Online Payment and Credit Card Processing Terminology Every Online Merchant Should Know
13 July, 2017
Using an online payment and/or credit card processing service can help to streamline business operations and increase revenue. Not only can you accept orders online, but you can receive credit and debit card payments from around the world.
If you’re going to take advantage of the technology, there are a few things you need to understand about it:
Issuing bank: This is the financial institution that provides the credit/debit cards—Wells Fargo, Bank of America, Citibank, Chase, etc.
Acquiring bank: This is the financial institution that processes the credit/debit card purchases on behalf of your business—Wells Fargo, Bank of America, Citibank, Chase, etc. They are responsible for accepting or declining the transactions.
Hard decline: This is a notification that the credit/debit card is not authorized for payments, due to account closure, use of a reported lost/stolen card, or invalid data. It is irreversible, and the card shouldn’t be tried again.
Soft decline: This is a notification that the credit/debit card transaction has been temporarily declined, due to incorrect credit card number or expiration date or insufficient funds. After a soft decline, the transaction can be re-attempted with the same card.
CNP: “Card not present” transactions do not require the buyer to physically present their card to the seller, but the transactions are made over the phone or via mobile device (such as via Apple Pay).
Mobile Point of Sale (mPOS): This is a device (tablet, smartphone, or credit card reader) that features a mobile application that can perform credit/debit card transactions.
Payment Processor: This is the financial institution that provides the payment processing services.
Payment Gateway: This is the software merchants use to process payments via debit/credit cards. The software works with the payment processor to send and receive the information on the transaction.
Payment Service Provider: This is a 3rd party, like Dynamic Merchant Solutions, that provides payment solutions to merchants, allowing them to accept payments from credit/debit cards, e-cards, Apple Pay, and mobile bank and money transfers.
Chargeback: This is a reversal of a transaction intended to protect customers (not merchants) from fraud. Customers may request a chargeback on a purchase made using a credit card if they suspect the transaction was fraudulent.
Friendly Fraud: Also known as “Chargeback Fraud”, this is when a customer requests a chargeback on their card after paying with the card and accepting the services or goods.
Authorization: This is the process to confirm that the credit/debit card has sufficient funds to complete the transaction.