Learn Some Terms Used In Credit Card Processing
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This document serves as an ultimate guide to credit card processing terminology, defining essential terms like acquiring bank, batch processing, and payment gateway. It explains the roles of various entities such as issuing banks and card associations while also addressing concepts like chargebacks and merchant accounts. Additionally, it outlines the importance of PCI DSS compliance and processor costs in the credit card processing landscape.
Learn Some Terms Used In Credit Card Processing
- 1. Learn Some Terms Used In Credit Card Processing It's easy to get overwhelmed or lost when navigating the world of top credit card processors and credit card processing. Why? Credit card processing can be a complex system with an even more complicated set of terms. In this ultimate guide to credit card processing terminology, we'll be reading about some of the most common terms used by top credit card processors in the world of credit card processing. Ultimate Guide to Credit Card Processing Terminology • Acquiring bank/acquirer: It refers to a financial institution or bank that is entrusted with the responsibility of processing credit card transactions for business owners. Merchant accounts are maintained by acquiring banks that issue interchange fees. • Batch Processing: It refers to the merchant processing numerous transactions at the same time to save cost and human resources over time by processing and automating multiple transactions as a single group. • Card association/card network: They license and manage payment cards and two of the most popular names include Visa and Mastercard. Their logos are present either on the back or front of your card. • Card-not-present transaction (CNP): It refers to a transaction where the credit card is not physically present. This includes buying experiences over the phone or online. • Cardholder: The owner of a credit or debit card - your customers. They may purchase goods or services in-store or online. • Chargeback: This occurs when the customer or issuing bank disputes a transaction. Then, it is sent back via the interchange to the acquiring bank (or merchant account) to be resolved.
- 2. • Credit card payment services: They allow businesses to accept credit card payments from customers. Typically, these services involve the use of a virtual terminal or credit card terminal to process card payments in person or online. • Digital payment services: They refer to electronic payment systems that let businesses receive and make payments via digital means instead of checks or cash. Popular examples include Google Pay, Apple Pay, and PayPal. • Interchange Fees: They refer to fees that are charged for every credit or debit card transaction that you make. Interchange fees are paid by the acquiring bank (also known as merchant bank or acquirer) to the issuing bank (or card issuer). These fees vary depending on the card used and are determined by card associations. • Issuing bank/card issuer: It refers to a financial institution or bank that issues credit cards on behalf of the card association. Popular examples include Visa and Mastercard. They are licensed by their respective card associations and bear financial responsibility for all transactions made by the cardholder. All in all, they act as an intermediary between the cardholder (your customer) and the card association. • Merchant Account: It is opened by a business owner via a merchant bank (also referred to as an acquirer or acquiring bank) to accept credit cards, debit cards, or ACH (Automated clearing house) transactions. • Merchant Processing: It refers to the complete process of accepting and processing payment transactions made with debit or credit cards. • Online payment processing: It refers to the complete process of accepting digital payments made via an online platform, such as a website or mobile app. Businesses can accept digital payments from customers using numerous payment methods, including but not limited to digital wallets, bank transfers, and debit or credit cards. • Point-of-sale (POS): It refers to the location where payments for goods or services are made by customers. Colloquially known as the cash register or cash, it can also be used to describe the software or hardware used to process transactions. • POS terminal: It refers to an electronic handheld payment device that is used to process credit and debit card transactions. • Payment gateway: It refers to an essential technology for business owners to securely and seamlessly process digital payments (made through digital wallets, debit cards, credit cards, etc.). The payment gateway facilitates secure communication of the customer's payment information, using state-of-the-art encryption, to the acquiring bank for payment acceptance. • PCI DSS Compliance: Formed in 2004, the Payment Card Industry Data Security Standard (PCI DSS) refers to an information security standard that is utilized by major card brands to handle credit cards. It is aimed to reduce payment card fraud by increasing security controls around cardholder data. It is administered by the PCI SSC (Payment Card Industry Security Standards Council). • Payment processor: In the world of credit card processing, it refers to a third-party organization that processes debit or credit card transactions. Top credit card processors such as WebPays generally provide a wide range of merchant solutions such as customer support, security features, payment gateways, and others.
- 3. • Processor Costs: Processor Costs are usually non-negotiable by the merchant and they may or may not include markup by the payments company to cover costs generated by the merchant such as PCI compliance fees, technology fees, support fees, and more. We hope that this ultimate guide to credit card processing terminology by WebPays helped you gain a clear and complete understanding about top credit card processors and credit card processing.