Terms to Know

Acquirer

Also referred to as “acquiring bank,” “acquiring financial institution,” or “merchant acquirer.”  An acquirer is an organization licensed as a member of Visa/MasterCard that is in the business of processing credit card transactions for businesses (acceptors) and is always acquiring new merchants for the acceptance of payment cards.

Interestingly enough, many merchants don’t recognize their acquiring bank as the primary provider of their merchant account.  Acquiring banks are playing an increasingly hands-off role as the bankcard system evolves.  Acquiring banks often enlist the help of third-party independent sales organizations (ISO) and membership service providers (MSP) to conduct and monitor the day-to-day activities of their merchant accounts.

Affinity Card

A credit card offered in conjunction with two organizations, one a card issuer and the other a non-financial group with which consumers have an affinity.  Universities, sports franchises and non-profit organizations are examples of affinity groups that often offer special discounts or deals for using their credit cards issued in partnership with a major bank.

American Express

American Express Company, also known as AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best known for its credit card, charge card, and traveler's cheque businesses. Amex cards account for approximately 24% of the total dollar volume of credit card transactions in the U.S.

Approval Code

See Authorization Code.

Approval Response

An authorization response that is received when a transaction is approved.

Authentication

Process of verifying identity of an individual, device, or process.  Authentication typically occurs through the use of one or more authentication factors such as:

  • Something you know, such as a password or passphrase
  • Something you have, such as a token device or smart card
  • Something you are, such as a biometric

Fraud-protection tools in card-processing equipment, including address verification (AVS) and card code verification (CCV) systems, aid in the authentication process, which is essential in Internet, phone and mail orders where the card is not present.  Checking signatures and asking for other forms of ID also aid in authenticating card-present transactions.

Authorization

Granting of access or other rights to a user, program, or process.  For a network, authorization defines what an individual or program can do after successful authentication.  For the purposes of a payment card transaction, authorization occurs when a merchant receives transaction approval after the acquirer validates the transaction with the issuer/processor.

Authorization Code

Also called, “Approval Code.”  A code that an issuer or its authorizing processor provides to indicate approval for an authorization request.

Authorization Only

A transaction that is created to reserve an amount against a credit card’s available limit for intended purchases; the actual settlement may occur within three to five days, depending on the card type.