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Industry Terms

ACH REJECTS: Return Processing: The process of returning and settling funds for checks (demand instruments) that were dishonored by the RDFI (Paying Bank) and returned to the ODFI (Bank of First Deposit).

ADDRESS VERIFICATION SERVICE (AVS): The process of validating a cardholder's given address against the issuer's records, to determine accuracy and deter 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.

ADJUSMENTS: An adjustment is initiated by the acquirer to correct a processing error. The error could be a duplication of a transaction or the result of a cardholder dispute. The acquirer debits or credits the merchant DDA account for the dollar amount of the adjustment.

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.

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. Based on the applicant's eligibility, an underwriter will have the capability to decrease or increase the parameters.

BALANCE SHEET: A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet must follow the following formula:

Assets = Liabilities + Shareholders' Equity BUSINESS TYPE: A merchants' business type is determined by the transactions processed.

  • Retail - Merchants in a face-to-face environment that sell tangible goods. These merchants use conventional terminals and most transactions are usually swiped.
  • Service - Merchants in a face-to-face environment that sell services like automobile repair or plumbing. These merchants use conventional terminals and may either swipe transactions or key them in and take a manual imprint.
  • Restaurant - Merchants in a face-to-face environment who sell prepared foods. These merchants use conventional terminals and most transactions are usually swiped.
  • Hotel - Merchants in a face-to-face environment that sells lodging and hospitality services. These merchants use conventional terminals and either swipe or key in their transactions.
  • Mail Order / Telephone Order (MOTO) - Merchants in a non-face-to-face environment that sells tangible goods through mail order or over the telephone. These merchants use software or conventional terminals and all transactions are keyed in.
  • Internet - Merchants who process transactions over the Internet. The cardholder types in their credit card information online and the transaction is processed in seconds.

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 VERIFICATION NUMBER: The card verification number is the three or four digit code printed (not embossed) on the back of most credit cards and on some cases in the front of the card. Validation based on this number is available at the time of payment authorization to confirm the purchaser is in possession of the card. While also not full proof, requesting CVN goes a step beyond AVS in screening for fraud (with the trade-off being an extra step in the check-out/payment process which may impact sales conversion).

CHARGEBACK: A chargeback is the return of a transaction from the cardholder's bank. This may occur if the cardholder is disputing the transaction or if the authorization process was not followed properly.

CREDIT REPORT: Obtained for merchant applications and are reviewed for verification of identity as well as credit criteria CUSTOMER ADVISE: Credit is stopped by a merchant which results in a returned check.

DDA/ DEMAND DEPOSIT ACCOUNT: DDA / or banking deposit account is required on all applicants and must be domiciled in the United States

DRIVERS LICENSE: A valid government-issued identification document which is required for all applicants.

DUPLICATE TRANSCATIONS: Duplicate transactions processed by merchants. These are charges that are returned by the card issuer for duplicate charges made on a cardholders card.

FINANCIAL STATEMENTS: Documantation providing an overview of a business' financial condition in both short and long term.

  1. Balance sheet: also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and net equity as of a given point in time.
  2. Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time.
  3. The Profit and Loss (P&L) Statement is also known as the Income Statement. It shows how well a company buys and sells inventory (or services) to make a profit. A firm must create a profit in order to survive and remain solvent. Careful analysis of the components of a P&L is important in determining the cash flow available to repay existing debt, finance additional debt (for business expansion), or to reinvest in the company.

501 C 3 REPORT: Documentation required for all non profit applicants validating approved non -profit status with the U.S. Treasury Department

48 HOUR FUNDINGFunds are received 48 hours after settlement.

INSUFFICIENT FUNDS: Checks written that exceed the funds deposited in the DDA acct. Banks charge net fees for processing the check.

INVALID DDA ACCOUNT: Merchant transactions are returned due to inability to locate the deposit account provided by applicants. Net fees are charged by the issuing bank.

KEYED: When transactions are "keyed" the information from a credit card is typed into the credit card processing equipment (like a terminal or a computer) manually. This allows the merchant to accept credit cards when the card is unavailable such as an over the phone transaction or if the magnetic strip on the back of the card is unreadable to the credit card terminal.

MAC ALERT: A requirement issued by processing and acquirers to check all applicants' names for match on federal watch list.

MARKETING MATERIALS: Documentation such as brochures, advertisements or flyers verifying the merchant's establishment in U.S. This is required for all applicants. The Merchants business model must make sense by all logical means

MATCH REPORT: Report generated by the MasterCard Association which validates an applicants' credibility and insuries all merchants abide the associations' rules and regulations.

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, charge backs, end-of-month processing fees, etc.

90 Day ADDENDUM FORM: An addendum that is required on all applicants validating sales on any certificates /subscriptions do not exceed 90 days.

PERSONAL GUARANTEE: An agreement which is required on all merchant applications validating the ownership and responsibility for the account.

PRE PRINTED VOIDED CHECK: A signed, voided check or a signed bank letter from the applicant is required to validate DDA /or Deposit account ownership.

PROCESSOR: A Processor is the company that actually routes an Authorization Request from a Point of Sale device to Visa or Master Card, and then arranges for Fund Settlement to the merchant. Such processors are traditionally accessed via direct dial out modems connecting to their system.

PRODUCT LISTINGS: Documentation verifying the merchant's goods/ or services being sold. This is required for all applicants.

RECURRING TRANSACTION: A credit card transaction, which has been permitted by a customer, that is periodically charged to the customer's account. . (i.e. weekly, monthly, quarterly).

RESERVE ACCOUNT: One method that ACH Processors use to mitigate risk is to require that merchants maintain a Reserve Account at the processor's sponsoring bank. This allows the processor to issue a hold on funds in this account when fraud has been detected or an excessively large number of returns are received. Merchants with good credit and history can usually meet the expectations of ACH processors for covering returns and so are not always required to keep a reserve account. In cases where a reserve is required, the minimum-reserve-balance in the account is set at about 20% of the anticipated processing.

72 HOUR FUNDINGFunds are received 72 hours after settlement.

SOCIAL SECURITY NUMBER: A Social Security ID number is required on all principals.

TERMINATED MERCHANT FILE (TMF): Merchants with excessive charge backs are stripped of their merchant account and the ability to accept credit card orders. The merchant is then placed on the TMF match list that all Merchant Service Providers have access to. Being placed on this file can keep you from obtaining another merchant account for several years.

TOTAL MONTHLY VOLUME: Total monthly sales volume requested by merchant. Based on the applicants' eligibility, an underwriter will have the capability to increase or decrease the parameters.

UNDERWRITING: The department within merchant services that selects the merchants that can be boarded based on their risk assessment.