Fee Loan
A loan or line of credit calculated so that all of the fees and finance charges are deducted before the consumer receives the principal.
Advice
A daily; weekly; or monthly report that alerts an acquirer that a merchant has experienced above-average levels of suspect or fraud activity.
Affiliate
A member or licensee of Visa International or Visa U.S.A. or an organization affiliated with a MasterCard member that participates under the member’s rule or card plan on either the cardholder or merchant side.
Affinity Card
A Visa; MasterCard; Discover or American Express card bearing the trade name or mark of an affinity partner. These cards are issued through marketing alliances; an organization; or a collective group (such as a professional association or special interest group). The affinity partner’s name and logo are shown on the card; and the partner then solicits its membership or group for special rewards and promotions. Popular with sporting teams and university alumni groups; affinity cards work like regular credit/debit/prepaid cards and can be used anywhere that the brand is accepted. The card issuer often pays the affinity organization a royalty on charge transactions.
Affinity Partner
An entity that is not eligible for membership in either Visa or MasterCard and has a relationship with an issuer for the issuance of affinity cards.
Agent
Under the law of agency; a person authorized by another (known as the “principal”) to act for the principal. Agents can include processors; independent sales organizations; third-party servicers; independent contractors; and financial institutions engaged by a bank card member to provide services or act on its behalf in connection with payment services. For example; an independent sales organization may have a contractual relationship with a bank card member to sell and service retail merchants; thus becoming an agent of the member.
Agent Agreement
A contract with an agent under which the agent and the principal can be obligated. See Agent.
Agent Bank
Issuing: Agent banks contract with larger issuing (or sponsoring) banks to issue cards that are branded with the agent bank’s name. Cardholders are solicited through the agent. Shared revenue or fixed compensation may be negotiated; but the liability rests with the sponsoring bank; not the agent. Acquiring: Similar relationships exist in which the agent sells and services the merchants on behalf of the principal bank.
Agent member
A member of Visa or MasterCard that by agreement; participates in another member’s card program; usually by turning over its cardholder and merchant applications to the member administering the card program and by acting as a depository for merchants.
Agent Reference File
A file maintained by Visa U.S.A. containing information about independent sales organizations; third-party processors; third-party servicers; and independent contractors.
Age Verification
A security authentication; which can be POS terminal-based; that is used by certain age-sensitive market segments such as liquor and tobacco outlets; bars; and casinos. The merchant can verify the consumer’s age and deny transactions to an underage consumer.
Aggregators
A service bureau that provides bill presentment and/or payment consolidation services. Issuing: Aggregators enable a bank to enroll and aggregate information from multiple bank and brokerage accounts so that it can be presented in one place to the consumer. Merchants: Merchants such as PayPal and Amazon—which act as electronic Internet malls—can process under one merchant number but with multiple sub-merchant numbers for their individual accounts.
Aging
The process by which account receivables are classified by the amount of time that has passed since the date of the invoice. It is used for the purpose of determining delinquency; ranging from current to charge-off status.
Aid for Dependent Children (AFDC)
A federally funded and usually state- or county-administered public assistance program that provides supplemental financial aid to qualifying households that include one or more minor children. An AFDC family may receive benefits and services from other assistance programs; including food stamps; Medicaid; and subsidized child care. Families receive food stamps via an EBT (electronic benefits transfer) card; which works like a debit card. The EBT system reduces fraud; theft; and abuse.
Alert
- Weekly notification to an acquirer when the acquirer’s suspect transaction or fraud activity level exceeds a specified risk identification service parameter. 2. A notification to an acquirer when the acquirer’s fraud activity-to-sales ratio exceeds a specified Acquirer Monitoring Program alert threshold.
Alert Merchants
Those merchants that have more than 8 percent of their sales dollars labeled as fraud transactions in two consecutive months. Acquirers must terminate or assume chargeback liability on all fraud for one year.
Algorithm
A step-by-step procedure for solving a problem or accomplishing an end; especially by a computer.
Alphameric or Alphanumeric
A set of letters and numbers. When used in reference to computer input and output; the set usually is expanded to include the uppercase and lowercase alphabetic characters (A-Z; a-z); the numeric characters (0-9); and special characters (such as the symbols $; #; and @; mathematical symbols; and punctuation marks).
Altered Card
A card on which the original embossed or encoded information has been altered for fraudulent purposes.
Alternate Payments
A non-traditional payment method such as instant transactional credit and ACH debit systems such as PayPal or Amazon Payments.
American Bankers Association (ABA)
A nonprofit organization; founded in 1875; that serves the banking industry. Its members include community; regional; and money center banks and holding companies; as well as savings associations; trust companies; and savings banks.
American Express (AMEX)
A diversified worldwide travel; financial; and network services company; founded in 1850. American Express issues credit; prepaid and charge Cards that support a broad base of clients and needs for both consumers and businesses. Along with its Card business; the company also provides business credit lines and merchant establishment services. In 1958; it introduced the American Express Card; a “charge card” with the entire bill paid in full each month. Because American Express was both the only issuer and the direct acquirer; it could gather more information on each transaction and was the first company to offer a detailed statement. Still viewed as a prestige business travel and entertainment supplier; American Express now offers an array of charge; prepaid and credit cards. It also has a reseller program; the External Sales Agent (ESA) Program; that provides incentives to ISOs and acquirers to market American Express cards to merchants. All American Express cards begin with “3.”
American National Standards Institute (ANSI)
A private; nonprofit organization that administers and coordinates the U.S. voluntary standardization and conformity assessment system in many areas; including computers and communications. ANSI’s mission is to enhance both the global competitiveness of U.S. business and the nation’s quality of life by promoting and facilitating voluntary consensus standards and conformity assessment systems and safeguarding their integrity.
American Public Transportation Association (APTA)
A nonprofit international association of more than 1;400 public and private member organizations; including transit systems and commuter rail operators; planning; design; construction; and finance firms; product and service providers; academic institutions; transit associations; and state departments of transportation. APTA governs and oversees the public transportation industry; which is involved in setting standards for micropayments and smart card technology.
American Standard Code for Information Interchange (ASCII)
The standard code used for information interchange among data processing systems; data communications systems; and associated equipment in the United States. ASCII code is an alphabet used in computer machine languages and represents the standard PC character set.
