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Glossary
Authorization Code: A code that a credit card issuing bank returns in an electronic message to the merchant's secure payment gateway that indicates approval of the transaction. The code serves as proof of authorization.
Acquiring Banks: An acquiring bank is another term used to describe a merchant bank. In order to use the Sage Pay service, the vendor needs to obtain a merchant account with one of the merchant banks that we work with.
Acquirer: An acquirer is an organization licensed as a member of Visa / MasterCard as an affiliated bank or bank/processor alliance that is in the business of processing credit card transactions for businesses and is always acquiring new merchants.
Acquiring Financial Institution: An acquiring financial institution (or "acquirer") contracts with the bank and merchants to enable credit card transactions. The acquirer deposits the daily credit card totals and debits the end-of-month processing fees from the merchants' accounts.
Associations: Any entity formed to administer and promote credit and cards. The best known examples of Associations are MasterCard and Visa.
Authorization: The process of verifying the credit card has sufficient funds (credit) available to cover the amount of the transaction. An authorization is obtained for every sale. An approval response in the form of a code sent to a merchant's POS equipment (usually a terminal) from a card issuing financial institution that verifies availability of credit or funds in the cardholder account to make the purchase. Also see Point-Of-Sale.
Address Verification Service (AVS): The process of validating a cardholder's given address against the issuer's records, to determine accuracy and detect fraud. This service is provided as part of a credit card authorization for mail order/telephone order transactions. A code is returned with the authorization result that indicates the level of accuracy of the address match and helps secure the most favorable interchange rates.
Average Ticket (Average Sale): The average dollar amount of a merchant's typical sale. The average ticket amount is calculated by dividing the total sales volume by the total number of sales for the specified time period.
Bankcard: A credit card issued by a Visa or MasterCard-sponsored financial institution. (American Express, Discover, Diners Club, JCB, etc., are issued directly from their respective operations, rather than through banks.)
Batch: The accumulation of captured credit card transactions in the merchant's terminal or POS awaiting settlement.
B2B: Business to Business. Supplier customer relationship is between two businesses.
Billing Address: An optional field you can pass in the Transaction Registration Post (field becomes compulsory if AVS checks are switched on). You must ensure the Post code is not included or Address Verification checks will fail.
Card Issuing Bank: An EFT Network Member-Bank that runs a credit card or debit card "purchasing service" for their account holders. An example is CitiBank and the CitiBank Visa Card that they issue.
Card Not Present: A transaction where the card is not present at the time of the transaction (typically an internet transaction or a telephone order transaction). Credit card data is manually entered into the terminal, as opposed to swiping a card's magnetic stripe through the terminal.
Capture: The submission of an electronic credit card transaction for financial settlement. Authorized credit card sales must be captured and settled in order for a merchant to receive funds for those sales. Also see Settlement.
Commercial Cards: Credit or charge cards issued to businesses to cover expenses such as travel and entertainment and procurement. Includes the multiple payment card brands of purchasing cards, business cards, corporate cards and multi-utility fleet cards. Visa and MasterCard now have special procedures for passing billing information back to the card issuing bank so that it can be displayed on card holder statements; this is a program for promoting the use of credit cards for business purchases by providing purchase tracking to business users. New regulations require that this billing information be passed back with the transactions, otherwise a higher pass through fee will be incurred.
Chargeback: A credit card transaction that is billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on behalf of the cardholder. Typical cardholder disputes involve product delivery failure or product/service dissatisfaction. Cardholders are urged to try to obtain satisfaction from the merchant before disputing the bill with the credit card issuer.
Close Batch: The process of sending the batch for settlement.
Cardholder: Any person who holds a payment card account (bankcard or otherwise). Person that uses a credit card to purchase goods and services.
Corporate Card: Charge card designed for business-related expenses, such as travel and entertainment. Please see Commercial Card.
Credit (Reversal): Nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately "undo" an authorization and return it to the open-to-buy balance on a cardholder's account. Some card issuers do not support reversals.
Discount Rate: The percentage of sales amounts that the bankcard acquirer or T&E card issuer charges the merchant for the settlement of the transactions.
Debit Card: 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).
Independent Sales Organization (ISO):An ISO is an Independent Sales Organization that represents a Bank or Bank/Processor alliance. The ISO has an agreement to sell the services of the Bank or Bank/Processor alliance, and is allowed to mark up the Fees and sign up merchants.
Interchange: The standardized electronic exchange of financial and non-financial data associated with sale and credit data between merchant acquirers and card issuers on various types of MasterCard and Visa transactions.
Internet Service Provider (ISP): Internet Service Providers (ISPs) are the Web Site Hosting companies that provide a home for merchant’s web sites.
Interchange Fee: A fee paid by an acquirer to an issuer for transactions entered into interchange. The interchange fee is a percentage applied, according to Visa/MasterCard regulations, to the dollar value of each transaction. There are multiple categories of interchange, and Visa and MasterCard each have their own criteria for their own categories. A transaction must meet the specified criteria for a category in order for that category's rate to be applied. Each transaction is evaluated individually, so various interchange rates may apply within one batch of merchant transactions.
Merchant: Customer of a processor/acquirer.
Merchant Identification Number (MID): This number is generated by a processor/acquirer and is specific to each individual merchant location. This number is used to identify the merchant during processing of daily transactions, rejects, adjustments, chargebacks, end-of-month processing fees, etc.
Mail Order/Telephone Order (MOTO): Credit card transactions initiated via mail, email or telephone. Also known as card-not-present transactions.
Network: Company and system used to authorize and capture credit card transactions.
POS Terminal: Equipment used to capture, transmit and store credit card transactions at the point of sale.
Processor: A Processor is the company that actually routes an Authorization Request from a Point of Sale device to Visa or MasterCard, and then arranges for Fund Settlement to the merchant. Such processors are traditionally accessed via direct dial out modems connecting to their system.
Processors need to have a Sponsoring Bank in order to gain access to the Visa and MasterCard networks. When a Processor or other entity has made such an arrangement with a Sponsoring Bank to resell their services, they are called an Agent of that bank.
Any entity that sells Visa or MasterCard must disclose themselves as an Agent of their Sponsoring Bank. Such sales entities may be a Processor, or an ISO/Agent of the Processor or Processor/Bank alliance.
Many banks are also their own processors, while other banks will use a Third Party Processor to handle this processing for them (in their own brand name in some cases).
Point Of Sale (POS): A location where credit card transactions are performed with the cardholder present, such as a retail store. The card is read magnetically, and the cardholder's signature is obtained as insurance against the transaction. This is the most secure form of credit card commerce.
Processing Network (Vendor): The medium of data transport between the merchant application and the processor. This company authorizes and captures credit card transactions.
Reserve Account: One method that international acquirers use to mitigate risk, is to require that merchants maintain a Reserve Account. This allows the acquirer to issue a Hold on funds in this account when fraud has been detected or an excessively large number of returns is received. Merchants with good credit and history can usually meet the expectations of international acquirers for covering returns and so are not always required to keep a reserve account. In cases where a reserve is required, the reserve is set to 10% of processing volume.
Real-Time Processing: Real-Time Processing means that when a web site's customer conducts an online purchase, that the check or credit card information is conveyed to the Processor at that exact time so that an authorization can be requested and received at that moment. Real-Time Processing always implies that a Secure Payment Gateway is being utilized, whether proprietary or third party. Please see Secure Payment Gateways and Real Versus Non-Real Time Processing.
Sales Draft (Ticket): A form showing an obligation on the cardholder's part to pay money (i.e., the sales amount) to the card issuer. This is the piece of paper that is signed when making the purchase. Sales draft data can be captured electronically and sent to be processed over the phone lines. Also see Electronic Data Capture.
Sponsoring Bank: A Sponsoring Bank is a Chartered Bank or S & L that has obtained membership in Visa or MasterCard in order to allow a Processor access to the Visa and MasterCard networks ( in order to process these types of transactions). Since only a Bank may join Visa or MasterCard, many Processors make deals with a Sponsoring Bank in order to gain access to the Visa and MasterCard networks. Because these Sponsoring agreements are usually like a partnership, the line between the Sponsoring Banks and their Processors is not always clear; sometimes the partnership is referred to by the name of the bank, while other times they are referred to by the name of the Processor.
Settlement: 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.
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.
Third-Party Processor: A Third Party Processor is an independent processor that is contracted with by a Bank or Processor to conduct some part of the transaction processing process.
Terminal: Equipment used to capture, transmit and store credit card transactions.
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