Learn With Card Network

10 Payment Processing Terms Everyone Needs to Know

March 27, 2024

Being a business owner means wearing multiple hats and being knowledgeable about all aspects of your business. One minute you might need to be handling accounting, then the next you are doing a full pivot into purchasing or inventory management. The moral of the story is that a small to medium-sized business owner needs to know a little about a lot of different aspects of their business.

It is that reason alone that we work so hard to be a trusted and reliable partner to business owners so we understand their growth goals and can help them achieve those goals with fitting the right payment processing solutions to their unique needs.

Whether you are brand new business owner, or you have been in business for 20 years, it is always good to have a baseline knowledge of some of the basics when it comes to your payment processing solutions. So, we’ve included some common terms below for you to either become familiar with or refamiliarize yourself with them.

Authorization – The process of validating transaction funds available on a credit or debit card. This action is done when the transaction is entered or swiped through a terminal. An authorization is either approved or declined by the issuing bank. 

Bank Identification Number (BIN) – A bank identification number or BIN is part of the number string located on a credit or debit card. This is typically an initial sequence of four to six numbers on the card.  

Batch – The action of batch processing is when a merchant runs all their authorized credit card transactions through their credit card processor at the end of the business day, or a designated time, as opposed to doing real-time processing, which typically requires more time and work. 

Card Present Transaction – This type of transaction is one where the card is physically present and it is usually inserted, tapped, or swiped at the terminal.  

Card Not-Present Transaction (CNP) – Card not-present is a payment transaction made where the card is not present physically. A common example of a CNP transaction would be an online order and payment.  

Point of Sale (POS) — Often abbreviated to POS, this is typically where a transaction is completed. Depending on your business, this could be a standard terminal fixed to certain place  

ChargebackWhen a merchant is liable to refund the cardholder’s money due to any of the reasons in favor of the cardholder (the customer), it is called a chargeback. This is typically a claim against a charge that is initiated by a customer with their bank. 

Credit Card Reader – A terminal use for reading credit and debit cards. This terminal is an electronic device that reads data stored on credit and debit cards.

High-Risk Business – Certain businesses are considered high-risk if the service or solution has a more extended time of chargeback liability, the business operates in an industry that has a high chargeback history, or if the account itself has a reputational risk.

Issuing Bank – The issuing bank is the bank of the cardholder or customer and is responsible for paying the required transaction amount to the acquirer bank.

Payment processing doesn’t have to be an intimidating minefield of industry jargon that you don’t understand. It is important to partner with a payment solution provider that has the experience and willingness to help you and your business thrive. If you need help understanding these, or any other terms in the payment industry, it is always best to consult a payments provider that has the experience and knowledge to help you and your business.