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Glossary of Terms

ALL

Although we maintain the currency of our glossary, some of the terms and definitions presented below are subject to expiration or change due to the evolving nature of the industry.

ABA

American Bankers Association. See Routing/Transit Number.

ACB

America's Community Bankers.

ACCU

Association of Corporate Credit Unions.

ACH

Automated Clearing House.

ACH Network

Funds transfer system governed by the Rules of the National Automated Clearing House Association that provides for the interbank clearing of electronic entries for participating financial institutions.

Acquirer

An Acquirer is a Visa / MasterCard Affiliated Bank or Bank/Processor alliance that is in the business of processing credit card transactions for businesses and is always Acquiring new merchants.

Acquiring Financial Institution

An acquiring financial institution (or "acquirer") contracts with the bank and merchants to enable credit card transactions. The acquirer deposits the daily credit card totals and debits the end-of-month processing fees from the merchants' accounts.

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.

Adjustment

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.

Affidavit

A sworn statement by a consumer declaring that a particular ACH transaction was unauthorized or that the authorization for that transaction has been revoked.

Audio Response Unit (ARU)

An electronic authorization and capture product where the merchant uses a touch-tone telephone to process transactions.

Authentication

A data security technique used to ensure that the professed sender of information or a payment order is actually who they claim to be.

Authorization (Credit Card)

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.

Authorization (Check Card)

An agreement by a Receiver to allow for the posting of debit or credit items to their account. Authorizations for credit transactions may be orally given, but debit transactions must be authorized in writing or similarly authenticated by other means (for example, by digital signature or PIN if by computer).

Authorization Response

An issuing financial institution's electronic message reply to an authorization request, which may include: Approval (transaction was approved), Decline (transaction was not approved), Call Center (response pending more information, merchant must call the toll-free authorization phone number).

Authorization Code

A code that a credit card issuing bank returns in an electronic message to the merchant's POS equipment that indicates approval of the transaction. The code serves as proof of authorization.

Authorizing Customer

The checkwriter, who has the legal authority to sign checks on the account shown on the check - and to sign an authorization for electronic payment.

Auto Close

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

Automated Clearing House (ACH) File

A file with instructions for the exchange and settlement of electronic payments passed between financial institutions. It represents debits and credits to be deducted from an account automatically as they occur.

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.

Bankcard

A credit card issued by a Visa or MasterCard-sponsored financial institution. (American Express, Discover, Diners Club, JCB, etc., are issued directly from their respective operations, rather than through banks.)

Batch

The accumulation of captured credit card transactions in the merchant's terminal or POS awaiting settlement.

Business Practices

Essential features of processes needed to affect standard operating procedures in a consistent manner.

Capture

The submission of an electronic credit card transaction for financial settlement. Authorized credit card sales must be captured and settled in order for a merchant to receive funds for those sales. Also see Settlement.

Cardholder

Any person who holds a payment card account (bankcard or otherwise).

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 Not Present

A transaction where the card is not present at the time of the transaction (such as mail order or telephone order). Credit card data is manually entered into the terminal, as opposed to swiping a card's magnetic stripe through the terminal.

CBC

Computer Based Controls.

CCD

A credit or debit ACH entry initiated by an organization to consolidate funds of that organization from its branches, franchises or agents, or from other organizations, or to fund the accounts of its branches, franchises or agents, or of another organization. CCD is a standard Entry Class Code.

Chargeback

A credit card transaction that is billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on behalf of the cardholder. Typical cardholder disputes involve product delivery failure or product/service dissatisfaction. Cardholders are urged to try to obtain satisfaction from the merchant before disputing the bill with the credit card issuer.

Check

(1) A negotiable demand draft drawn on or payable through or at an office of a bank; (2) A negotiable demand draft drawn on a Federal Reserve Bank or a Federal Home Loan Bank; (3) A negotiable demand draft drawn on the Treasury of the United States; (4) A demand draft drawn on state government or unit of general local government that is not payable through or at a bank; (5) A United States Postal Service money order; or (6) A traveler's check drawn on or payable through or at a bank. The term "check" does not include a noncash item or an item payable in a medium other than United States money. A draft may be a check even though it is described on its face by another term, such as "money order." For some purposes, the term "check" also includes a demand draft of the type described above that is nonnegotiable.

Check Authorization

A service that validates routing numbers and account information to determine if the checking account is valid.

Check Debit

An EFT Network service through which a paper check, presented to a merchant or other check acceptor, is converted into a real-time electronic transaction that debits funds for the amount of the check from the accountholder's account and credits those funds to the merchant's or check acceptor's account, provided that the account is valid and has sufficient funds to cover the transaction. Such funds are guaranteed for transactions accepted by the payor bank.

Check Digit

A digit, often the final digit of a number and usually calculated by applying an algorithm to all or some of the digits in the number, that may be used to test validity of the non-check-digit number. For example, routing/transit numbers have nine digits, eight of which provided FI identification information and the ninth is the check digit.

Check Guarantee

A service that guarantees the checkwriter's payment and assumes the collections risk of check payments for a merchant.

Check Safekeeping

The customer's financial institution keeps the customer's checks, not returning it in the customer's statement. The customer may receive an image of the check in the statement.

Check Truncation

The conversion of a check to an electronic debit or image of the check by someone in the payment system other then the paying bank. The transaction may be governed by check law (UCC, Reg CC and Clearing house rules) or by electronic banking law (Electronic Fund Transfer Act).

Check Verification

A service accessing customer and/or account databases through a point of sale system and/or by phone to verify or authorize that the check writer and/or checking account information is valid and/or in good standing.

Clearing House

The organization that collects, sorts and classifies, and distributes information, usually among a large number of organizations or entities.

Close Batch

The process of sending the batch for settlement.

Code 10 Authorization

If you suspect a card is fraudulent at the time of the transaction, the merchant can call their voice authorization phone number and ask for a code 10. The voice operator will instruct the merchant on how to proceed.

Commercial Card

A Commercial Card is a credit or charge card issued to businesses to cover expenses such as travel and entertainment and procurement. This includes the multiple payment card brands of purchasing cards, business cards, corporate cards and multi-utility fleet cards. Visa and Master Card now have special procedures for passing billing information back to the card-issuing bank so that it can be displayed on cardholder statements; this is a program for promoting the use of credit cards for business purchases by providing purchase tracking to business users. New regulations require that this billing information be passed back with the transactions; otherwise a higher pass through fee will be incurred.

Composite Receivers File

A directory of all RDFIs served by an ACH Operator.

Consumer

Usually refers to a natural person not engaged in commercial transactions.

Consumer Account

A deposit account held by a participating DFI and established by a natural person primarily for personal, family, or household use, and not for commercial use.

Controlled Disbursement

A bank service provided typically to corporate customers wherein the company is notified early in the day of the dollar amount of items waiting to clear the account later that day; the company funds the account with the exact amount to clear the items.

Conversion

Transforming a payment initiated by paper check that has not been negotiated to an electronic payment.

Corporate Card

Charge card designed for business-related expenses, such as travel and entertainment. Please see Commercial Card.

Credit (Reversal)

The nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately "undo" an authorization and return it to the open-to-buy balance on a cardholder's account. Some card issuers do not support reversals.

CTA

Check Truncation Act.

CUNA

Credit Union National Association.

Customer

Both consumer and corporate, an individual or company that purchases or uses the goods or services of another individual or company.

DDA Account

This is the merchant's Demand Deposit Account, otherwise known as the merchant's hometown bank account.

Debit Card

Payment card whose funds are withdrawn directly from the cardholder's checking account at the time of sale (online debit on a Debit Network) or after batch settlement (off-line debit on a Credit Card Network).

Deposit Correction Notice (DCN)

Adjustments (debits or credits) made for an out-of-balance condition due to various problems in the transmittal. The correction is made by the merchant's acquirer at the time of capture prior to being sent out for interchange.

Depository Financial Institution

A financial institution able to receive deposits from its customers, or credits from the Federal Reserve Bank.

DFI

Depository Financial Institution.

Discount Rate

The percentage of sales amounts that the bankcard acquirer or T&E card issuer charges the merchant for settlement of the transactions.

ECC

Electronic Check Council.

ECCHO

Electronic Check Clearing House Organization.

E-check

A generic term for an ACH debit to a consumer account that is originated on the Internet, at the point of sale, over the telephone, or by a bill payment sent through the mail or dropped in an unattended dropbox.

ECHO

Electronic Clearing House, Inc.

ECP

Electronic Check Presentment.

Edit Rejects

The rejection of a sales draft by Visa or MasterCard before a transaction processes through interchange, but after it has been paid by the acquirer.

EFT

Electronic Funds Transfer.

Electronic Check

The term "electronic check" is used to refer to several types of electronic transactions. (1) ACH-based electronic check. A payment that begins as a paper check is converted into, or truncated to, an ACH debit entry. The paper check is not processed. (2) Electronic network electronic check. A payment that begins as a paper check is converted into, or truncated to, an electronic network entry, using networks such as an ATM network or a credit card network. The paper check is not processed. (3) Internet- or telephone-initiated payments. A transaction that is initiated over the Internet or via phone, with the debit carried out by an electronic debit, usually an ACH debit. Some users categorize payments initiated via Internet or telephone but that are affected by paper drafts as electronic checks, even though the debit is paper-based. A catchall term used loosely to refer to any attempt to initiate payment through PCs, the Internet, and computer systems.

Electronic Check Council

A membership organization of financial institutions, companies and other interested entities dedicated to improving check clearing and collection. Operated under the auspices of NACHA:- The Electronic Payments Association.

Electronic Check Presentment

The electronic transmission of the contents of a cash letter (as captured from the MICR line on each check) to the drawee bank ahead of the physical arrival of the checks actually in the cash letter.

Electronic Cash Register (ECR)

A device used for cash sales. Can also be integrated to accept credit cards.

Electronic Date Capture (EDC)

Process of electronically authorizing, capturing and settling a credit card transaction.

Electronic Fund Transfer Act

The law passed by the US Congress in 1978 that set out the rights and obligations of consumers and their financial institutions regarding the use of electronic systems to transfer funds. This act is implemented in the Federal Reserve Bank's Regulation E.

FI

Financial Institution - any bank, savings and loan, credit union or other institution organized under either national or state banking laws capable of both accepting deposits and making loans.

Fleet cards

Private label credit cards designed mainly for repairs, maintenance and fueling of business vehicles.

FMS

Financial Management Service.

Footer

Text printed at the bottom of a sales draft. A merchant can customize the footer (i.e., Have a Nice Day, No Refunds, Thank You for Shopping With Us, etc.).

Forward Collection

The process of collecting and settling funds for checks (demand instruments) from the Bank of First to Deposit to the Paying Bank.

FRB

Federal Reserve Bank.

ICBA

Independent Community Bankers of America.

Independent Sales Organization (ISO)

An ISO is an Independent Sales Organization that represents a Bank or Bank/Processor alliance. The ISO has an agreement to sell the services of the Bank or Bank/Processor alliance, and is able to acquire merchants.

Interchange

The standardized electronic exchange of financial and non-financial data associated with sale and credit data between merchant acquirers and card issuers on various types of MasterCard and Visa transactions.

Interchange Fee

A fee paid by an acquirer to an issuer for transactions entered into interchange. The interchange fee is a percentage applied, according to Visa/MasterCard regulations, to the dollar value of each transaction. There are multiple categories of interchange, and Visa and MasterCard each have their own criteria for their own categories. A transaction must meet the specified criteria for a category in order for that category's rate to be applied. Each transaction is evaluated individually; so various interchange rates may apply within one batch of merchant transactions.

Internet Service Provider (ISP)

Internet Service Providers (ISPs) are the Web Site Hosting companies that provide a home for merchant's Web sites.

Issuing Financial Institution

The financial institution that extends credit to a cardholder through bankcard accounts. The financial institution issues a credit card and bills the cardholder for purchases against the bankcard account. Also referred to as the cardholder's financial institution.

Lockbox

A financial institution or third party processor service that facilitates rapid collection and posting of corporate receivables. Typically, customer payments are mailed to a lockbox or mailbox for collection, sorting, totaling and recording by the bank or provider rather than by the billing organization.

Magnetic Ink Character Recognition (MICR) Line

The characters on the bottom line on the face of a paper check that contains the routing/transit number of the financial institution the check is drawn on, the account number of the drawee (Receiver) and the check number, all printed in machine readable magnetic ink in a font devised for check reading.

Manual Close

A batch close that must be initiated by the merchant on a daily basis, as opposed to an auto close at a pre-set time.

Merchant

Customer of a processor/acquirer.

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, chargebacks, end-of-month processing fees, etc.

Merchant

The seller of goods and services.

Merchant Processor

A company that handles or provides transaction and sometimes data processing services to merchants (and, possibly, others).

Magnetic Stripe

A strip of magnetic tape affixed to the back of credit cards containing identifying data, such as account number and cardholder name.

Mail Order/Telephone Order (MOTO)

Credit card transactions initiated via mail, email or telephone. Also known as card-not-present transactions.

MICR

Magnetic Ink Character Recognition.

MOTO (or MO/TO)

Mail Order/Telephone Order.

NACHA

The national trade association for electronic payment associations, which establishes the rules, industry standards and procedures governing the exchange of commercial ACH payments by depository financial institutions. Network: A system of channels and interconnections such as among financial institutions, processors and merchants.

NACS

National Association for Check Safekeeping.

NAFCU

National Association of Federal Credit Unions.

NCN

National Check Network.

Network

Company and system used to authorize and capture credit card transactions.

Non-Qualified Transaction Fees (NON-Qual)

Bankcard sales transactions that do not meet set Visa/MasterCard criteria for that particular merchant and are processed at a higher interchange rate. An example of this is a merchant that is retail (card present) that processes a card-not-present transaction (or manually enters card data rather than swiping the magnetic stripe through the terminal). The merchant will pay the difference between what they should have paid on retail and what they actually qualified for (card not present). This difference is called non-qualified interchange fees.

ODFI

Originating Depository Financial Institution.

Originating Depository Financial Institution (ODFI

The financial institution that delivers ACH entries directly or indirectly through a third party to its ACH operator.

Participant

A person or entity that has a share or plays a part in the activities at hand.

PC Software

A software program that is designed to perform a specific function on a computer system. Examples would be accounting systems, manufacturing systems, order entry and fulfillment, ticketing, reservations, etc. The application is either purchased or built by the merchant, and must be interfaced with a credit card authorization system in order to provide on-line transaction processing.

Private Label Cards

Credit, debit or stored-value cards that can be used only within a specific merchant's store. Also referred to as Proprietary Cards.

Point of Purchase

Location where payment for goods or services takes place where the purchaser and seller are both present.

Point Of Sale (POS)

A location where credit card transactions are performed with the cardholder present, such as a retail store. The card is read magnetically, and the cardholder's signature is obtained as insurance against the transaction. This is the most secure form of credit card commerce.

POP

Point of Purchase.

POP entry

An ACH debit entry initiated by an Originator pursuant to (1) a single-entry authorization, and (2) a source document as set forth in subsection 3.7.1 (Source Documents), provided to the Originator by the Receiver at the point-of-purchase to effect a transfer of funds from a Consumer Account of the Receiver. This type of entry may only be used for non-recurring, in-person (i.e., at the point-of-purchase) entries for which there are no standing authorization with the Originator for the origination of ACH entries to the Receiver's account. POP is a Standard Entry Class Code.

POS

Point of Sale.

POS Terminal

Equipment used to capture, transmit and store credit card transactions at the point of sale. Examples are Verifone terminals.

PPD entry

An ACH credit or debit entry (other than an MTE or POS entry) initiated by an organization pursuant to a standing or a single-entry authorization from a Receiver to effect a transfer of funds to or from a consumer account of the Receiver; or (2) an ACH debit entry constituting a presentment notice of an item eligible under section 2.9 (PPD Accounts Receivable Truncated Check Debit Entries). ... This debit entry is initiated pursuant to a check or share-draft provided to the Originator by the Receiver and delivered via the U.S. mail for payment of an obligation. "PPD+" is a PPD entry with one addenda record. PPD and PPD+ are Standard Entry Class Codes.

Processor

A Processor is the company that actually routes an Authorization Request from a Point of Sale device (such as a Verifone credit card terminal) 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.

Processors need to have a Sponsoring Bank in order to gain access to the Visa and Master Card networks. When a Processor or other entity has made such an arrangement with a Sponsoring Bank to resell their services, they are called an Agent of that bank. Any entity that sells Visa or Master Card must disclose themselves as an Agent of their Sponsoring Bank. Such sales entities may be a Processor, or an ISO/Agent of the Processor or Processor/Bank alliance. Many banks are also their own processors, while other banks will use a Third Party Processor to handle this processing for them (in their own brand name in some cases).

Processing Network (Vendor)

The medium of data transport between the merchant application and the processor. This company authorizes and captures credit card transactions. Some examples of processing networks are FDR, MAPP and Envoy.

Procurement/Purchasing Cards

Charge cards used by businesses to cover purchasing expenses, such as raw materials or office supplies.

RCK

Re-presented Check.

RCK entry

An ACH debit entry constituting a presentment notice of an item eligible under section 2.8 (Re-presented Check Entries). An RCK entry is an item as defined by Revised Article 4 of the Uniform Commercial Code (1900 Official Text) only for the limited purpose of presentment as set forth in Article 4-110(c) and notice of dishonor as set forth in Article 4-301(a)(2). RCK is a Standard Entry Class Code.

RDFI

Receiving Depository Financial Institution.

Real-Time Processing

Real-Time Processing means that when a Web site's customer conducts an online purchase, that the check or credit card information is conveyed to the Processor at that exact time so that an authorization can be requested and received at that moment. Real-Time Processing always implies that a Secure Payment Gateway is being utilized, whether proprietary or third party. Please see Secure Payment Gateways and Real Versus Non-Real Time Processing.

Receiver

An individual, corporation or other entity that has authorized a company or an Originator to initiate a credit or debit entry to a transaction account held at an RDFI.

Receiving Depository Financial Institution (RDFI)

A financial institution that receives ACH entries directly or indirectly from its ACH operator.

Regulation CC

The regulation published by the Federal Reserve Board to implement the law which mandates the time limits for funds availability on deposited items.

Regulation E

The regulation published by the Federal Reserve Board to implement the Electronic Fund Transfer Act mandating consumer rights and obligations with regard to electronic fund transfers.

Reserve Account

One method that ACH Processor's 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 volume. New merchants are usually allowed to build up their reserve by sending in transactions which are not withdrawn until the minimum reserve balance is achieved; after that, the merchant is allowed to withdraw the excess funds for transfer to their home town bank.

Retail Customer

A consumer (not a business) paying for a purchase at a retail point of purchase (point of sale).

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).

RMRS

Rocky Mountain Retail Systems.

Routing/Transit Number

Also known as Routing Number, Transit/Routing Number and ABA number. A nine-digit number (eight digits plus a check digit) which identifies a specific financial institution. Routing numbers are administered by the Routing Number Administrative Board under the sponsorship of the American Bankers Association and officially maintained and published by Thomson Financial Publishing.

Routing Number Administrative Board

The cross-industry board sponsored by the American Bankers Association which defines and administers all policies regarding routing/transit numbers.

Sales Draft (Ticket)

A form showing an obligation on the cardholder's part to pay money (i.e., the sales amount) to the card issuer. This is the piece of paper that is signed when making the purchase. Sales draft data can be captured electronically and sent to be processed over the phone lines. Also see Electronic Data Capture.

Secure Payment Gateway

Secure Payment Gateway companies help other Processors conduct secure business on the Internet using Secure Socket Layer (SSL) technology. They provide a system that passes credit card data, authorization requests, and authorization responses over the Internet using encryption technology. The transaction information is sent by the Payment Gateway secure server via leased line to the credit card network where the validity of the card is checked and the availability of funds on that account is verified. An authorization code is returned via leased line to the Payment Gateway; the authorization is encrypted by the Payment Gateway and transmitted in encrypted form to the Web server of the merchant, which triggers fulfillment of the order. Rather than creating their own Secure Web System, many Banks and Bank/Processor alliances will use a Secure Payment Gateway Provider to perform this task for them.

Secure Payment Software/Software Module/Payment Mo

In order to conduct secure business on the Web, the Secure Gateway Provider runs a Secure Host System, and sells/licenses software modules that allow Shopping Carts and other applications to request and receive Credit Card Authorizations via their system using encrypted communications. (This is called Real Time Authorization.) The other features of this licensed software are the functions provided to merchants online when they connect to the Secure Payment Gateway host; merchant can access their own account information, use a "Virtual Terminal" to conduct transactions, handle administrative tasks, etc.

Settlement

The process of sending a merchant's batch to the network for processing and payment. For non-bankcards, the issuer pays the merchant directly (less applicable fees) and then bills the cardholder. For bankcards, the acquirer pays the merchant (less applicable fees) with funds from Visa/MasterCard. The bankcard issuer then bills the cardholder for the amount of the sale. Also see Capture.

Shopping Cart Software

These applications typically provide a means of capturing a client's Credit Card information, but rely on the Software Module of the Secure Gateway Provider, in conjunction with the Secure Payment Gateway, in order to conduct secure Credit Card transactions online.

Smart Card

A credit-type card that electronically stores account information in the card itself, utilizing chip technology rather than a magnetic stripe.

Software

A POS Terminal Application or PC or Internet Application that runs transactions and associated administration.

Sponsoring Bank

A Sponsoring Bank is a Chartered Bank or S & L that has obtained membership in Visa or Master Card in order to allow a Processor access to the Visa and Master Card networks (in order to process these types of transactions). Only Banks may join Visa or Master Card.

Standard Entry Class Code

A three-letter code that uniquely identifies the class of ACH transaction. For example, "POP" stands for "Point of Purchase".

T & E cards

Credit or charge card used by businesses for travel and entertainment expenses. Examples of these cards are American Express, Diners Club, Carte Blanche and JCB. Also see Corporate Cards.

TEL

A single-entry ACH debit initiated by an Originator pursuant to an oral authorization obtained over the telephone to affect a transfer of funds from a consumer account of the Receiver. This type of entry many only be used for a single-entry for which there is no standing authorization for the origination of the ACH entries to the Receiver's account. A TEL entry may only be used when there is an existing relationship between the Originator and the Receiver, or, when there is not an existing relationship between the Originator and the Receiver, when the Receiver initiates the telephone call. TEL is a Standard Entry Class Code.

Terminal

Equipment used to capture, transmit and store credit card transactions.

Terminal Identification Number (TID)

A unique number assigned to each POS terminal.

Terminal Software

Programming that determines the characteristics and features of the terminal.

Third-Party Processor (Credit Card)

A Third Party Processor is an independent processor that is contracted by a Bank or Processor to conduct some part of the transaction's processing process. Some of these Third Party Processors specialize in running and hosting networks of Point Of Sale (POS) terminals connected to their Host via dial out modem; they produce the software in the POS terminals as well as in their host, and route authorization requests to Visa or Master Card as needed (MAPP, MDI, FDR, for example). Other Third Party Processors specialize in the Settlement of credit card transactions with Visa and Master Card so that merchants can be paid (FDR for example). In the world of Internet Credit Card Processing, the Secure Payment Gateway Provider is another type of Third Party Processor.

Third Party Processor (Check Card)

A party that processes ACH files and/or items on behalf of one of the participants in the ACH system. Examples of third party processors are payroll processing companies which create ACH files for transmission to the ACH Operators on behalf of an originator or ODFI, a data processing company which receives incoming ACH files and processes them for an RDFI, or a correspondent bank which processes ACH files for its correspondents.

Third Party Secure Payment Gateway

In this model, the Third Party Secure Payment Gateway's server-computers have to provide a connection between the merchant's Web site and the Visa/MC (or Check) Merchant Processor. This is done via telephone (or leased land line). The Merchant Processor will receive the transaction through it's non-internet modem bank, and then send the transaction through it's direct connection to the Card Network (like Visa) for approval. The Merchant Processor returns a response via landline to the Secure Payment Gateway, which encrypts the message and transmits it over the Web back to the originating secure Web site host. The Third Party Secure Payment Gateway is a different company than the Merchant Processor, and has its own fees that are separate from any Merchant Processing fees. Rather than creating their own Secure Web System, many Banks and Bank/Processor alliances will use a Secure Payment Gateway Provider to perform this task for them.

TRC (Truncated (Check) Entry)

An ACH entry that originally represented a check, in which the actual check is safekept by one of the financial institutions in the chain of deposit and the MICR information is converted to an electronic entry and processed through the ACH network back to the issuing institution. TRC is a Standard Entry Class Code.

Truncation

See Check Truncation.

TRX (Truncated (Extended) (Check) Entry)

A series of TRC entries put together as addenda records with the payment item representing the total settlement of the TRC entries for that batch. TRC is a Standard Entry Class Code.

Uniform Commercial Code

A body of law whose underlying purpose and policies are (a) to simplify, clarify and modernize the law governing commercial transactions; (b) to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; (c) to make uniform the law among the various jurisdictions. The effect of provisions of this Act may be varied by agreement, except as otherwise provided in this Act and except that the obligations of good faith, diligence, reasonableness and care prescribe by this Act may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.

Value Added Reseller (VAR)

Third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer.

WEB

An ACH debit entry-initiated by an Originator pursuant to an authorization that is obtained from the Receiver via the Internet to affect a transfer of funds from a consumer account of the Receiver. WEB is a Standard Entry Class Code.

XCK entry

A debit entry initiated in the event an item eligible for section 2.7 (Destroyed Check Entries) is contained within a cash letter that is lost, destroyed, or otherwise unavailable to and cannot be obtained by an ODFI. XCK is a Standard Entry Class Code.

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