Terms you’ve never heard of in merchant account credit card processing
Every industry has its own “language,” and it’s easier to navigate when you know the lingo. When it comes to payment processing, evaluating various providers and services, and learning how merchant account credit card processing fees are calculated, it can be a big learning experience for any business.
Whether you are acquainted with all the aspects of merchant services or not, there are likely some things that aren’t totally familiar. Following are some working definitions of industry terms you may encounter in your payments journey.
Many merchants choose a payment processor based on fees alone. But this doesn’t take into account the whole picture. Credit card processing costs depend on many factors such as support services, security offerings, and more. One of the types of fees that does not vary between payment providers are assessment fees, which are set by the card networks and are not negotiable—a merchant will be charged the same assessment charges regardless of which credit card processor they work with. However, assessments can vary by pricing model, which payment processors do have control over. One type of pricing model is known as bundled or tiered pricing, in which fees are categorized into different “buckets.”
A chargeback is a reversal of funds for a completed sale, and is a common point of fraud. A chargeback representment is the process that occurs when a merchant decides to dispute the chargeback, and provides information and documentation to provide the invalidity of the chargeback. If sufficient information is presented, the merchant will be refunded the cost of the chargeback.
Like Assessment Fees, interchange fees are set by the card networks (MasterCard, Visa, Discover) and are not negotiable. Interchange fees are charged to the processors, who pass these fees on to their merchants. Interchange fees are based on things like whether the transaction is swiped, dipped, keyed, or eCommerce, the type of business, and many other variables. Although interchange fees are not negotiable, it is possible for a merchant to gain more favorable interchange rates and lower their processing costs by working with a reputable processor.
This is simply an acronym for Merchant Processing Agreement, the contract between a merchant and their merchant account provider. The MPA typically lays out the responsibilities of all parties involved in processing credit cards for the business.
PA-DSS / PABP / PCI SSC / PCI DSS
Don’t be put off by all the acronyms—these are important for any merchant accepting credit cards to know about. The Payment Application Data Security Standard (PA-DSS) was originally referred to as the Payment Application Best Practices (PABP), and serves as the global security standard established by the Payment Card Industry Security Standards Council (PCI SSC). PA-DSS differs from the Payment Card Industry Data Security Standard (PCI DSS); while PCI DSS pertains to all entities that handle credit cards, PA-DSS is applicable only to vendors that develop and sell payment applications. A list of PA-DSS validated payment applications is maintained by the PCI SSC.
PayFac is short of “payment facilitator,” a merchant registered by an acquirer to facilitate transactions on behalf of sub-merchants. When a merchant works with a PayFac such as Etsy, they don’t need to sign up for an individual merchant account in order to accept credit card payments. PayFacs are common in industries such as government, education, utilities, and nonprofit organizations.
When a merchant wants to work with a particular payment processor but that processor does not have a direct integration to the merchant’s point of sale system, the merchant can use a payment gateway to bridge the gap. A payment gateway can be used for both card present and eCommerce transactions, and is the interface from a merchant’s system to their chosen payment processor. There are pros and cons to payment gateways, depending upon the needs of the business.
Managing fraud in a card not present environment is a challenge and solutions like 3-D Secure is one way the card networks are addressing the issue. 3-D Secure is a security process used in online credit and debit card transactions to authenticate the cardholder’s identity. Designed to decrease online fraud and increase consumer confidence, 3-D Secure was initially developed by Visa (Verified by Visa). The other card brands have released their own versions of the technology: MasterCard (SecureCode), American Express (SafeKey), and Discover (ProtectBuy).
Like any language, the more you encounter these terms, the more familiar you will become with them. Get a reputable merchant account provider as your partner, your ability to “speak payments” is bound to improve greatly.