Payment Industry Glossary | Intelligent Chargeback Management Software

What is 3-D Secure?

3-D Secure is a fraud prevention security protocol for online credit card payments. It facilitates the exchange of customer information between acquirer and issuer whenever a customer makes an online purchase. This allows merchants to confirm the identity of a customer, cutting down on identity fraud and reducing the frequency of “unauthorized transaction” chargebacks.

What is an Acquirer?

An acquirer is a bank or financial institution that processes payments, such as debit card or credit card transactions, on behalf of a merchant.

What is Address Verification Service?

Address Verification Service (AVS) is a tool for verifying a customer's identity during an online transaction or other card-not-present transaction. It verifies the customer's identity by asking them to input their address and then comparing that to the address on file with the issuing bank.

What is Arbitration?

Arbitration is the final step in an unresolved transaction dispute. If the acquiring and issuing banks cannot resolve the dispute on their own, they each present their case to the credit card company. The credit card company's decision is final and also results in fees being levied against the losing party.

What is Authorization?

Authorization is the process whereby the merchant requests that the issuing bank release funds to complete a purchase. It is the process of verifying that the credit card can adequately cover the cost of the transaction. The issuer may respond with a code indicating one of the following responses to the authorization request: approved, declined, referral/call, hold/pick up card, invalid account number, or expired card.

What is a Bank Identification Number?

The bank identification number (BIN) is the first four to six digits on a payment card. They identify the bank or financial institution that issued the card, the issuer's location, and the type of card.

What is a Billing Descriptor?

A billing descriptor is a short explanation that appears on a cardholders transaction statement. Billing descriptors usually have a 25 character limit and are often the name of the business.

What is a Business Identifier Code?

A business identifier code (BIC) is a unique identifier code for financial institutions that conduct international commerce. It is assigned by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

What is a Card Association?

A card association or card brand is a network of issuers and acquirers that process a specific brand of payment cards. Card brands are companies—such as Visa, Mastercard, or American Express—that facilitate credit card and debit card payments by lending funds to merchants and seeking reimbursement from cardholders.

What is a Card-Not-Present transaction?

Card-Not-Present (CNP) refers to any sort of transaction that does not involve a physical credit or debit card being run through a point-of-sales terminal. Transactions such as online transactions where the customer enters the card details or phone orders where the customer communicates the card details over the phone are common examples of CNP transactions.

What is a Card-Present transaction?

Card-Present refers to any sort of transaction that involves a physical credit or debit card being run through a point-of-sales terminal.

What is a Card Security Code?

A card security code (CVC2, CVV2, CID) is printed on each credit or debit card, either on the signature panel or above the embossed numbers on the front of the card. It is a fraud prevention tool for card-not-present (CNP) transactions. It is either a 3 or 4 digit number.

What is a Chargeback?

A chargeback is a mechanism for returning payment to a customer after a disputed credit or debit card charge. Unlike a refund, a chargeback does not involve the direct communication of customer and merchant but, rather, involves communications between their respective banks (issuer and acquirer).

Related Article: Introduction to Chargebacks 101

What is a Chargeback Fee?

A chargeback fee is assessed to a merchant by an acquirer to pay for administrative tasks associated with the processing of a chargeback. The fees are determined in the merchant account agreement between acquirer and merchant.

What is Compelling Evidence?

Compelling evidence is something that a merchant must provide in order to dispute a chargeback. It can include documents such as written communications with a customer, delivery confirmations, biometric payment confirmation information, and other written evidence that the merchant fulfilled their contract with the customer.

What is a Credit Card?

A credit card is a payment card issued by a financial institution that is connected to a line of credit from which the cardholder can borrow in order to make payments. It is distinct from a debit card, which draws from a bank account rather than a line of credit.

What is a Customer Relationship Management System?

A customer relationship management (CRM) system is a system that businesses use to store information about past, current, and potential customers and other business contacts.

What is a Debit Card?

A debit card is a payment card issued by a financial institution that is connected to a bank account from which the cardholder can withdraw money in order to make payments. It is distinct from a credit card, which draws from a line of credit rather than a bank account.

What is a Dispute Response?

A dispute response is the mechanism by which a merchant can challenge a potentially fraudulent or otherwise illegitimate payment dispute. In a successful dispute response, the merchant provides some evidence supporting the legitimacy of the original transaction and recovers the lost revenue from the initial dispute. Dispute responses can be submitted manually or automatically.

What is a Dual Message System?

A dual message system refers to one of Mastercard's two methods of processing credit and debit card transactions. In a dual message system, the merchant sends an authorization request and a request for settlement as two separate messages. This is most often used for signature confirmation transactions.

Related Article: Pre-Arbitration Rules for MasterCard

What is Dynamic Currency Conversion?

Dynamic Currency Conversion (DCC) allows cardholders who shop with international merchants to process transactions in the currency of their issuing bank rather than the merchant's local currency.

What is Electronic Funds Transfer?

Electronic funds transfer (EFT) is a transfer of funds from one bank account to another that is processed electronically over computer networks without the direct intervention of bank employees. Examples of EFTs include ATM transfers, direct deposit payments, automatic debit payment, funds transfers conducted over the telephone, credit and debit card transactions, and electronic bill payment.

What is Friendly Fraud?

Friendly fraud is when a customer requests a chargeback for a relatively innocuous reason, such as a family member making a purchase without the customer realizing, the customer genuinely forgetting that they had made a purchase, or some mistake relating to the customer not understanding something such as a return policy. The key distinction between friendly fraud and other forms of chargeback fraud is that the customer is not knowingly, intentionally committing fraud.

What is an Interchange Fee?

Interchange fees are paid by the acquirer to the issuer in order to cover costs related to the processing of transactions. These fees are set by the credit card networks. They are usually passed on to merchants through other fees levied by the acquirers.

What is an ISO (Independent Sales Organization)?

An independent sales organization, commonly known as an ISO, is contracted by acquirers and processors to fulfill such duties as sales and customer support.

What is an Issuer?

An issuer is the cardholder's bank. It is a member of a card association and issues payment on behalf of that association for the cardholder. Technically speaking, not all issuers are banks. Some card associations such as American Express serve as issuers themselves, bypassing the step of having a separate issuing bank.

What is the MATCH List?

The MATCH List stands for "Member Alert to Control High-Risk Merchants". It is a blacklist of merchants who have lost the privilege of processing payments. Reasons for a merchant being put on the MATCH list include too many chargebacks, accepting too many unauthorized transactions, accepting too many counterfeit transactions, making changes to the business that were not authorized by the acquirer, otherwise violating the merchant agreement, or even committing outright crime like money laundering. The MATCH List is the only currently available and regularly updated Terminated Merchant File (TMF).

Related Article: The True Cost of a Chargeback

What is a Merchant Account?

A merchant account is the account that a merchant has with an acquirer that allows the merchant to process payment card transactions. The acquirer deposits funds received from issuers into the merchant account.

What is a Merchant Account Reserve?

A merchant account reserve is created by the acquirer to withhold a portion of the merchant's funds to serve as a security deposit in case the merchant is unable to fulfill its financial obligations for any reason.

What are Merchant Category Codes?

A Merchant Category Code (MCC) is a four-digit number that indicates the kind of business that a merchant does. They are assigned by a credit card company when the business first starts accepting that card for payment.

What is a Merchant Service Agreement?

A merchant service agreement is the contract between the acquirer and merchant that establishes a merchant account and enumerates the conditions and responsibilities associated with the account. It is also sometimes known as a merchant processing agreement.

What is a MID?

A merchant identification number (MID) is a unique alphanumeric identifier that is assigned to a merchant account. It is used to identify the account at the various stages of processing a transaction.

What is Negative Option Billing?

Negative option billing is a form of subscription billing in which consumers receive goods or services free of charge and then must either specifically opt out of receiving further goods or services or automatically be enrolled in a subscription plan.

What are P2P payments?

P2P payments are peer-to-peer or person-to-person payments conducted through apps such as Cash App, Venmo, and Zelle.

What is Payment Card Industry Data Security Standard?

The Payment Card Industry Data Security Standard (PCI DSS) is an industry standard set of requirements for merchants, banks, payment device makers, software designers, and other entities involved in the process of payment transactions. They are designed to protect cardholder and account information.

What is a Payment Dispute?

A payment dispute is a mechanism by which a customer can challenge a credit or debit card charge that they feel was illegitimate. The issuer and acquirer negotiate the circumstances resulting in the merchant returning payment to the customer. Disputes can be initiated by the customer or by the issuer.

Related Article: Journey of a Payment Dispute

What is a Payment Gateway?

A payment gateway is the platform that receives transaction information and ensures its safe transmission to a payment processor. It can be device- or software-based. Payment gateways are where certain essential elements of the transaction process occur, such as the initialization of the authorization process, the calculation of taxes, the conversion of currencies, the initialization of fraud detection tools, and the processing of refunds.

What is a Payment Processor?

A payment processor is a system that processes transaction data between card associations, the acquirer, and the payment gateway. Among elements of the transaction process that occur through a payment processor are processing authorization requests between the gateway and issuers and processing chargebacks and representments between the issuers and acquirers.

What is Pre-Arbitration?

Pre-arbitration is the last step before potential arbitration in the process of a chargeback dispute. It is essentially the final opportunity the opposing parties and their banks have to resolve a dispute before the card brand steps in to render a final decision via arbitration.

Related Article: Pre-Arbitration Rules for Visa

What is Presentment?

Presentment is the formal act of a merchant requesting payment. In a payment card transaction, it consists of the merchant's data being submitted to the issuer to request payment.

What is a Reason Code?

A chargeback reason code is an alphanumeric code that indicates the claimed reason for a chargeback. Each card brand has their own unique set of reason codes.

Related Article: Chargeback Reason Codes Demystified

What is Recurring Billing?

Recurring billing, also known as subscription billing, is a business model whereby consumers are automatically charged regularly in exchange for subscribing to an ongoing product or service.

What is Representment?

Representment is the process that allows merchants to respond to chargebacks. It allows the merchant to provide evidence to prove the validity of the chargeback and recover the revenue that had been revoked as a result of the chargeback.

What is a Retrieval Request?

A retrieval request is a procedure whereby a cardholder or issuing bank obtains information about a particular transaction from a mechant. It is sometimes known as a “soft chargeback” because it resembles the first step of a chargeback.

What is SecureCode?

SecureCode is Mastercard's version of 3-D Secure anti-fraud, identity verification protocols.

What is a Settlement?

Settlement is the stage in a sales transaction where the acquirer and issuer exchange data or funds, completing the transaction.

What is a Terminated Merchant File (TMF)?

A terminated merchant file (TMF) is a blacklist of merchants who have lost the privilege of processing payments. The currently industry standard TMF is the MATCH List.

Related Article: The True Cost of a Chargeback

What is a Transaction Information Document (TID)?

A transaction information document (TID) is information that is sent from the acquirer to the issuer about a questionable transaction. This could include such items as sales receipts, invoices, shipping receipts, or tracking numbers.

What is a VAR Sheet?

A Value-Added Reseller (VAR) sheet is the file containing the identifying information for a merchant, including merchant account information, MID, processor info, and MCC. It is also known as a tear sheet or a parameter sheet.

What is a Virtual Payment Terminal?

A virtual payment terminal is a tool that allows merchants to process transactions online without the use of point-of-sale hardware.

What is Visa Chargeback Monitoring Program?

The Visa Chargeback Monitoring Program (VCMP) is a program that Visa uses to manage merchant accounts with the risk of receiving too many chargebacks.

What is Visa Claims Resolution?

Visa Claims Resolution (VCR) is a program by Visa to both streamline and standardize the chargeback and dispute resolution process for transactions involving Visa cards.

What is Visa Secure?

Visa Secure is Visa's version of 3-D Secure anti-fraud, identity verification protocols.

What is Win Rate?

Win rate is a statistic measuring the number of successfully disputed chargebacks compared to the total number of disputed chargebacks. It is a valuable metric for measuring the relative success of a merchant's chargeback management strategies.