Commonly Used Payment Industry Terms
Having an understanding of the payment industry's terms and processes can help your business have a competitive advantage over other small business' and allow you to reduce your costs. Sun State Merchant Services is committed to educating our merchants. Below is a list of commonly used terms in the payment industry to help you gain a better understanding of our industry along with common fees and items you will see on your merchant processing application.
Address Verification (AVS)
This is a very important feature that we teach our merchants to use. A service provided through merchant services in which the merchant verifies the cardholder's address. Primarily used by mail/telephone order merchants to combat fraud. AVS response is given to indicate the level of accuracy of a given address based on the billing address of the customer's credit card. This will allow "you" the merchant to lower your risk and reduce your processing costs. Often times, other merchant services providers don't tell you about this feature which could cost you a lot of money. All of Sun States terminals are deployed with a feature that will prompt you for this, ultimately reducing your costs. Cost for AVS fees can range from $0.10 to $0.50 depending on what type of business you are in.
Automated Clearing House - Allows for the exchange and settlement of electronic payments between financial institutions.
Acquiring Bank (ACQUIRER)
A principal member of Visa and MasterCard (Sun State is a licensed member/affiliate) that acquires data relating to transactions from a merchant or card acceptor for processing. All merchant accounts must be sponsored by a bank that is a member of the card associations (Visa and Mastercard). The member bank/acquiring bank receives funds from a cardholder when a credit card transaction is completed, and deposits the payment amount, minus any fees, into the merchant's Merchant Account and from there into there business checking account. Acquirer' usually refers to the entity-usually a credit card processor–that provides credit card processing services for Visa, MasterCard, AmEx and Discover receipts collected by merchants, directly or through an affiliated ISO.
Application Programming Interface - An interface allowing integration with virtually any programmable software package or platform.
A transaction verifying the availability of funds in a cardholder's account to make the purchase (usually identified by an Approval Code).
The feature allowing some gateways and terminals to automatically batch transactions daily without them being initialized by the merchant. We use this feature so you don't have to remember to close the batch in your terminal ever night and you will know when you funds are going to be deposited without any guess work.
Automated Recurring BillingTM
Automated Recurring BillingTM (ARB) is a convenient feature and easy-to-use tool for submitting and managing recurring or subscription-based, transactions. If you need to bill a customer more than one time, you can easily enter the date of each transaction only once for multiple transactions in the future. You can take advantage of ARB’s flexible features to enhance customer service and build customer loyalty, while reducing authorization declines and overall administrative costs. With all of our affiliate gateways and virtual terminals, you will have an option to add the service to your account.
Automated Response Unit (ARU)
An ARU (also known as a voice authorization, capture and deposit) allows the manual keyed entry and subsequent authorization of a credit card over a cellular or land-line telephone. With this method a merchant typically imprints their customer's card with an imprinter to create a customer receipt and merchant copy, then process the transaction instantaneously over the phone.
A batch fee (also known as a batch header fee) can be charged to a merchant whenever the merchant "settles" their terminal. Settling a terminal, also known as "batching", is when a merchant sends their completed transactions for the day to their acquiring bank for payment. Some providers perform this automatically. It is important to close a batch every 24 hours or a higher rate can be assessed by the credit card companies. We often suggest you use the auto batch closing time so you don't forget and end up paying higher processing costs. Costs for batch closings can range from $0.30 to $0.60 in our industry.
Card Issuing Bank
The financial institution that issues a credit card. This institution is responsible for issuing the statement and collecting the payments on the card.
Card Not Present
A transaction where the card is not present at the time of the transaction (moto/ecommerce). Credit card data is typically manually entered instead of swiping the card. You will often pay a higher percentage rate when the card is not present at the time of the transaction because the risk level is slightly higher.
A person who holds a payment card account.
A credit card transaction is billed back to the merchant after a sale has been completed typically on behalf of the cardholder. The cardholder usually has disputed the transaction because of dissatisfaction or failure to deliver. Credit card processors usually charge between $25 and $40 dollars for this.
Code 10 Authorization
If you suspect a card is fraudulent at the time of the transaction, the merchant can call the voice authorization phone number and ask for a code 10. The voice operator will instruct the merchant on how to proceed.
About CVV2 and Credit Card Security An important new security feature for online and other "card-not-present" transactions now appears on recently issued Visa, Mastercard, Discover, and American Express credit cards. This new feature, called CVV2, is a three-or four-digit value which provides a cryptographic check of the information embossed on the card. Note: CVV2 is now used at most major e-commerce websites. It protects the credit card holder from fraud.
Visa, Mastercard, and Discover:
The CVV2 three-digit value is printed on the signature panel on the back of your credit card immediately following the card account number.
The CVV2 four-digit value is printed on the front of your credit card above and to the right of the card account number.
The CVV2 value helps validate two things:
The customer has an actual credit card in his/her possession.
The card account is legitimate.
This is the merchants Demand Deposit Account, otherwise known as the merchant's home town bank account. This is your business account where we will deposit your funds form your transactions.
(phone line) A communications circuit between two endpoints that is permanently connected and always available. It is important to have a dedicated line for your terminal if your are not using the Ethernet so your terminal can communicate the transaction process. This is also called a leased line or private line.
Payment card whose funds are withdrawn directly from the cardholder's checking account at the time of sale (online debit on a Debit Network) or after batch settlement (off-line debit on a Credit Card Network).
The fee charged by the merchant financial institution to the merchant for services associated with processing card transactions. Don't be fooled by other merchant services companies that offer low teaser rates such as 1.05% for processing. This is a correct discount rate but only applies to 1 of the 500 types of cards a customer might hand you and is not an actual overall discount rate. Industry discount rates for credit card processing range from 1.80% to as high as 2.50% for qualified transactions. Don't be fooled by a competitor's smoke and mirrors advertising. Should you have any questions regarding this, we will be glad to explain our rates and fees. We offer honest pricing with impeccable service you can count on.
Refers to the payment to a merchant for his submitted deposits. We offer 24 hour funding on your deposits at Sun State. This means that as long as you "Batch" out your deposits by 2:45 pm (CST), you can be assured your money will be in your bank account he following day with visa, mastercard, and discover. Any batched transactions after that time will be deposited into your bank account the day following the next. Some merchant service companies only advertise this but they can't actually follow through on it. We put our money where our mouth is and get you your money.
A Payment gateway is an e-commerce service that authorizes payments for e-businesses and online retailers. It is the equivalent of a physical POS (point-of-sale) terminal located in most retail outlets. A merchant account provider is typically a separate company from the payment gateway. The gateway usually has 2 components: a) the virtual terminal that can allow for a merchant to securely login and key in credit card numbers or b) have the website's shopping-cart connect to the gateway via an API to allow for real time processing from the merchant's website. We are partnered with some of the best gateways in the industry.
Examples: Authorize.net, Virtual Payment Solutions, USA Epay, and YourPay.
Mail Order/Telephone Order (MOTO)- Credit card transactions initiated via mail, email or telephone. Sometimes ecommerce transactions are referred to as MOTO instead of ecommerce. This is an example of a "card not present" type of account. Be sure you know how you are going to take payments so we can properly set you up with the right account and offer you the lowest processing costs.
Non-Qualified Transaction Fees (NON-Qual)
Bankcard sales transactions that do not meet set Visa/MasterCard criteria for that particular merchant and are processed at a higher interchange rate. Many rewards cards are also processed at a non qualified rate. An example of this is a merchant that is a retail merchant (card present) that processes a card-not-present transaction (or manually enters card data rather than swiping the magnetic stripe through the terminal). The merchant will pay the difference between what they should have paid for swiping the card and what they actually qualified for (card not present). This difference is called non-qualified interchange fees.
Point of Sale
If you are planning to integrate with one of the major restaurant POS systems, like our Radiant 1500, we can help to ensure a smooth transition for your business.
Here are some of the most popular point-of-sale systems we support:
Charge cards used by businesses to cover purchasing expenses, such as raw materials or office supplies.
Retrieval Request (12B Letter Retrieval)
A request by the issuer to the acquirer for a copy of the actual ticket of a transaction. This is the initial step that the issuer takes in the event that either the issuer or the cardholder disputes a transaction. Cost for this can range anywhere from $15 to $30 depending on the processor.
Secure Payment Gateway
Secure Payment Gateway companies help other Processors conduct secure business on the internet using Secure Socket Layer (SSL) technology. They provide a system that passes credit card data, authorization requests, and authorization responses over the internet using encryption technology.
The transaction information is sent by the Payment Gateway secure server via leased line to the credit card network where the validity of the card is checked and the availability of funds on that account is verified. An authorization code is returned via leased line to the Payment Gateway; the authorization is encrypted by the Payment Gateway and transmitted in encrypted form to the web server of the merchant, which triggers fulfillment of the order.
The process of sending a merchant's batch to the network for processing and payment. For non-bankcards, the issuer pays the merchant directly (less applicable fees) and then bills the cardholder. For bankcards, the acquirer pays the merchant (less applicable fees) with funds from Visa/MasterCard. The bankcard issuer then bills the cardholder for the amount of the sale. Also see Capture.
Shopping Cart Software
Ask us for a list of preferred shopping carts. These applications typically provide a means of capturing a client's Credit Card information, but they rely on the Software Module of the Secure Gateway Provider, in conjunction with the Secure Payment Gateway, in order to conduct secure Credit Card transactions online. Any given shopping cart can work with any given Secure Gateway Provider if they have been approved. It is very important we know what type of cart you are using for your website to make sure it is approved through the chosen gateway.
The statement fee is a monthly fee associated with the monthly statement that is sent to the merchant at the end of each monthly processing cycle. This statement shows how much processing was done by the merchant during the month and what fees were incurred as a result. Typical statement fees in the industry can range from $10.00 to $20.00. Don't be fooled by companies changing $0.00. This means they are charging you much higher fees somewhere else. These companies often charge a huge cancellation fee as well to lock you into there contract.
Terminal Identification Number (TID)
A unique number assigned to each POS terminal.
The date on which a transaction between a cardholder and a merchant, an acquirer, or a carrier, occurs.
Web Site Payment Gateway
Acquire payments through your web site or online presence from your customers with ease. The payment gateway will link right up to your websites shopping cart to allow the payment to be processed and for you to receive your funds very quickly. Anytime you are processing payments online, you will need one of our trusted affiliate gateways. We will help you decide which gateway is best for your business needs. Contact us to find out more about setting up your business with the right solution...
Virtual Terminal provides the best solution for merchants who manually enter credit card and electronic check transactions for mail order/telephone order sales via the web. If you are on the move and would like the ability to access your account to make a transaction at any computer, than this solution is for your business. You can take payments and access your virtual terminal as long as you can access the web with no software requirements.
The reversal of an approved transaction, a transaction that has been authorized but not settled. Settled transactions require processing of a credit card in order to be reversed. A void does not remove any hold on the customer's open to buy.
An approval response obtained through interactive communication between an issuer and an acquirer, their authorizing processors, or stand-in processing, through telephone, facsimile, or telex communications.