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Glossary

ADSL (Asymmetric Digital Subscriber Line)

A communications protocol for connecting computers and other electronic devices to a network, such as the Internet. ADSL offers more bandwidth than current telephone modem connections. ADSL can operate over most existing telephone lines but is currently available in only a few areas and generally costs more.

 

Address Verification Service (AVS)

An important fraud-prevention mechanism that verifies customer addresses within the United States. This ensures the identification of the cardholder and guarantees that you ship merchandise to a legitimate customer.

 

Automated clearing house (ACH)

This is one acronym you'll want to remember. ACH is a national electronic network that transfers and clears funds between banking institutions on behalf of merchants and their customers. In other words, ACH helps you get your money from your customers' transactions.

 

Bandwidth

The amount of electronic data that can be transferred through an electronic connection in a given time. For modems connected by telephone to the Internet, the modem's "speed" represents the maximum possible bandwidth of the connection, such 56.6K.ps (kilobits per second). Competent web site operators strive to keep the size of web page files low to conserve bandwidth and speed downloading.

 

Batch

A collection of credit card transactions saved for submitting at one time, usually each day. Merchants who do not have real-time verification systems must submit their transactions manually through a POS terminal. Batch fees are charged to encourage a merchant to submit his or her transactions at one time, rather than throughout the day.

 

Browser

A software package used for locating, requesting and displaying web pages. Examples include Netscape Navigator, Microsoft Internet Explorer, and Opera.

 

Business-to-business (B2B)

Commerce refers to businesses purchasing goods from other businesses, generally over the Internet. It is a strong Internet growth component, and B2B connects companies' supply chains of companies through comprehensive Internet communications and offers goods through online catalog and portals. B2B is also known as BBP, or business-to-business procurement.

 

Business-to-Consumer (B2C)

When customers purchase products or services from a merchant - whether in an online or brick-and-mortar environment - they conduct B2C commerce.

 

Capture

The submission of a credit card transaction for processing and settlement. POS terminals and real-time processing software capture transactions to submit to merchant account providers or credit card processors.

 

Card Validation Code 2 (CVC2) and Card Verification Value 2 (CVV2)

Important fraud prevention mechanisms initiated by MasterCard and Visa to protect merchants. MasterCard's CVC2 and Visa's CVV2 codes help merchants distinguish between legitimate customers from those who try to commit fraud. These codes are the three digits on the back of a MasterCard or Visa credit card that follow the cardholder's credit card number. These codes protect Internet merchants by helping to identify a cardholder in anon- face-to-face transaction.

 

CFR (Cost & Freight)

Indicates that a quoted price includes the cost of the goods and transportation charges, but not insurance.

 

Chargeback

A procedure in which the bank that issues the credit card returns a customer's disputed transaction to the merchant - via the merchant's transaction processor - for resolution. For example, the Cardservice International Chargeback and Retrieval Department defends its merchants' rights by making sure that the MasterCard or Visa dispute resolution guidelines have been met when the cardholder-issuing banks send us transaction receipt requests and contested transactions. Having a dedicated, experienced chargeback and retrieval department protects merchants and reaches favorable resolutions for them by reviewing the merchant's responses to transaction requests and contested transactions for completeness and proper documentation.

 

CIF (Cost, Insurance & Freight)

A term indicating that a quoted price includes the cost of the goods, insurance, and transportation charges.

 

Client

A computer that requests and receives data over a network, including the Internet. The most common types of client on the Internet are computers running browsers or email programs.

 

Commerce Server

A web server which contains the software necessary for processing customer orders via the web, including shopping cart programs, dynamic inventory databases, and online payment systems. Commerce servers are usually also secure servers.

 

Commerce service provider (CSP)

Supplies businesses with the tools and services they need to buy and sell products and services over the Internet and manage their online enterprises. CSPs provide service in areas such as hardware and software design, risk management, online payment, brand recognition, distribution control, taxes, site development and hosting, site performance monitoring, fulfillment management, online marketing, building a customer base and order processing and delivery.

 

Cookies

Small files that are automatically downloaded from a web server and installed on the computer of someone browsing a web site. Information stored in cookies can then be accessed any time that computer returns to the site. Cookies allow web sites to "personalize" their appearance by identifying visitors, storing passwords, tracking preferences, and other possibilities.

 

Credit Card Processor

An organization that manages the process of transferring authorized and captured credit card funds between different financial accounts. Credit card processors charge merchants a discount rate and a transaction fee for this service, and these fees vary from processor to processor. Cardservice international is an example of a credit card processor.

 

Database

A file containing organized information and, most commonly, a filing and retrieval system for storing information. Most database software also include tools for data analysis. Examples of database software include Oracle, Sybase, and Microsoft Access.

 

Debit Card

Is used similarly to a credit card, but the funds are transferred immediately from the customer's bank account to the merchant's account. The advantage of debit cards to merchants is instant access to funds. Watch for Internet and e-commerce debit card capabilities in the near future.

 

Destination Control Statement (DCS)

A document that accompanies nearly all commercial shipments, which declares that shipments contents are licensed for export to a particular destination. The anti-diversion clause in the DCS precludes the diversion of the shipment to any other destination or use.

 

Digital Wallet

A consumer account set up to allow e-commerce transactions through a particular credit card processing system. Before the consumer can make a purchase, he or she must first establish and account with the credit card processor, who provides an ID and password. These can then be used to make purchases at any web site that supports that transaction system. CyberCash's "Digital Coin" system is an example of a digital wallet system.

 

Direct Deposit Account (DDA)

The bank account you establish to receive the funds your credit card processor transmits directly to you for your customers' purchases. It is the term that banks use for your checking account.

 

Discount Rate

A percentage fee paid to the merchant account provider or ISO for handling an electronic transaction. Most web merchants pay between two and 10 percent of their revenue from online credit card or electronic check orders.

 

Domain

A designation for particular location on the Internet. Domain names work alongside IP Addresses

 

E-Commerce

The processing of economic transactions, such as buying and selling, through electronic communication. E-commerce often refers to transactions occurring on the Internet, such as credit card purchases at web sites.

 

EDI (Electronic Data Interchange)

EDI is a global computer network, separate from the Internet, used to handle financial transactions between banks and other institutions, including large businesses.

 

Electronic Soft-Good Download (ESD)

Is the delivery of purchased merchandise (software programs, text, graphical images, music and information) by electronic meansover the Internet.

 

Encryption

Is the process of scrambling a message so that a key, held by only authorized recipients, is needed to unscramble and read the message. This is an important security and fraud prevention measure for merchants conducting e-commerce.

 

Euro

The common currency shared by most of the members of the European Union (Britain, Greece and Denmark are not participating). Introduced in January 1999, the Euro will eventually replace national currencies, such as the German Mark, French Franc, and Italian Lira.

 

Export License

A permission granted to ship a product to a foreign recipient. In the U.S., export licenses are either general licenses or individual export licenses.

 

Factoring

The purchase of debts owed or accounts receivable in exchange for immediate payment at a discount. In e-commerce, the term is often applied to a merchant that offers to process credit cards for another business, usually in exchange for a percentage of the transaction or some other fee. Factoring of credit card debt is illegal.

 

 

FAQ (Frequently Asked Questions)

A file or location containing basic information and, not surprisingly, the answers to frequently asked questions.

 

 

Freight Forwarder

A firm which handles export shipments for other firms.

 

Front-End

The user interface that appears on a web page, which allows a visitor to the site to interact with dynamic features, including databases, shopping-cart programs, and online purchase processing software.

 

FTP (File Transfer Protocol)

A set of standard codes for transferring files over the Internet. FTP is usually used for retrieving large files or files that cannot be displayed through a browser. Windows FTP and Fetch are examples of FTP software.

 

General License

A declaration by the U.S. Bureau of Export Administration that permits the open export of certain nonstrategic goods and services to designated countries. Exporters of these goods need not acquire an individual validated license (IVL). GIF (Graphic Interchange File): a file type that contains a graphic, photo or other image. GIFs are commonly found on the Web, along with another graphic file format called JPEG. GIFs tend to take less memory and bandwidth than JPEGs, and can contain animation. JPEGs offer greater image clarity, especially for photo images.

 

Holdback

A portion of the revenue from a merchant's credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant.

 

Hypertext markup language (HTML)

Is the standard set of formatting codes, which are inserted into a text file that is published on the World Wide Web. If you develop a Website, your developer will probably create it using HTML.

 

Hypertext transmission protocol (HTTP)

Transfers information, graphics and text over the Internet.

 

Individual Validated License (IVL)

Written declaration by the U.S. Dept. of Commerce granting permission to export specified products to a specified foreign recipient. See General License.

 

Interchange

The exchange of information, transaction data and money among banks. Interchange systems are managed by MasterCard and Visa 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. Interchange fees are roughly 1.37% and ten cents per transaction for a typical swiped business and 1.8% and ten cents per transaction for a MOTO or internet business. This is the money that for the most part goes to the bank that issued the credit card. You could say this is the Merchant Account Provider's cost of sales.

 

IP (Internet Protocol) Address

A designation for a particular location on the Internet, such as 216.35.46.16. IP addresses often operate in parallel to domains, but domain names used are more often since they are generally easier to remember.

 

IPSP (Internet Payment Service Provider)

A firm or organization which offers to process online credit card transactions, usually in exchange for transaction fees or a percentage of sales. See Factoring.

 

ISP (Internet Service Provider)

Allows an online merchant to access and conduct business over the Internet. EarthLink and America Online are examples of ISPs, which, for a monthly fee, provide their members with a software package, user name, a password and access telephone numbers. Once merchants contract with an ISP, they are ready to host a Web site and conduct e-commerce.

 

ISO 9000

A set of standards for electrical and electronic products, formulated by the International Standards Organization. Product quality standards in most nations either meet or exceed IS09000 standards.

 

Issuing Bank

The bank that maintains the consumer's credit card account and which must pay out to the merchant's account in a credit card purchase. The issuing back then bills the customer for the debt.

 

JCB

Originally the Japanese Credit Bureau, but today only the acronym JCB is used. JCB is Japan's leading credit card, and it is similar to MasterCard and Visa credit cards. Accepting JCB may be very important for merchants that conduct international ecommerce. You can apply for JCB through your transaction processor.

 

Java

A programming language frequently used on web sites. Java programs (or "applets") are downloaded from the web server to the visitor's own computer, which then runs them. This distinguishes Java programs from other web programming languages, like PERL, which reside and run on the web server. Only the results are downloaded to the visitor's computer.

 

JPEG or JPG

A file format used for storing graphic images, usually photographs. JPEG files are larger than GIF files of the same image, but offer better color control and clarity. See GIF.

 

Keyed Discount Rate

The discount rate charged by the merchant account provider for credit card transaction where no actual credit card was available to the merchant. MOTO rates are generally higher than swipe rates to account for the increased chance of fraud or nonpayment.



First Data Secure Payment Gateway (Previously Linkpoint or LSPG)

FDIS's secure payment gateway - one of the most secure in the industry. A secure payment gateway translates information from a merchant's Web site into a format that can be read by an electronic processing system. By operating in real time, a merchant can immediately capture funds upon delivery of goods to customers. The First Data Secure Payment Gateway supports sales, returns, real-time authorizations, captures, batch settlement processing and refunds. State-of-the-art technology provides merchants with numerous benefits, including fraud screening for every transaction submitted and providing real-time reporting via merchants' Web browsers.

 

Mail Order/Telephone Order (MOTO)

Businesses that conduct transactions through the mail or over the telephone.

 

MAP (Merchant Account Provider)

A bank or other institution that hosts merchant accounts and processes credit card transactions. The term is also often used broadly to include any credit card processing service, including ISOs.

 

Merchant Account

A bank account established by a merchant to receive the proceeds of credit card purchases. By establishing a merchant account, the merchant bank agrees to pay the merchant for credit card purchases in exchange for the right to collect on the debt owed by the consumer.

 

Merchant Bank

The bank that holds the merchant account. After a consumer buys a product using a credit card, the merchant bank places funds into a merchant account in exchange for the right to collect on the debt owed by a consumer.

 

Micropayments

Very small charges, perhaps even less than a penny, processed through e-commerce systems. Until this time, E-commerce has been largely limited to purchases of $10.00 or more. With micropayment systems, however, e-commerce merchants can sell products for far lower prices, such as small fees for downloading documents or charges per click for online advertising. Micropayment systems are still largely experimental and not widely available.

 

MOTO (Mail Order/Telephone Order)

Businesses that operate via mail or telephone, such as catalogue businesses. Merchants who advertise on the internet but who do not actually accept payments on their websites are also MOTO merchants, as they must receive the credit card information via mail order or telephone order.

 

Personal Identification Number (PIN)

Is a cardholder's unique identification number that is used when making a debit card transaction.

 

Point of sale (POS)

Refers to anything that is used at the merchant's point of sale, such as a credit card or debit card terminal.

 

Public Key Encryption

A method of encrypting electronic data. Developed to account for weaknesses in symmetric encryption, public key encryption does not require the transmission of decoding keys themselves.

 

Recurring Fees

Regular, usually monthly, charges for maintaining a merchant account. Recurring fees include the discount rate, transaction fees, statement fee, and monthly minimum.

 

Real Time Verification and Capture

The verification and processing of credit card transactions immediately following purchase. Real time verification on the Web usually takes less than five minutes. Real time verification is especially important for web sites that sell products and services that consumers expect immediately, such as memberships to the site or software downloads.

 

Reserve Account

See Holdback.


Robot

A software application that automatically finds and retrieves information from the Web. Also called a "spider" or "crawler"

 

SET (Secure Electronic Transaction)

A system for encrypting e-commerce transactions, such as online credit card purchases. Developed by Visa, MasterCard, Microsoft and several major banks, SET combines 1024-bit encryption with digital certificates to ensure security. SET is still in development.

 

Secure Sockets Layer (SSL)

This protocol, designed by Netscape Communications, allows encrypted, authenticated communications to travel safely and securely across the Internet. SSL provides merchants with privacy, authentication and message integrity. Advise your customers that your Web site is secure - show them the key or closed lock on the bottom left- hand corner of your site, which tells customers they are on a secure page when they make an online credit card transaction.

 

Secure Hypertext Transmission Protocol (SHTTP or HTTPS)

Transfers credit card information safely and securely, using special encryption techniques. It is used to secure a Web site for electronic transactions and enables credit card users to make safe online purchases.

 

Secure Server

A web server or other computer connected to the Internet that is capable of establishing encrypted communication with clients, generally using SSL or SET.

 

Setup Fees

Fees charged for establishing a merchant account, including application fees, software licensing fees, and equipment purchases.

 

Shopping Cart Program

A software package that runs as part of a web site to collect and record purchasing decisions by a visitor. Shopping cart programs are stored on web servers.

 

Smart Card

A plastic card containing a computer chip that can store electronic "money." Unlike a credit card, a smart card can only spend out what the owner has already put into the card. Similar in function to a pre-paid calling card, but available for all purchases. Trail runs of smart cards have returned mixed results.

 

Spam

Unsolicited emails. There are two common usages: 1) mass emailings by commercial sites to recipients who have not requested any contact, and 2) emails sent to intentionally annoy or harass the recipient, including crashing their computer my overloading its email capacity. The former often provokes that latter.

 

Swiped Discount Rate

The discount rate charged by a merchant account provider for transactions where a credit card is available for inspection by the merchant. Swiped rates are generally lower than keyed rates since the merchant can match signatures and other checks on fraud or misuse. See Keyed Discount Rate.

 

T-1 (also T-2, T-3)

Commercial-sized connections to the Internet. T-1 connections offer approximately 25 times the bandwidth of 56.6K telephone modems.

 

Transaction Fee

A charge for each credit card transaction, collected by the merchant account provider or ISO. Transaction fees usually fall between US$0.10 and US$0.25.

 

Turn-Key Application

Computer software which requires little or no modification when inserted into a web site. In e-commerce, many merchant account providers and ISOs offer turn-key applications for processing credit card orders online. a portion of the Internet; other parts include email communication, FTP, and gopher.

ABOUT THIS GUIDE
About the Author
A Word About Our Membership Community
Frank Merchant knows how to get the best price
The Internet Marketplace
   
UNDERSTANDING IT ALL
What are the advantages (and disadvantages) of accepting credit cards for your business?
6 Benefits of Accepting Credit Cards
Disadvantages of Accepting Credit and Debit Cards
Who are the players? How does the money get in your bank account?
Credit Card Transactions Step By Step
Should I go visit my banker for my merchant account?
How can I tell if I will get good customer service?
Be on the Lookout for Deceptive Sales Practices
How to Avoid Your Money Being Held By Your Non-Cash Transaction Processing Company
Banking Terms You Need To Know
Benefits of Debit as a Payment Option
What You Need To Know About Leasing a Credit Card Terminal
Fraud Protection 101
Cardholder Security: Avoid Monthly Fees, Fines, and Penalties What Is PCI Compliance (PCI DSS)?
   
THE PROCESSES
Four Key Components to Conduct eCommerce Successfully: What They Are, and How They Work
Web Site
Your Merchant Account
Secure Payment Gateway / Payment Transaction Software
Shopping Cart and Catalog
Should I use a third party processor like PayPal?
   
ANALYZING IT ALL
Quick Summary of Costs
Detailed Summary of Setup Fees, Recurring Fees, and Risk Estimate
Total Risk Estimate (TRE)
Total Risk Estimate Worksheet (Low-Medium-High)
   
THE DETAILS
Are you being stung with "Non-Qual" fees for keyed orders?
Have You Ever Felt Betrayed By Your Credit Card Processing Company?
Your Customers' Credit Card Numbers at Risk
Visa: Heartland, RBS WorldPay no longer PCI compliant
PayPal
Marketing 101: Gift and Loyalty Smart Card Technology Ensures Customer Loyalty
Check Warranty and Check Acceptance Policies
How Can I Prevent Credit Card Fraud?
Identity Theft
Merchant Account Comparison Worksheet
Glossary
 
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