Acquiring Bank

An Acquiring Bank is a financial institution that maintains a contractual relationship with the merchant. Acting as a “middle man,” the acquiring bank receives credit card transactions from the merchant or from the card acceptor / payment gateway, and then settles those transactions with the issuing banks.

The acquiring bank deposits funds into the merchant depository bank account, and recoups those funds from the card issuers. The merchant must pay certain fees to the acquiring bank for handling the credit card transactions.

Other terms used for “acquiring bank” are: Acquirer or Merchant Bank.

Address Verification Service (AVS)

Address Verification Service (AVS) is a service that is offered as a part of the credit card authorization procedure.
AVS is intended to combat fraud in mail order, telephone order, and Internet transactions by including cardholder billing address information in the authorization request. The issuing bank compares the address information in the authorization request message with its database of information about the cardholder. If the address contained in the request message does not match the information in the database, the authorization may be declined. Mail, telephone, and Internet transactions that do not include cardholder AVS data are not eligible for the lowest interchange rates from the VISA and MasterCard networks.

Bank Identification Number (BIN)

Bank Identification Number (BIN) is a six-digit number assigned by VISA or MasterCard and used to identify a card issuing institution. The BIN is the first six numbers embossed on the card.


Batch is an accumulation of credit card transactions. The batch may contain sales transactions, refunds, voids, and other credit card transaction types. Typically, there are two types of batches: Open and Closed.

Open Batch: credit card transactions are accumulated throughout a business day waiting to be settled, and then submitted to the processor at the end of the day.

Closed Batch: credit card transactions that have been already settled.

CVV Number

CVV Number (Card Verification Value) on your credit card or debit card is a 3 digit number on VISA®, MasterCard® and Discover® branded credit and debit cards.

On your American Express® branded credit or debit card it is a 4 digit numeric code.


Chargeback is transaction returned through interchange by an issuing bank to an acquiring bank. A transaction may be returned because of rules and regulations violations, because the sale is disputed by a cardholder, or as a result of fraud. In the case of cardholder dispute, the merchant has the opportunity to appeal and prove that the sale is valid.

Fraudulent Transaction

Fraudulent Transaction is a transaction that takes place without the legitimate consent of the cardholder. Such transactions might be derived from the use of lost, stolen, or counterfeit cards, or other fraudulent conditions as defined by the card issuer.


Interchange is a domestic and international systems operated by the MasterCard and VISA associations for authorization, settlement, and routing of interchange and other fees, as well as other monetary and non-monetary information related to credit card activities.

IPOS System

IPOS System is an integrated point-of-sale system. That system combines the ability to process credit card transactions with software or hardware that manages other business-related functions. For example, a restaurant management system might track menu items, server clock in and clock out, and open tickets, while also interfacing with a credit card module that would allow diners to pay for meals by credit card.

Issuing Bank

Issuing Bank is any VISA or MasterCard association member financial institution, bank, credit union, or company that issues, or causes to be issued, credit cards to cardholders.

An individual desiring a credit card makes application to an issuing bank. The issuing bank undertakes a review of the individual's credit history, current salary, and other such factors. If the application is approved, the issuing bank provides the individual with a credit card and associated account number.

The issuing bank transfers funds to acquiring banks to cover purchases made by the cardholder, and receives the cardholder's payment at the end of the billing period.

MOTO Transaction

Mail Order / Telephone Order Transaction (MOTO Transaction) is a transaction where a cardholder orders goods or services from a merchant by telephone, by mail, or by other similar means, and neither the card nor the cardholder is present at the merchant outlet.

Merchant Category Code (MCC)

Merchant Category Code (MCC) is a Four-digit classification code used to identify the type of merchant business in various stages of transaction processing. For example 5999 is the code given to miscellaneous and specialty retail stores.

Merchant Identification Number (MID)

Merchant Identification Number (MID) is a unique number issued by the acquiring bank to identify a merchant and the merchant's terminal(s) to a host computer in the credit card processing network.


Pre-Authorization is a pre-approval for a future transaction. The pre-authorization is usually followed, within a specific time interval, by the actual financial transaction that will be settled by the merchant. Pre-authorizations are used primarily in situations where the cardholder wishes to obtain “advance approval” or “verification” that sufficient funds are available to make a subsequent purchase using a credit card.


A processor is an organization that furnishes credit card processing, billing, reporting, settlement, and operational services to acquiring banks. The processor provides the computing facilities for routing credit card transactions over a network to an appropriate issuer for authorization or settlement.

Some acquiring banks process their own credit card transactions. Merchant point-of-sale terminals connect directly to computer systems owned and managed by the acquiring bank.

Other acquiring banks outsource the processing of their credit card transactions to a third- party processor. The third-party processor then owns and maintains the hardware and software needed to process credit card transactions. In that case, merchant point-of-sale terminals connect to the third-party processor to transmit credit card requests. The third-party processor provides transaction reporting to the acquiring bank.


Settlement is the procedure that results in the total value of credit card transactions being deposited in the merchant's depository account by the acquirer. Most merchants will “settle” credit card transactions on a daily basis by transmitting a credit card batch file to the credit card processor.


Void is a transaction that nullifies a previous sale that has not yet been settled. This transaction can typically be completed only within the same batch. The original sale transaction is effectively removed from the batch of transactions to be settled.

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