A bank or financial institution that processes credit or debit card payments on behalf of a merchant. The acquirer allows merchants to accept card payments from card-issuing banks.
An agreement between an ISV, ISO, or payment facilitator and the acquirer that sells processing services. This contract is negotiated and determines a variety of topics including but not limited to: processing rates, transaction fees, value added services, liability, and applicable service level agreements (SLAs).
Address Verification Fees (AVF)
Fees charged for the verification of a credit cardholder's address. This is typically performed via the Address Verification System (AVS), which verifies that the zip code submitted at the time of processing matches the zip code on the cardholder's billing statement.
Address Verification System (AVS)
The system that verifies the zip code that is submitted at the time of processing matches the zip code of the cardholder's billing statement.
Fees associated with a credit card. This can include membership fees, as well as rewards costs.
Anti-Money Laundering (AML)
Anti-Money Laundering activities and controls are practices and procedures designed to identify and protect against financial criminals seeking to disguise illicitly gained funds as legitimate. Many institutions, especially those in the financial sectors, are required by the Bank Secrecy Act (BSA) to have detailed programs in place to prevent, detect, and report potential money laundering activities.
The approval process to prove the customer has sufficient funds on their payment card to pay for a transaction.
Automated Clearing House (ACH)
A network between banks that facilitates the transfer of money between depository accounts at participating banks.
Automated Clearing House (ACH) Credit
Funds are electronically deposited into a bank account.
Automated Clearing House (ACH) Debit
Funds are electronically debited from a bank account.
Automated Clearing House (ACH) Refund
A returned ACH transaction.
Automated Clearing House (ACH) Return
A failed ACH transaction.
Bank Identification Number (BIN)
Identifies the bank or financial institution issuing the card. The first six or eight digits on the credit card identify the card issuer.
Bank Identifier Code (BIC)
Identifies the beneficiary's bank. It is the same as the bank's SWIFT code.
Bank Secrecy Act (BSA)
U.S. law requiring financial institutions to assist government agencies in detecting and preventing money laundering. The BSA is also known as the Anti-Money Laundering Law (AML).
Basis Points (BPS)
A financial term that describes a common unit of measure. One basis point is equal to 1/100th of 1% or 0.01%.
Fee charged for each submission of a batch file to a payment processor. Batch fee(s) are volume based fees charged for the processing load on the system that ingests and ultimately executes the transactions specified in a given batch file.
Classifies any transaction or use case where a business sends money to another business.
Classifies any transaction or use case where a business sends money to a consumer.
Refers to the four major US based card payment systems; Visa, Mastercard, American Express, and Discover.
A transaction where the card cannot be physically presented to the merchant at the time of transaction. Transactions can be completed via telephone, internet, mail, mobile device or any time the physical card is not interacting with a card reader.
A transaction where the cardholder can present a physical card to the merchant. Transactions can be completed via swiping the card through a magnetic card reader, waving the card in front of a contactless payment terminal or inserting the card into a chip-reading device to request the transaction authorization.
Card Verification Value 2 (CVV2/CVC2)
Three digit code imprinted on the back of a payment card, a tool used to assist in validating the individual presenting the payment card is the actual cardholder.
Card Verification Value/Code (CVV/CVC)
Three digit code contained in the magnetic stripe of a payment card relied upon by the issuer to validate the presence of the actual card in a magnetic stripe read transaction.
A transaction made by the card issuer to the merchant's acquiring bank because of a dispute, POS error, or fraud. An excessive number of chargebacks can result in issues with card networks who may refuse to onboard merchants on their networks.
Fee charged for a chargeback. In the instance of a chargeback, additional work may be required to remediate the issue, including but not limited to: notifications, evidence collecting, escalation and others. Most if not all service providers involved in the transaction may charge chargeback fees to the end merchant that incurs the initial chargeback.
The level of risk in a bank's portfolio arising from concentration to a single counterparty, sector, or country.
Classifies any transaction where a consumer pays a business.
Currency Transaction Report (CTR)
A report that U.S. financial institutions are required to file with FinCEN for each deposit, withdrawal, exchange of currency or other payment, or transfer that exceeds a certain monetary threshold.
A bank, a financial institution, or other entity that is responsible for managing, administering, or safekeeping assets for other persons or institutions. A custodian holds assets to minimize risk of theft or loss, and does not actively trade or handle the assets.
The act of or authority to safeguard and administer clients’ investments or asset
Customer Due Diligence (CDD)
Policies, practices, and procedures that enable a financial institution to predict with relative certainty the types of transactions in which the customer is likely to engage.
An amount withdrawn from an account.
Also known as a chargeback. A claim made by a cardholder to the issuing bank that questions the validity of a credit or debit charge.
Dues and Assessments
Fee paid to the card network for use of their credit card and to process transactions on their networks.
Early Termination Fees
Fee that merchant(s) may incur as a result of the merchant terminating the processing agreement before the end of a specified period of time.
An electronic form of a check.
A reversed eCheck.
A failed eCheck.
Electronic Funds Transfer (EFT)
The electronic transfer of money from one bank account to another without bank interaction. One of the most widely-used EFT programs is direct deposit, through which payroll is deposited straight into an employee's bank account.
Refers to natively building and incorporating payments processing as an integral part of a business offering or product.
Fees charged to merchants to lease or for maintenance of payment processing equipment.
Foreign Exchange (FX)
The trading of one currency for another. When a trade occurs, a fee is applied by the financial institutions of the receiving or originating institution.
To prevent or restrict the exchange, withdrawal, liquidation, or use of assets or bank accounts. Unlike forfeiture, frozen property, equipment, funds, or other assets remain the property of the natural or legal person(s) that held an interest in them at the time of the freezing and may continue to be administered by third parties. The courts may decide to implement a freeze as a means to protect against flight.
Any business set up and controlled by another organization. While not necessarily illicit, criminals use front companies to launder money by giving the funds the appearance of legitimate origin. Front companies may subsidize products and services at levels well below market rates or even below manufacturing costs.
A secure connection involved in the transmittal of a payment transaction message between the merchant point of sale and the acquiring processor.
Independent Sales Organization (ISO)
An ISO contracts with a member bank to provide merchant or cardholder solicitation. ISO representatives sell businesses payment processing solutions to merchants so they can accept card payments, as well as card readers and payment processing rate contracts for a given acquirer or ISO.
Refers to the act of building and incorporating payments processing into an existing business offering or product. This type of payments processing shares data between the business management system and the payments system.
Integrated Software Vendor (ISV)
An ISV is an individual or organization that sells software that incorporates a payments strategy or processing as part of its product offering. This type of software is generally associated with an integrated payments approach.
Fees that go to the issuing banks.
IRS Reporting Fees
Fees charged by a payment processing service for reporting payment processing information directly to the IRS for a given merchant.
Also known as the issuing bank. This is the card network that issues a credit or debit card.
Know Your Customer (KYC)
Anti-money laundering policies and procedures used to determine the true identity of a customer or merchant. KYC regulation requires payment facilitators and financial institutions to guard against money laundering, terrorist funding, and other criminal activity.
Know Your Employee (KYE)
Anti-money laundering policies and procedures of employees of an institution for the purpose of detecting conflicts of interest, money laundering, past criminal activity, and suspicious activity.
Distancing illegal proceeds from their source by creating complex levels of financial transactions designed to disguise the audit trail and provide anonymity.
The risk that lawsuits, adverse judgments or contracts that cannot be enforced may disrupt or harm a financial institution. Banks and financial institutions will be unable to protect themselves from legal risks if they do not practice due diligence in identifying customers and understanding and managing their exposure to money laundering.
Level 2 and Level 3 Processing (L2/L3)
Level 2 and Level 3 (L2/L3) data are a Visa and Mastercard feature that can help reduce interchange rates for transactions on corporate and commercial credit cards that meet a set of requirements.
A penalty or fee in a merchant agreement charged by the acquirer in the event an agreement is terminated early by the merchant to recoup costs associated with opening and maintaining the account.
Fees that go to the credit card processors. These fees are negotiable.
Member Alert to Control High-Risk Merchants (MATCH™) List
The MATCH™ list, also called Terminated Merchant File (TMF), is a list maintained by Mastercard that identifies high-risk merchants or those that have been terminated by another entity within the last five years.
Any business that accepts credit or debit cards, or alternative payment methods as a source of payment. A merchant offers goods or services in exchange for payment.
Merchant Category Code (MCC)
A four digit number that classifies a business by the type of goods or services it provides.
Merchant Identification Number (MID)
A unique code provided to a merchant by their payment processor.
A solution that connects your platform with the payment processor.
Concealing the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.
An element of a financial institution’s anti-money laundering program in which customer activity is reviewed for unusual or suspicious patterns, trends, or outlying transactions that do not fit a normal pattern. Transactions are often monitored using software that weighs the activity against a threshold of what is deemed “normal and expected” for the customer.
National Automated Clearing House Association (NACHA)
National association responsible for developing and enforcing ACH rules and guidelines.
Non-Governmental Organization (NGO)
Nonprofit organizations that are not directly linked to the governments of specific countries, and perform a variety of service and humanitarian functions, including bringing citizen concerns to governments, advocating for causes, and encouraging political participation.
Non-Sufficient Funds Fee (NSF)
Fee charged to process and track transaction(s) that have been reversed due to insufficient funds.
Notice of Change (NOC)
The risk of direct or indirect loss of operations due to inadequate or failed internal processes, people or systems, or as a result of external events. Public perception that a bank is not able to manage its operational risk effectively can disrupt or harm the business of the bank.
Originating Depository Financial Institution (ODFI)
The ODFI acts as the interface between the Federal Reserve or ACH network and the originator of the transaction.
The entity that starts or 'originates' a transaction flow.
Payment Card Industry Data Security Standards (PCI -DSS)
An information security standard for organizations that handle payment cards. This standard is governed by the Payment Card Industry Security Standards Council and exists to increase controls around cardholder data and to reduce credit card fraud. Compliance is validated on an annual basis, either by a qualified security assessor, or by self-assessment questionnaire, depending on the volume of transactions made by each organization.
Payment Card Industry Fees
Fees associated with maintaining PCI compliance, including but not limited to: audit fees, external security assessment fees, infrastructure hosting fees (if cloud-based), and consulting fees (if needed in the absence of a formal compliance officer).
Payment Facilitator (PayFac)
A service provider for merchants who want to accept payments online or physically.
Payment Gateway Fees
Fees charged by the gateway for the authorization, capture, and or processing of transactions.
Software/technology that processes transactions between merchants, issuing banks, and acquiring banks.
The physical disposal of proceeds derived from illegal activity into the financial system.
“Specified unlawful activities” whose proceeds, if involved in the subject transaction, can give rise to prosecution for money laundering. Most anti-money laundering laws contain a wide definition or listing of such underlying crimes. Predicate crimes are sometimes defined as felonies or “all offenses in the criminal code.”
A real-time payments standard that allows individuals or businesses to instantly transmit funds to a specific card on a given card network. Funds are generally available immediately up to a specified limit based on use case, and funds settle at the time they appear in the account, meaning there is no liability for funds availability.
Receiving Depository Financial Institution (RDFI)
An institution qualified to receive ACH entries.
The process in which incoming and outgoing funds are matched.
When a customer cancels the purchase of product or service after they have paid and the merchant must return the funds to the customer.
Part of the chargeback process. Representment occurs when the merchant does not agree with the customer's clams and will not accept the chargeback.
The potential that adverse publicity regarding a financial institution’s business practices and associations, whether accurate or not, will cause a loss of confidence in the integrity of the institution. Banks and other financial institutions are especially vulnerable to reputational risk because they can become a vehicle for, or a victim of, illegal activities perpetrated by customers.
Retrieval Request Fee (RRF)
Fee charged when a customer or the customer's issuing bank requests a copy of a sales draft. Credit card processors charge a nominal fee to process the request.
The assessment of the varying risks associated with different types of businesses, clients, accounts, and transactions in order to maximize the effectiveness of an anti-money laundering program.
To prohibit the transfer, conversion, disposition, or movement of funds or other assets on the basis of an action initiated by a competent authority or a court under a freezing mechanism. However, unlike a freeze, a seizure allows the competent authority to take control of specified funds or other assets. The seized assets remain the property of the person(s) or entity(ies) that held an interest in them at the time of the seizure, although the competent authority will often take over possession, administration, or management of the seized assets.
A collection of transactions that are batched together in a settlement to pay out the merchant.
Standard Industrial Classification (SIC)
A government-maintained list of codes identifying and classifying business types from which MCC codes used by card networks are derived.
Fees for statement services.
Compulsory legal process issued by a court to compel the appearance of a witness at a judicial proceeding, sometimes requiring the witness to bring specified documents.
Irregular or questionable customer behavior or activity that may be related to a money laundering or other criminal offense, or to the financing of terrorist activity. May also refer to a transaction that is inconsistent with a customer’s known legitimate business, personal activities, or the normal level of activity for that kind of business or account.
Suspicious Activity Report (SAR)
A government filing required by reporting entities that includes a financial institution’s account of a questionable transaction. Many jurisdictions require financial institutions to report suspicious transactions to relevant government authorities.
Terminal ID (TID)
The individual identification number provided to a merchant by a credit card processor. A TID can be used to identify the source of a transaction.
The right to end an existing payment processing contract.
Encryption of payment card data into a 'token' - a hashed version of the card that uses encryption to ensure that personal card information cannot be accessed while it is stored on file or in transmission to process a transaction. This technology allows 'card on file' processing without enormous risk to the cardholder and the entire payment card network. Tokenization is governed by the PCI standard and requires certification and audit of any provider of the service prior to its use.
Ultimate Beneficial Owner
The natural persons who have significant ownership of, as well as those who exercise ultimate effective control over a legal person or arrangement.
A transaction that is canceled before it settles through a customer's credit or debit card.
A near real-time transfer of funds between bank accounts. This feature is limited for bank to bank or intrabank transfers.