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Glossary of Industry Terms

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                                           PCI Related Terms Technical Terms

ABA routing number

The American Banking Association routing number is a 9-digit number (bank code) identifying the financial institution on which it was drawn. This number is found at the bottom of a check generally between colons and directs ACH deposits to the correct bank. This number is used to facilitate the electronic routing of funds (ACH transfer) from one bank account to another. This code is also used by Federal Reserve Banks to process Fedwire funds transfers and by the Automated Clearing House to process direct deposits and other automated transfers. The routing number is derived from the bank\'s transit number originated by the American Bankers Association, which designed it in 1910.

Acceptance

The act of receiving a credit or debit card as a form of payment.
 

Acceptor

A business that has qualified to accept credit or debit cards as payment (a merchant).
 

Access Control

(Technical)
Mechanisms that limit availability of information or information processing resources only to authorized persons or applications. This ensures that systems and data are only accessed by those authorized to do so, and only in a manner for which they have been authorized. The access may include data access permissions including create, read, update, and delete.
 

Access Number

A telephone number dialed by the modem that lets a computing device (computer, terminal, etc.) communicate with an online service or Internet Service Provider (ISP).

Account Harvesting

(PCI) (Technical)
Usually performed in a fraudulent fashion, it is the process of identifying existing user accounts based on trial and error. The perpetrator may be guessing passwords based upon known user names, or may try to use common names based upon employees or general terms.
Note: Providing excessive information in error messages can disclose enough to make it easier for an attacker to penetrate and ‘harvest’ or compromise the system.
 

Account Number Truncation

See PAN Truncation.

A procedure by which a Cardholder account number is shortened to show only the last 4 digits as a security measure. The process of not printing the full primary account number and expiration date on a receipt. Typically, only the last four digits of the primary account number are printed.
 

Accounts Payable

Debts that a business owes to creditors.

Acquirer

A financial institution that provides accounts for merchants and is an organization licensed as a member of Visa / MasterCard  as an affiliated bank or bank/processor. It is in the business of processing credit card transactions for businesses (acceptors). The merchant acquirer acquires and settles credit/debit transactions, acting as am intermediary between the merchant and the consumers issuing bank. An acquirer may also facilitate merchant relationships with other card brands such as American Express and Discover. The merchant typically signs an agreement with the acquirer/processor or the acquirer and a third party processor.
 
Acquirers are so named because they acquire a merchant\'s sales tickets and credit the order value to the merchant\'s account.
 
Note: Some companies (processors and ISOs) refer to themselves as acquires (but not acquiring banks) when they have a BIN relationship with a Bank. This means that they have established a contractual relationship, as either a shared responsibility, or complete responsibility, for the BIN.
 

Address Verification Service

Introduced in 1996 by Visa and Mastercard, it is a service through which the merchant verifies the Cardholder’s address, in whole or in part. Primarily used by merchants when the cardholder or the cardholder’s card is not present. These are normally Mail Order, Telephone Order, and Internet merchants. Address Verification is intended to deter fraudulent transactions but is not a guarantee that a transaction is valid. It is a real-time service that operates by verifying the cardholder’s address against the records of the card issuing bank and returning the response as advice to the merchant for appropriate action. The network response helps the merchant determine the level of accuracy of the address match and only functions for US-issued credit cards. Using AVS helps secure the more favorable interchange rates.
 

Adjustments

Adjustments come in many forms, depending on the context.
 
    • Credit Card Processing - An adjustment is initiated by the acquirer (a Visa / Master Card Affiliated Bank or Bank/Processor that is the host of the merchant\'s merchant bank account) to correct a processing error, such as a duplicate transaction or the result of a cardholder dispute. The acquirer debits or credits the merchant DDA account for the dollar amount of the adjustment.
    • Debit Card Processing - An electronic message is initiated by a Debit Network member to correct a transaction that didn’t settle for the amount submitted or an amount that’s disputed by the Debit Card holder.
    • Merchant Processor – An adjustment is created by the processor and shows up on the merchant statement. These may relate to processing issues, billing issues, transaction downgrades, or pricing issues.
 

Administrative Interface

Typically a web-based tool allowing Merchants to view/edit their web reporting and processing information. This may or may not included authority to create new users and associate functional access/rights to those users.
 

Advanced Encryption Standard (AES)

A block cipher adopted by NIST in November 2001 and used as an encryption methodology referenced by PCI DSS standard. The Algorithm is specified in FIPS PUB 197.
 

Affidavit

A sworn statement by a customer stating that an ACH transaction was unauthorized or that the authorization was revoked.
 

American Express (AMEX)

American Express is a diversified international financial services company headquartered in New York City.
It is a competitor to Visa & Master Card that both issues cards and acquires transactions through merchants. This is unlike Visa and MasterCard which are associations of financial institutions and performs their own transaction processing within their own processing network.
 

American National Standards Institute (ANSI)

(Technical)
Private, non-profit organization that administers and coordinates the voluntary standardization and conformity assessment system within the United States.
 

American Standard Code for Information Interchange (ASCII)

(Technical)
The standard system for representing letters and symbols. Each letter or symbol is assigned a unique number between 0 and 127. Many of the existing transaction protocols rely on this encoding of data for passing data.
 

Annual Fee

An annual fee is any yearly fixed charge that banks or other financial institutions charge for the use of merchant accounts, credit cards or other financial instruments. This is also called a renewal fee, subscription fee, or membership fee.
 

Antenna

The part of a hardware device that communicates with networks, smart cards and/or other payment devices in a wireless fashion. The device may be a POS device, computer, or cell phone.
 

Anti-Virus Program

Programs capable of detecting, removing, and protecting against various forms of malicious code or malware, including viruses, worms, Trojan horses, spyware, and adware.
 

Application Fee

An application fee is any charge paid by a potential customer who is requesting merchant credit card processing or other services from any institution, financial or otherwise. Application fees for merchant accounts are not uncommon.
 

Application Layer

(Technical)
The layer of the ISO Reference Model which provides communication between applications.
 

Application Programming Interface (API)

(Technical)
An Application Programming Interface is a set of routines, data structures, object classes and/or protocols provided by libraries and/or operating system services in order to support the building of applications. In lay terms, it is basically an agreed upon set of things for different programs to work together.
 

Application Security

(Technical)
The provision of security services within user applications running above the Application Layer of the ISO model.
 

Approval

Within the transaction processing cycle, identifies that a transaction has been approved for processing by the appropriate authority (Issuing bank, American Express, etc.). Normally, the authority (issuing bank, etc.) evaluates the identified payment vehicle (credit card) is a valid, in good standing, and within the appropriate limits set up for the consumer.
 

Approval Response

(PCI)
The authorization response code received when a transaction is approved.  
 

(PCI) See also Approval.

Approved Standards

(PCI) (Technical)
Approved standards are standardized algorithms (like in ISO and ANSI) and well-known commercially available standards (like Blowfish) that meet the intent of strong cryptography. Examples of approved standards are AES (128 bits and higher), TDES (two or three independent keys), RSA (1024 bits) and ElGamal (1024 bits).
 

Arbitration

A conflict resolution process outside of the court system between two entities that agree to be bound by the arbitrator’s decision. This procedure may be used when there is a chargeback dispute between two parties. Arbitration is used to determine who is responsible for a transaction.
 

Articles of Incorporation

A legal document that identifies the terms under which a corporation was created as well as the principal members of the organization if appropriate. The organization is bound to these articles.
 

Assessment (PCI)

(PCI)
Assessments are performed by accredited PCI Assessors to create a report on compliance for processors and major merchants.
 

Asset

(PCI)
Information or information processing resources of an organization
 

Association

See Bankcard Association.

Any entity formed to administer and promote Cards. The best known examples of Associations include MasterCard International, Incorporated (”MasterCard”), Visa U.S.A., Inc. and Visa International (”Visa”), and Discover Financial Services LLC (”Discover”).
 

Association Rules

The rules, regulations, releases, interpretations and other requirements (whether contractual or otherwise) imposed or adopted by any Association. These rules may be updated from time to time by the associations and distributed to their members. These are typically released twice annually, but may be released as needed by the association.
 

Audio Response Unit (ARU)

An electronic authorization and capture product allowing a merchant to utilize a touch-tone telephone to process transactions.
 

Audit (PCI)

(PCI)
The process of reviewing financial accounts, records, and accounting procedures to identify if appropriate controls have been used and that the records are accurate.
 

Audit Log

(PCI)
An Audit Log captures a record of events in a computer system, whether initiated by users or systems. These logs are used to review/research suspicious activities or to reconstruct the sequence of events leading to an issue. This record should identify the operation, when it happened, and who initiated the operation.
The Audit Log may also be referred to as security audit trail.
 

Auth Fee

This is the amount of money charged to the merchant for authorizing a transaction.
 

Authenticate

To verify that a consumer credit card is valid for a card-not-present transaction. The card associations are starting to assess penalties to merchants who use a zero amount authorization (or small dollar amount transaction - $1.00) instead of an Authenticate transaction. The Authenticate is typically a better mechanism because it does not reduce the limit to buy for the consumer.
 

See also Authorization.

Authentication (PCI)

(PCI) (Technical)
Process of verifying the identity of a subject or process. Authentication assures that data has come from its claimed source, or it corroborates the claimed identity of a communicating party.
 

Authorization

The process of verifying with the card issuer that an account has sufficient funds available and is in good standing. The cardholder\'s available credit limit is reduced by the authorized amount for a predetermined amount of time. A merchant receives an authorization code when the financial institution verifies the funds and approves the transaction. An Authorization (or pre-authorization) is the first half of a sale. It is during this process that the issuing bank checks to ensure that the available credit on the card is not exceeded. The funds are not necessarily transferred at batch settlement/close, depending on merchant type/settings, unless a capture or the transaction is performed using the Authorization\'s approval code. This capture of the transaction, or post-authorization, tells the processor to complete/settle the transaction. There is a time limit for the Authorization\'s usability. The processor determines the time limit, which is usually 7-10 days, after which the transaction amount is released back into the card holder buy limit.
 
Visa is currently in the process of releasing a single message format, that will operate much the same as a debit transaction in regard to the interactions with the pos device.
 

Authorization (PCI)

(PCI) (Technical)
Granting of access or other rights to a user, program, or process
 

Authorization Amount

Dollar amount approved in a payment transaction.
 

Authorization Approval Code

A numerical or alphanumerical code that a credit card issuing bank, or its authorizing processor, provides to a merchant to indicate and verify approval or denial for an sales transaction authorization request. This code should be printed on the sales draft.
 

Authorization Center

A department that electronically verifies an authorization request from a merchant. This comes in the form of a Voice Authorization center for an issuing bank or its processing agent.
 

Authorization Code

A code that an issuer, or its authorizing processor, provides to indicate approval or denial for an authorization request.
 

See also Authorization Approval Code.

Authorization Date

The date and time that transaction was authorized.
 

Authorization Fee

A credit card authorization fee is charged to a merchant when a request is made to authorize a transaction. Not all processors charge separately for an authorization and then for a completed and settled transaction, but most do. This fee can occur whether from a Point of Sale (POS) terminal of from a web site, or other device authorizing a sale transaction or whether the cardholder is in person or conducting the transaction via telephone or internet.
 
This fee may be listed as its own line item to the Merchant on their statement or it may be “bundled” into the Merchant’s Discount Rate. Some Merchant Service Providers will state they are waiving this fee, but usually it is just being “bundled” in the Discount Rate.
 

Authorization Only

Authorization only is a request that reserves funds for a credit card transaction without actually capturing and settling those funds.  These transactions are typically the first part of transactions where the amount to be charged is not known or that require shipment of product to ensure that the consumer is not charged until the product is actually shipped to them. The second part of the transaction is a capture request, which initiates the settlement process with the actual amount of the transaction. In these cases, a different amount may be captured/settled than authorized (partial shipments/back orders). Only certain industries are allowed to use this functionality: MO/TO, hotels, car rental or contractors. In the case of Hotels and Car rental, the actual amount is not as yet known and is an estimate. The authorization only requests will typically expire 7 days from the approval date of the authorization request.
 

See also Authorization.

Authorization Response

The reply to an authorization request sent to a merchant from the issuing bank or its processor. Responses vary according to processor, but generally include such responses as:
    • Approval     -- transaction was approved
    • Decline       -- transaction was not approved (may include a number that identifies the general reason)
    • Call Center  -- response pending more information, merchant must call the toll-free authorization phone number.
 

Authorized Amount

Dollar amount approved for a sale transaction from the authorization request (or capture request for a force or voice auth transaction). This amount may not be equal to the Transaction Amount in some cases, such as restaurant, lodging, and partial shipment cases where not all of the product ordered is available.  
 

Authorized Transactions

Transactions that have been approved by the issuing bank or its processor.
 

Auto-Close

A terminal or host-based feature that allows an end-of-day batch closing to occur automatically at a specified time, without being initiated by the merchant.
 

Automated Clearing House (ACH)

(Automated Clearing House) A system of the U.S. Federal Reserve Bank that provides electronic funds transfer (EFT) between banks. It is used for all kinds of fund transfer transactions, including direct deposit of paychecks and monthly debits for routine payments to vendors. The ACH is separate and distinct from the various bank card networks that process credit card transactions. ACH operations are done in a batch mode, which can take up to 72 hours before the money is actually transmitted. A return notification is sent if there are insufficient funds in the account.
 
The term ACH (or ACH network) also denotes a secure computer network that efficiently connects individuals, businesses and banks together through the Federal Reserve System enabling electronic payments to flow safely from start to finish. Rules and regulations governing the ACH network are established by NACHA (the National Automated Clearing House Association) and the Federal Reserve. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills, pre-authorized debits, Internet and telephone payments, and checks converted into ACH payments.
 

See also Automatic Check Handling (ACH).

Automated Teller Machine (ATM)

An unattended, magnetic stripe-reading terminal that dispenses cash; accepts deposits and loan payments; enables a bank customer to order transfers among accounts and make account inquiries.
 

Automatic Check Handling (ACH)

ACH can also mean Automated Clearing House. ACH is a form of e-payment or electronic payment. There are two ways payments can be processed: (1) by wire transfer, or (2) through an automated clearinghouse. Wire transfer is an e-payment system that is designed to handle high-dollar, time-crucial payments, usually between large banks. ACH is designed to be an e-check or electronic check. Unlike the wire transfer, it is usually used to process higher volumes or small-dollar payments for settlement issues within 1 to 2 business days. All ACH transactions are settled pretty much the same way checks are. The clearinghouse takes all of the ACH files received daily from member banks, it then divides them by the originating bank (where the check was either cashed or deposited) and the paying bank (the bank where the check was drawn), then it totals the accounts, and credits or deducts the accounts accordingly.
 

See also Automated Clearing House (ACH).

Average Ticket Size

The average credit card dollar amount for transactions that the merchant anticipates processing or actually processes over time. The average ticket amount is calculated by dividing the total sales volume by the total number of sales for the specified period of time (month, quarterly, annual). Note that seasonality can adversely impact the average.
 

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I highly recommend PE Systems to any business that desires an outside review of their payment processes and wants potential cost savings.
Central Washington University

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Central Washington University
 
 
Central Washington University
400 E. 8th Avenue
Ellensburg, WA 98926-7471
 
Dear Sir or Madam:
 
Central Washington University contracted with PE Systems in January of 2002, to review our credit/debit card payment processes and to make recommendations for cost savings.  PES reviewed our receipting processes, our contracted agreements, and fee structures.  They educated our staff in the most efficient way to process transactions, assisted in the renegotiations of our service contracts fees, and recommended changes in business practices.
 
Alan and Tom have been a pleasure to work with.  They are experts in the workings of the electronic payment world of banking.  They were flexible and quick in their follow up activities.  They went beyond what was expected in terms of service and advice.  Their reimbursement plan makes for a no lose situation for their clients.  Staff time required for their review was minimal.
 
I highly recommend PE Systems to any business that desires an outside review of their payment processes and wants potential cost savings.
 
Sincerely,
 
Joseph M. Antonich
Director of Financial Services
 
 






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