Payment Industry Glossary

The Three-Domain Secure (3D Secure) security protocol helps to protect online payments by enabling cardholders to authenticate themselves prior to card authorization.

The primary electronic network for money movement in the United States; it automates the movement of money between banks.

An acquiring bank provides merchant accounts that allow a business to accept card payments and works in conjunction with the acquirer processor. In some cases the acquiring bank and acquirer processor are a single entity.

Acquirer processors connect directly with merchants, the network and the acquiring bank, or via a payment gateway, to facilitate payment acceptance at the merchant. They provide the technical capabilities to create the system of record to communicate with authorization and settlement entities. In some cases the acquiring bank and acquirer processor are a single entity.

A fee charged by the network to both issuing and acquiring banks in addition to the interchange fee. Assessments are how the networks generate revenue, taking a fee from each bank for every transaction.

A type of transaction. The process of confirming whether a card is valid, business rules are met, and funds are sufficient, and then placing a temporary hold on those funds.

An authorization code is a six-digit number that serves as the record for the credit, debit or stored value card approval.

Every payment card has an available balance that governs its purchasing power; this factors into the authorization process.

A system to verify a user’s address at varying levels of detail, such as the cardholder’s ZIP code, street address, city or state.

One basis point, often referred to with the shorthand “bips”, is equal to 1/100th of one percent of the transaction amount. One percent, therefore, equals 100 bips.

The first four to six digits of a card representing the identification number of the issuing or acquiring bank.

The process of completing a transaction and the initiation of funds transfers by a merchant.

Parameters set on a card to limit when, where, and how often cards can be used. These controls can include purchase amount, merchant ID, merchant category code (MCC), time/date, and more.

A “chargeback” occurs after a successful dispute of a specific transaction and funds are returned to the cardholder.

The process of exchanging financial transaction details (but not actual funds) to facilitate the posting of that transaction to a cardholder’s account and reconciling an issuing bank’s settlement position.

A type of payment card that is typically restricted to use at one single company and is not tied to a card network (Visa, Mastercard, etc.).

A type of payment card typically attached to a line of credit that a user can make purchases against.

A type of payment card typically tied to funds held in a deposit account.

Also known as a mobile wallet, digital wallets are typically phone-based apps that store digital payment credentials and can be used to make purchases online and in-store.

Also referred to as the add on rate, the discount rate refers to the interest that the acquiring bank adds on top of the interchange fee and assesses to the merchant. The discount rate is generally tiered and falls in the range of 40-50 basis points though can be as low as 20-30 basis points.

A situation where a card owner, either a consumer or a business, is challenging the validity of a transaction, including an unauthorized purchase, or goods and services that were not delivered. Disputes are commonly handled between the cardholder, the issuing card program, card network, and merchant.

Payment programs built for business-to-business applications (for example, for expense payment).

“For benefit of” (FBO) funds are held in an issuer bank account for stored value card programs.

Charges assessed by one entity to another.

When working with the Marqeta API, fee transfers move funds from a user’s general-purpose account (GPA) into a partner account.

Special purpose software platform that provides an interface between merchants and acquiring institutions.

When working with the Marqeta API, funds in a GPA are “open-loop” funds that can be used at any merchant, subject to authorization controls. Most Visa and Mastercard accounts access GPA funds.

When working with the Marqeta API, a GPA Order refers to the direction of funds into a user’s general-purpose account (GPA).

Refers to an operation that has no additional effect if it is called more than once with the same input parameters; in the payment world, idempotency is important because it prevents requests from being processed repeatedly in the case of multiple, inadvertent submissions.

Payment networks like Visa and Mastercard determine the interchange fee for processing payment cards transactions. Interchange fees are typically paid by the merchant’s bank (the acquirer) to the customer’s bank (the issuing bank). In the United States, interchange fees average between one and two percent of the transaction (200 bips).

Connects directly with the networks and issuing bank to provide the system of record, manage issuance of cards, authorize transactions and communicate with settlement entities.

The issuing bank enters into a relationship with the cardholder, and enables cards on a given network. The issuing bank fills three primary roles in payment processing: it is a “network sponsor,” which means it can issue cards on a given network; it is a holder of prepaid funds (for example, for gift cards and other non-credit cards); and it is a “settlement point,” managing a consumer’s card account and paying out to the merchant’s account after a purchase.

The process of approving, declining, and funding card transactions in real-time based on business logic. Cards carry a $0 balance until the release of funds are authorized.

To comply with regulatory requirements and as a protection against fraud, issuer processors can run a “know your customer verification” to verify the identity of potential cardholders.

The term “ledger balance” refers to the amount of spendable funds.

A merchant simply refers to any business that accepts card-based payments via a physical swipe (at the POS in the real world), by entering payment data manually or via a virtual swipe online.

Refers to funds allocated by merchants to power rewards programs (and accounts) that promote their brands (and partners’ brands) and to encourage brand loyalty.

Card issuing and processing delivered via an open API platform that enables card issuers to create custom, flexible, and scalable payment card products.

A Marqeta term used to describe funds in a merchant specific account that are allocated only for specific merchants or stores.

The National Automated Clearing House Association, NACHA is a not-for-profit organization that manages and governs the ACH Network, the backbone for the electronic movement of money and financial data in the United States. NACHA represents nearly 11,000 financial institutions across the United States.

A Marqeta term; the “offer order” connects a specific offer to a specific user with information that identifies the user, the offer and a unique order number to facilitate fulfillment of the offer.

To combat fraud, many processors generate one time use virtual card numbers good for only one transaction (the number then becomes inactive).

The ODFI functions as the interface between the ACH network and the originator of the transaction, confirming that transactions comply with the rules.

Any institution or person initiating a debit or credit transaction through ACH.

Occurs when two users transfer funds between two different accounts (also known as “peer transfers”).

A pending credit is unavailable for use by the card or account holder and does not affect purchasing power; typically, a pending credit results when an ACH load that has been accepted but the funding hasn’t yet cleared.

A type of payment card that holds a finite amount of funds and is not directly tied to a bank account or line of credit.

A card that is accepted by only one merchant.

Businesses that manage a card program on behalf of the issuing bank. The Program Manager is responsible for defining the program, operating the program, and managing its profitability. The program manager typically is responsible for establishing relationships with processors, banks, payment networks and distributors and for establishing pooled account(s) at banks.

An organization or person that authorizes the originator to initiate an ACH transaction, either as a debit or credit to an account.

The corollary to the ODFI, the RDFI receives the ACH transaction from an operator and credits or debits funds from their appropriate accounts.

An accounting process to compare two sets of records to ensure the figures are in agreement and are accurate. Reconciliation is the key method for determining whether the incoming or outgoing funds in an account match the amount spent/returned and that the two values are balanced at the end of a given recording period.

An ACH transaction that was disputed or rejected by the issuing bank.

A key requirement for every participant in the payment system is information security, which for the vast majority of users takes the form of the Payment Card Industry Data Security Standard (PCI DSS). This is a proprietary information security standard for merchants and card issuers handling credit cards branded with the major card network players: Visa, Mastercard, American Express, Discover (plus JCB in Japan). The standard was established to tighten security around cardholder data to reduce the potential for fraud.

The process by which a merchants’ (acquirer) and a cardholders’ (issuer) banks exchange financial data and value (real funds). Marqeta functions as the system of record for all transaction approvals and declines for our customers.

In the world of payment technology, a “store” refers to any place a merchant accepts payments. For example, a retailer might have a chain of (physical) stores plus one or more online “stores” and can accept card payments at each of them. There may be many stores (both real-world physical locations and e-commerce sites) to a given merchant.

The TID is used to uniquely identify a terminal originating a transaction, which can be a device with a card swipe capability or an e-commerce site.

The process of protecting sensitive data, such as the personal account number (PAN), by replacing it with more secure, surrogate data, called a token.

Broadly defined as a Marqeta account holder.

A digital counterpart to a payment card, generated with a unique card number to settle a particular transaction by an authorized user. These are often used for one-time, business-to-business payments.