15 Payment Processing Terms You Should Know
You may hear some of these terms frequently, but might not be so sure what they exactly refer to. Here's a short guide on some of the most commonly used terms that are meaningful in the payment processing industry.
1. Virtual Terminal
An application that lets merchants manually enter customers’ credit card info, which is then securely transmitted and authorized by the payment gateway.
2. Secure Payment Gateway
A gateway is a system that uses encryption technology to securely pass credit card data, authorization requests and authorization responses over the internet.
3. Card Issuer
The card issuer is the financial institution (most likely a bank) that lends money to the cardholder.
4. Point of Sale
Quite literally, the point where a sale is made. Usually a retail store or other similar location where the cardholder presents their card to make a purchase, where it then undergoes the payment processing procedure. Their card will be read magnetically, and cardholders usually have to sign or present their signature for security and insurance purposes.
5. Back End Processor
A back end processor is where payments go after a merchant submits a batch of payments that pass through the front end processor. A back end processor will then accept the settlement obtained from the front end processor, and move the money from the issuing bank to the acquiring bank.
An acquirer is licensed as a member of Visa/MasterCard as an affiliated bank or processor. The acquirer is the financial institution (or bank) that processes the credit card payments that take place during point of sale, on behalf of the merchant.
7. Merchant Identification Number
Each merchant location gets a unique number to identify this merchant during daily processing transactions.
E-Commerce is the all-encompassing term for electronic commerce. This refers to buying and selling products or services online through a website or other means like social media. E-Commerce can be used on many platforms using the internet.
9. Address Verification System (AVS)
This is a system used to reduce fraud by verifying the cardholders’ billing address. This system checks the billing address against the information provided by the issuing bank. This system is supported by Visa, MasterCard, Discover, and American Express.
This refers to a transaction where the physical card is not present for the payment. The card information has to be entered through other means, where it is then transmitted via internet, fax, mail, or telephone.
A payment processor refers to the (usually third party) company that acts as an intermediary between the authorization request from a Point-of-Sale device, and the card payment brands. The merchant appoints a processor to handle credit card transactions.
12. Payment Card Industry (PCI) Data Security Standard (DSS)
This refers to the strict requirements and rules put in order to ensure safety and prevent credit card fraud, hacking, and other security threats. Payment processing organizations must meet these standards in order to be PCI compliant.
ISO stands for independent sales organization, which has an agreement to sell the services of a bank, is allowed to mark up fees, and sign up merchants.
14. Merchant Account
This is an account opened through a bank or credit card processing company, by a business that wants to accept credit card payments.
EMV stands for Europay, MasterCard and Visa, who were the original founders of the global standard for card processing and security. This standard is what created the EMV smart chip. This global standard now includes American Express, JCB, Discover, and UnionPay.