ALLEGIANCE NEWS

Merchant Services Terms

Payment Processing and Merchant Services are industries that involve the handling of financial transactions between merchants and their customers. If you are in the process of starting a business or setting up merchant services and payment solutions, you may come across some new terms you have never heard of. Here is a glossary of common terms and concepts that are specific to this industry.

Payment Processor: A company that processes financial transactions for merchants. It provides the technology and infrastructure required to process payments securely.

Merchant Services Provider: A company that offers services to merchants, including payment processing, point-of-sale systems, and other tools to facilitate transactions.

Merchant Account: An account provided by a bank or payment processor that allows a merchant to accept credit card payments from customers.

Acquirer: A financial institution or bank that processes credit card transactions on behalf of a merchant.

Issuer: The bank or financial institution that issues credit cards to customers.

Payment Gateway: A software application or service that connects an online store’s shopping cart to the payment processor. It securely transfers customer payment information for authorization and settlement.

Authorization: The process of verifying whether a customer’s credit card has sufficient funds available for a transaction.

Settlement: The process by which funds from a customer’s credit card transaction are transferred from the issuing bank to the merchant’s bank account.

Interchange Fee: A fee paid by the merchant’s acquirer to the issuer for each transaction processed. This fee is set by card networks such as Visa and Mastercard and is typically a percentage of the transaction amount.

ATM Interchange Fee: Fee paid to the acquirer by the cardholder bank for an ATM transaction. These fees are set by the ATM network.

PCI DSS Compliance: Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure that merchants handle customer payment information securely.

Chargeback: A disputed transaction initiated by a customer who believes they have been wrongly charged for a purchase. The amount is deducted from the merchant’s account until the dispute is resolved.

Point-of-Sale (POS) System: A hardware and software solution used by merchants to accept payments at physical locations. It includes a card reader, cash register, and other features to facilitate transactions.

Mobile Payment: A payment made using a mobile device, such as a smartphone or tablet. Examples include Apple Pay, Google Pay, and Samsung Pay.

PIN Debit: A type of debit card transaction where the customer enters their Personal Identification Number (PIN) to authorize the payment.

MID (Merchant Identification Number): A unique identifier assigned to a merchant’s account by the payment processor or acquirer. It is used to track transactions and settlements.

merchant services provider underwriting

Card-present vs. Card-not-present Transactions: Card-present transactions occur when the customer’s physical card is present during the transaction, such as at a retail store. Card-not-present transactions occur when the cardholder is not physically present, such as online or over the phone.

Virtual Terminal: A web-based interface that allows merchants to manually enter credit card information for processing card-not-present transactions.

API (Application Programming Interface): A set of rules and protocols that allows different software applications to communicate with each other. In payment processing, APIs are used to integrate payment gateways with e-commerce platforms or other systems.

E-commerce: The buying and selling of goods and services over the Internet.

Tokenization: The process of replacing sensitive payment data with a unique identifier called a token, which can be used for future transactions without exposing the actual card details.

Bank Identification Number (BIN): The first six digits of a payment card number that identify the issuing bank. It helps in routing and verifying transactions.

TMF or Match List: The match List, also referred to as the Terminated Merchant File is a database that helps merchants identify and prevent fraudulent transactions. It is maintained by the payment card industry (PCI) and contains information about individuals and businesses that have been identified as high-risk or involved in suspicious activities. A person on the match list may have complications setting up new payment processing. If you are facing this issue, visit TFM Law and give us a call to remedy this.

Reserve account: Reserve accounts are necessary for high-risk merchants as they ensure that a portion of funds is set aside. These accounts are required by acquiring banks to handle chargebacks, disputed charges, fees, and other expenses. Some organizations mandate reserve accounts for all new merchant accounts.

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