Definitions for the Payments Industry

From 3DS to SSL, language around payments can be complicated. And while we pride ourselves on being payments nerds, we know that not everyone is as passionate about this terminology as we are. That’s why we’ve put together this list of some of the most common industry terms and their definitions. We hope it helps shed some light on the payments industry (and what the heck we’re all talking about). Keep in mind that the use of these terms may differ outside of Braintree or across different countries and regions.

Still can’t find what you’re looking for? Check out our support articles for more information on the basics of payment processing and how you can use Braintree features to best fit your business, or reach out to our Support team -- we’re always happy to help.

Industry definitions

3DS: 3D Secure. An additional security layer provided by certain credit card associations for online credit and debit card transactions. 3DS adds an authentication step for customers making online purchases.

Acquirer: The financial institution that provides a merchant account and processes credit or debit card transactions on behalf of a merchant.

ACH: Automated Clearing House. A network for the processing of electronic financial transactions between banks in the United States

ACS: Access control server. The server that banks contract out to provide their end of the 3DS schema.

Amex: Shorthand for American Express.

APAC: Shorthand for Asia-Pacific.

ARN: Acquirer Reference Number. A unique number that tags a credit or debit card transaction when it goes from the merchant’s bank through to the cardholder's bank. Also called a trace ID, this number is often used to determine where a transaction's funds lie at a certain time.

Authorization: The confirmation from the cardholder’s bank that the credit or debit card or account is valid for a specific transaction.

Auth fee: In international markets, the static monetary amount deducted from each transaction. Also known as a per-transaction fee.

AVS: Address Verification System. A fraud protection feature that checks to see that the billing address given by the customer matches the one on file with the issuing bank for the credit or debit card.

Bankcard: A credit or debit card issued by a bank.

Batch: A group of credit or debit card transactions that have been submitted for settlement to the merchant’s bank account. Also known as a settlement batch.

BIN: Bank identification number. The first 4 or 6 digits of a debit or credit card number. Also known as an issuer identification number (IIN). Looking up the BINs associated with payment methods you’re processing can provide insights like where most of your customers are located or what types of cards they use.

Capture: After authorization, a follow up transaction that refers to the submission of a credit or debit card transaction for processing. Upon success, the transaction is sent to the acquirer for settlement

Card association: A specific credit card company, such as Visa, MasterCard, American Express, Discover, etc.

Cardholder: The customer to whom a credit or debit card has been issued; the individual authorized to use the card.

Chargeback: The result of a cardholder disputing a specific credit or debit card transaction with his or her issuing bank. The issuing bank initiates a chargeback with the acquiring bank, which then filters the chargeback down to the merchant account level The amount of the disputed transaction is immediately withdrawn from the merchant's bank account, and the merchant has a set amount of time in which to defend the chargeback, depending on the rules of the card association. A chargeback fee is usually charged to the merchant in addition to the amount of the transaction.

Chargeback defense: The transaction information a merchant needs to defend against a chargeback, such as the amount, an invoice, a customer verification/signature, and/or shipping documents.

Credit card: A payment card that enables cardholders to purchase goods and services on credit. The cardholder is then billed by the issuing bank for repayment of the credit extended.

Credit card processors: Merchant services providers -- like Braintree -- that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Also called third-party processors or payment processors.

Currency conversion: The process by which a presentment currency is converted into the settlement currency. The presentment currency is determined by the acquirer; the settlement currency is the currency in which a merchant is funded.

CVV: Card verification value. A 3- or 4-digit numeric code on credit and debit cards; a fraud protection feature that helps verify physical possession of a credit or debit card.

Debit card: A payment card issued by a bank that can be used to make purchases or withdraw cash. Unlike credit card transactions, money for a debit card transaction comes directly from the cardholder’s bank account.

Decline: A processor decline. This indicates that the cardholder’s issuing bank has refused the transaction request.

Disbursement: The paying out of funds from an acquirer to a merchant’s bank account.

Dispute: A claim made by a cardholder to his or her issuing bank to contest or question the validity of a charge to his or her credit or debit card. Customers dispute charges for a variety of reasons, such as unauthorized or excessive charges, dissatisfaction with the product, or billing errors. Disputes often result in retrievals or chargebacks.

Ecommerce: The buying and selling of goods and services, including the transmitting of funds or payment data, online.

Electronic draft capture (EDC): A system which enables merchants to capture and transmit transaction data for credit and debit card processing.

Electronic funds transfer (EFT): The electronic transfer of money between two bank accounts, including ACH transfers and wire transfers.

EMEA: Shorthand for Europe, the Middle East, and Africa.

Interchange fee: A fee specified by card associations that is paid by the acquirer to the issuing bank for each credit or debit card transaction. The acquirer passes this fee to merchants, in addition to any other fees charged for processing credit or debit card transactions. The exact interchange fee for a particular transaction depends on a number of variables, such as card type, business type, card acceptance method, settlement or batch time frame, information submitted with the transaction, and more.

Issuing bank: The bank that maintains the customer’s credit or debit card account and settles funds to the merchant’s acquirer for payout to the merchant. The issuing bank then bills the cardholder for the sum of all transactions during a given time period.

Merchant: Any business that accepts payments in exchange for goods or services.

Merchant account: A bank account provided by an acquirer that enables the holder to accept credit and debit card payments.

Payment gateway: The software used to transfer payment information from the merchant to the acquirer.

PCI compliance: Adherence to the Payment Card Industry Data Security Standard (PCI DSS), a set of requirements mandated by card associations that apply to any business that transmits, processes, or stores credit cards, regardless of the business's size or location. If card associations find that a merchant is not PCI compliant, they can suspend the merchant’s ability to accept credit card payments and assess penalties to the merchant.

Reserve account: A portion of the funds from a high-risk (as defined by the merchant account provider) merchant's credit card transactions, held in reserve by the acquirer to cover possible disputed charges, chargeback fees, and other expenses.

Retrieval request: A request initiated by an issuing bank when a cardholder or issuing bank wants information on a credit card transaction. The merchant has a set number of days in which to respond with transaction information, or the retrieval request becomes a chargeback, in which case there is usually a retrieval request fee issued against the merchant.

SSL: Secure socket layer. A system for encrypting data sent over the Internet, including ecommerce transactions and passwords. With SSL, client and server computers exchange public keys, allowing them to encode and decode their communication.

Settlement: The process by which the acquirer and issuing banks exchange financial data and value resulting from sales transactions, cash disbursements, and merchandise credits. After authorization, the merchant must submit a transaction for settlement -- this is done automatically through some payment gateways.

Void: The cancellation of the transfer of funds from the customer to the merchant. Merchants can issue a void if the transaction is either authorized or submitted for settlement.

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