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This article will cover the different terms that you may come across when utilizing Shift4 Payments as your credit card processor for the Shift4Shop application.
Acquiring Bank
The Acquiring Bank is the card association member which contracts with merchants to process credit card transactions. They receive funding from the issuing bank and deposit the merchant’s funds into their account after processing.
Automatic Clearing House (ACH)
ACH is an electronic network for financial institutions in the United States; a computer-based clearing and settlement facility established to process the exchange of electronic transactions.
Card Associations (Visa / MasterCard)
Card associations are the governing body of financial institutions licensed to offer their card brand. Maintains and improves the card networks, dictates interchange fees, and arbitrates between the Acquiring and Issuing Banks.
Card Not Present
A transaction that occurs when a card is not physically present at the time of the sale; typically occurs in a scenario such as a pizza shop accepting payment over the Telephone.
Card Types
Below are the different card types you may come across while processing:
- Charge Card: requires the balance to be repaid in full each month
- Credit Card: allows the consumer to retain a debt balance subject to interest
- Debit / Check Card: allows cardholders to make purchases and debit the funds directly from their bank account; the cardholder must have the required funds available in their account to authorize the purchase
Cardholder
A user of a payment card for payment of merchant goods or services.
Credit Card Processor
The credit card processor is a company (like Shift4 Payments) that manages credit card transactions for the acquiring bank. They are registered with payment brands to supply authorization and settlement services and transfer money between the issuing and acquiring banks. There are two kinds of credit card processors:
- Front End Processor: utilizes various payment brand networks to supply authorization and settlement services
- Back End Processor: accepts settlement files from front end processors, review and sort transactions, and calculate interchange fees
Dues and Assessments
Fees paid directly to the card associations for the use of the card brand and the ability to process credit and debit transactions on the payment networks; used to cover operating costs.
Issuing Bank (Cardholder Bank)
The issuing bank is the card association member which issues credit cards to consumers (cardholders). The issuing bank holds the risk of whether or not the consumer will pay their credit card bill and so they collect interest to compensate for that risk.
Merchant
A business engaged in the sale of goods or services. Every merchant will be assigned a file ID and Merchant Account # (MID) after they initially sign up at www.shift4shop.com.
Merchant Bank
The merchant’s personal bank account. This is where funds from credit card transactions will be deposited as well as where fees due to the MSP or payment the processor will be debited.
Merchant Discount
The fees removed from the sales totals given to the merchant. The average merchant discount in the United States is 1.9%. Approximately 0.1% goes to the acquirer, 1.7% to the issuer, and 0.09% to the network.
Merchant Services Provider (MSP)
Third-party processors or independent entities that provide merchants with the products and services necessary to accept credit cards, debit cards, and other forms of electronic payment.
Non-Bank Financial Institutions (Discover / American Express)
Issue their own cards, authorize purchases and settle both with consumers and merchants. They are also referred to as card associations but they operate as the issuer and also the acquirer (in some cases) paying the merchant directly.
Payment Network
Routes transactions between acquiring and issuing banks. These banks have relationships with a network, rather than with each other, for fulfilling card purchases. The merchant pays various fees to the issuer, acquirer, and payment network for participating in these networks.
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