Credit Card Industry Terms Defined Don't be intimidated by the jargon. We'll help you figure out what the heck they're saying.

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Q: I've just started accepting credit cards online, and I'm confused by all the different terms, acronyms and abbreviations in the transaction processing industry. What do they mean, and why are they important for me to know?

A: You are absolutely correct: e-commerce and transaction processing have their own language, which can be intimidating at first. But once you've learned this new vocabulary, you will be very comfortable with payment processing. Learn the following e-commerce-related processing terms and acronyms, and use them as a guide to becoming a payment solutions expert.

Address verification service (AVS) is an important fraud-prevention mechanism that verifies customer addresses within the United States. This ensures the identification of the cardholder and guarantees that you ship merchandise to a legitimate customer.

Automated clearing house (ACH) is one acronym you'll want to remember. ACH is a national electronic network that transfers and clears funds between banking institutions on behalf of merchants and their customers. In other words, ACH helps you get your money from your customers' transactions.

Business-to-business (B2B) commerce refers to businesses purchasing goods from other businesses, generally over the Internet. It is a strong Internet growth component, and B2B connects companies' supply chains of companies through comprehensive Internet communications and offers goods through online catalogs and portals. B2B is also known as BBP, or business-to-business procurement.

Business-to-consumer (B2C) commerce.-When customers purchase products or services from a merchant-whether in an online or brick-and-mortar environment-they conduct B2C commerce.

Card validation code 2 (CVC2) and card verification value 2 (CVV2) are important fraud-prevention mechanisms initiated by MasterCard and Visa to protect merchants. MasterCard's CVC2 and Visa's CVV2 codes help merchants distinguish legitimate customers from those who try to commit fraud. These codes are the three digits on the back of a MasterCard or Visa card that follow the cardholder's credit card number-they protect Internet merchants by helping to identify a cardholder in a non-face-to-face transaction.

Chargeback is a procedure in which the bank that issues the credit card returns a customer's disputed transaction to the merchant-via the merchant's transaction processor-for resolution.

A commerce service provider (CSP) supplies businesses with the tools and services they need to buy and sell products and services over the Internet and manage their online enterprises. CSPs provide service in areas such as hardware and software design, risk management, online payment, brand recognition, distribution control, taxes, site development and hosting, site performance monitoring, fulfillment management, online marketing, building a customer base, and order processing and delivery.

A credit card processor is an organization that manages the process of transferring authorized and captured credit card funds between different financial accounts. Credit card processors charge merchants a discount rate and a transaction fee for this service, and these fees vary from processor to processor.

A debit card is used similarly to a credit card, but the funds are transferred immediately from the customer's bank account to the merchant's account. The advantage of debit cards to merchants is instant access to funds. Watch for Internet and e-commerce debit card capabilities in the near future.

A direct deposit account (DDA) is the bank account you establish to receive the funds your credit card processor transmits directly to you for your customers' purchases. It is the term that banks use for your checking account.

Electronic soft-good download (ESD) is the delivery of purchased merchandise (software programs, text, graphical images, music and information) by electronic means over the Internet.

Encryption is the process of scrambling a message so that a key, held by only authorized recipients, is needed to unscramble and read the message. This is an important security and fraud-prevention measure for merchants conducting e-commerce.

HTML is the standard set of formatting codes, which are inserted into a text file that is published on the World Wide Web. If you develop a Web site, your developer will probably create it using HTML.

Hypertext transfer protocol (HTTP) transfers information, graphics and text over the Internet.

Interchange is the exchange of information, transaction data and money among banks. Interchange systems are managed by MasterCard and Visa associations and are standardized so banks and merchants worldwide can use them.

An Internet service provider (ISP) allows an online merchant to access and conduct business over the Internet. Once merchants contract with an ISP, they are ready to host a Web site and conduct e-commerce.

Next Step
Can't get enough jargon? Try the Electronic Commerce Dictionary: The Definitive Terms for Doing Business on the Information Superhighwayby Ted Haynes.

LinkPoint Secure Payment Gateway (LSPG) is Cardservice International's secure payment gateway, and it is one of the most secure in the industry. A secure payment gateway translates information from a merchant's Web site into a format that can be read by an electronic processing system. By operating in real time, a merchant can immediately capture funds upon delivery of goods to customers. The LinkPoint Secure Payment Gateway supports sales, returns, real-time authorizations, captures, batch-settlement processing and refunds. State-of-the-art technology provides merchants with numerous benefits, including fraud screening for every transaction submitted and providing real-time reporting via merchants' Web browsers.

Mail order/telephone order (MOTO) businesses conduct transactions through the mail or over the telephone.

The Secure Sockets Layer (SSL) protocol, designed by Netscape Communications, allows encrypted, authenticated communications to travel safely and securely across the Internet. SSL provides merchants with privacy, authentication and message integrity. Show your customers that your site is secure by displaying the key or closed lock on the bottom of your site.

Secure hypertext transfer protocol (SHTTP or HTTPS) transfers credit card information safely and securely, using special encryption techniques. It is used to secure a Web site for electronic transactions and enables credit card users to make safe online purchases.

The Uniform resource locator (URL) is the global address of different documents, Web sites and other resources found on the World Wide Web.

These are just a few of the terms associated with online transaction processing. Give yourself time to absorb the information. For other acronym translations, find an online Internet dictionary through your search engine, or call your transaction processor's customer service department.

Tim Miller is COO of Cardservice Internationaland has more than 15 years of experience in the credit card processing industry.

The opinions expressed in this column are those of the author, not of All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

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