Payments Industry Terms and Definitions

Below are some common terms you’ll run across as a merchant dealing with payments processing.

3DS:
Acronym for “Three Domains Secure”. 3DS is an authentication process where three “domains” (hence 3D) are involved in authorizing a transaction. Those domains are the issuing bank, the acquiring bank, and an “interpolarity” domain, that handles communications between merchant, issuer and acquirer.
acquirer:
(AKA “acquiring bank”) The merchant’s bank that receives the money from a transaction.
Agent:
Agents are subcontracted by ISOs or MSPs to connect merchants with the card association they resell for.
chargeback:
A reversal of charges by an issuing bank resulting from cardholder complaint, fraud, or processing error.
chargeback ratio:
The percentage of transactions that become chargebacks within a specified period of time, used by Visa, MasterCard and other card associations and banks to determine if a merchant is processing too much fraud. Typically this threshold is around 1%.
compelling evidence:
The evidence presented by a merchant to the cardholder’s bank that is sufficient enough to reverse a chargeback.
decline:
When a transaction is invalidated because the information provided can not be authenticated or it triggers processing security measures.
EMV:
Acronym for “EuroPay, MasterCard and Visa” which together created the standard for “smart card” technology.
false decline:
(AKA false positive) When a legitimate transaction was incorrectly declined.
false positive:
(AKA false decline) When a legitimate transaction was incorrectly declined.
friendly fraud:
When a cardholder tries to get money back from a purchase that they made, claiming the transaction was fraudulent.
gateway:
The point of sale where a cardholder enters their credit card and other personal information required to process a transaction.
ISO:
Acronym for “Independent Sales Organizations”. ISOs are contracted by VISA to connect merchants with their services.
issuer:
(AKA “issuing bank”) The bank that has issued the card that a cardholder uses to purchase goods/services from a merchant.
MDR:
Acronym for “Merchant Discount Rate”. The rate that a merchant is charged per transaction.
merchant account:
A bank account which the merchant holds with an acquiring bank to process credit card transactions.
MID:
Acronym for “Merchant Identification Number”. The number that identifies a merchant account, MID is now used as a shorthand for a merchant account.
MSP:
Acronym for “Member Service Providers”. MSPs are contracted by MasterCard to connect merchants with their services.
paywall:
The divide between free, publicly accessible content and the area users must pay to access on a website.
PCI:
Acronym for “Payment Card Industry Association”. The PCI is the trade group of major card companies American Express, Discover, JCB, MasterCard and Visa.
presentment:
The request made by an acquiring bank to an issuing bank to retrieve funds that pay for a transaction.
representment:
When a merchant or their acquirer re-submit their request for funds from a cardholder after the initial transaction was charged back
rolling reserve:
Usually 5-10% of a merchant’s monthly sales that are witheld by an acquirer to cover costs stemming from chargebacks.
ticket size:
The average dollar amount of a merchant’s transactions.
TID:
Acronym for “Terminal Identification Number”. The number that identifies a specific terminal that has processed a transaction.
user logs:
A form of compelling evidence, user logs track how a customer logs in and navigates behind a merchant’s paywall.
VCR:
Acronym for “the VISA Claims Resolution Initiative”. The initiative was implemented April 15, 2018 as an attempt to update and improve cardholder disputes.
VMPI:
Acronym for “VISA Merchant Purchase Inquiry”. A component of the VCR, the VMPI is an automated platform VISA provides issuing banks with to send transaction data to merchants in cardholder disputes. It is intended as a preemptive means to resolve disputes before they become chargebacks.
VROL:
Acronym for “VISA Resolve Online”. This is VISA’s proprietary online infrastructure for resolving cardholder disputes. VROL enables merchants and issuers to exchange transaction data to facilitate dispute resolution.

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