E-Commerce Merchant Glossary

Acquiring Bank/Merchant Bank
A financial institution that is a member of Visa and/or MasterCard and maintains the merchant credit card processing relationship.  The acquirer receives all transactions from the merchant to be distributed to the issuing banks.

Acquiring Processor
The processor provides credit card processing, billing, reporting and settlement and operational services to acquiring and issuing banks.

Authorization
A request made to the payment processor in order to approve the reservation of funds in a customer's account. The request can involve several transaction types, including Auth, Pre-Auth, Post-Auth, Re-Auth, and RePre-Auth.

Auth
A transaction type in which a transaction is preauthorized and post-authorized in one step. Auth is used only to process purchases of goods or services that do not require physical shipment, e.g., donations, registrations, or "soft" goods that are delivered electronically.  An Auth is sometimes referred to as a Sale.

Batch
The accumulation of captured transactions waiting to be settled.  Multiple batches may be settled throughout the day.

Billing Address
The address to which a customer's credit card billing statement is mailed. It is used to help verify that the customer is the actual owner of the credit card he/she is using.

Capture
Converting the authorization amount into a billable transaction record within batch transactions cannot be captured unless previously authorized, and authorizations cannot be captured until the goods or services have been shipped or transmitted to the consumer.

Cardholder
Any person who opens a credit card account and makes purchases using a credit card.

Card-Not-Present
This term pertains to a credit card transaction that does not require the cardholder and card to be physically present. All Internet transactions are card-not-present transactions.

Credit Card Processor
A corporation that manages the process of transferring authorized and captured credit card funds between different financial accounts.  These corporations typically charge merchants a discount rate and a transaction fee for this service. These fees vary from processor to processor.

CVM (Card Verification Method)
A method used to ensure that a credit card being used in a purchase is in the possession of its owner.  The CVM security code is a 3 or 4 digit code imprinted on the physical credit card, but not embedded or encrypted in the magnetic stripe.  The code is a 3-digit number located on the signature strip on the back of Visa and MasterCard cards after the card number.  It is on the front of American Express cards and is 4 digits long.

Chargeback
The reversal of a previously Settled transaction in which the merchant bank debits the amount of the sale from the merchant's account because the cardholder has disputed the charge.

Credit Deposit
The value of a merchant's credit card purchases that are credited to its bank account after the acquirer buys the merchant's sales slips. The deposit is credited. It is not funded until the acquirer gets the monetary value from the issuer during settlement.

Crypto box
A commonly used term that refers to a piece of hardware which contains one or more encryption software applications.

Customer
The individual who is purchasing the goods or services from the Merchant and using a credit card to pay.

Digital Receipt
An electronic (email) acknowledgement of an order placed from an e-commerce-enabled web site sent to the customer placing the order.  It is merely for the convenience and assurance of the customer.  It has no legal standing since email can be lost or forged.

Discount Rate
The fee a merchant pays its acquiring bank/merchant bank for the privilege to deposit the value of each day's credit purchases. The fee is usually a small percentage of the purchase value.

Firewall
A series of network security measures that establish and monitor restricted access to a network of servers.

HTML
Stands for Hyper Text Markup Language, the standard set of formatting codes which are inserted into a text file to be published on the World Wide Web. These codes affect how the text in the file will be displayed when viewed over the Internet by people using Mosaic and other World Wide Web browsers. It also tells the web browser where to find other resources (such as images) displayed within the page or which have been hotlinked to it.

Interchange
The exchange of information, transaction data and money among banks. Interchange systems are managed by Visa and MasterCard associations and are very standardized so banks and merchants worldwide can use them.

Interchange Fee

A fee paid by the acquiring bank/merchant bank to the issuing bank. The fee compensates the issuer for the time after settlement with the acquiring bank/merchant bank and before it recoups the settlement value from the cardholder.

Issuer
The bank that extends credit to customers through bankcard accounts. The bank issues the credit card and receives the cardholder's payment at the end of the billing period. Also called the issuing bank or the cardholder bank.

Merchant ID
A credit card processor assigns this unique computer code to a merchant after he has been successfully approved to take credit card purchases. This code identifies his specific bank account into and out of which credit card funds are transferred.

Online Merchant
The online business accepting credit card payments for the goods or services they provide.

Order
A record of a request for goods or services initiated by a customer.

Partial Shipment
A process in which a store ships/provides only some of the goods/services in a single order. Therefore, the PostAuth amount would be less than the amount of the approved PreAuth for the order.

Point-of-Sale
A facility, such as a web form, for the merchant to enter a new customer order.  It is used by a merchant on behalf of the customer, who may initiate the order in person, by phone, fax, or other method.

PostAuth
A transaction that puts a PreAuth transaction into a Captured state for settlement. In the case of partial shipments, the PostAuth amount may be less than the PreAuth amount. By law, PostAuths can be initiated only after the purchased goods have been shipped.

PreAuth
A transaction type in which a cardholder's account is verified to be in good standing, that is, the card is valid and has not reached its limit. Any applicable Address Verification Service checks have been performed and approved. If the verifications are approved, the total amount of the order is reserved against the cardholder's account balance.

PreAuths are used if goods are to be physically shipped or in other cases for which the merchant must first verify whether the order can be fulfilled. An approved PreAuth is followed by a PostAuth, which prepares it for settlement.

Price threshold
A method of charging for shipping. The merchant defines the various price ranges and assigns an amount for shipping charges to each range.

Real-time credit card processing
When a credit card purchase is “authorized” while a shopper is on-line. If the credit card is denied, the shopper has another opportunity to enter in another credit card number to be authorized.

Settlement
As the sales transaction value moves from the merchant to the acquiring bank, to the issuer, each party buys and sells the sales ticket. Settlement is what occurs when the acquiring bank and the issuer exchange data or funds during transactions.

SSL
The SSL (Secure Sockets Layer) Protocol is a protocol developed by Netscape Communications which provides secure communications between the server and client, preventing others from capturing or viewing the data being exchanged. Netscape has extensive information on the SSL Protocol.

Terminal ID
A term used to indicate the specific merchant ID used by a merchant to process a specific category of transactions. A merchant who handles retail sales transactions, phone/fax/mail order transactions and Internet transactions will likely have one master merchant ID for his retail store and two additional terminal IDs, one each for his phone/fax/mail orders and Internet transactions.

Ticket
Another name for the sales slip or its monetary value that results when a credit card purchase is made.

Transaction
A transaction is considered by most credit card processors to take place when a request for authorization or capture is passed through to them. Therefore, each authorization request and each capture request is a separate transaction. However, you should check with your credit card processor to determine their specific definition of a “transaction”.

Transaction Type
A label identifying the nature of the transaction and determines how the transaction will be handled. For example, a PreAuth transaction reserves funds.

The most common Transaction Types are Auth, PreAuth, PostAuth, Credit, and Void.  

Weight threshold
A method of charging for shipping. The merchant defines the various weight ranges and assigns a dollar amount for shipping charges to each range.

Void
A transaction type that cancels a transaction that has not yet been Settled.