Most businesses take credit card payments from their customers on a daily basis, but few think much about it. But as a business owner, if you don’t know what’s involved in processing card transactions, you can run into trouble when an issue comes up. You may even wonder, what is a payment processor? Here, we’ll answer that question and look at four other payment terms to know.
#1. Payment processor
A payment processor manages the credit card transaction process by acting as the mediator between the merchant and the financial institutions involved. A processor can authorize transactions and works on merchants getting paid on time by facilitating the transfer of funds. Some processors provide equipment for card acceptance, security solutions, PCI compliance assistance, customer support, and other value added services.
The acquirer, also known as the acquiring or merchant bank, is the financial institution that maintains a merchant’s account in order to accept credit cards. The acquirer settles card transactions for a merchant into their account.Sometimes the payment processor and the acquirer are one and the same.
The issuer, or issuing bank, is the cardholder’s bank, which is responsible for paying the acquirer (and subsequently the merchant) for approved card transactions, and collecting payment from cardholders.
#4. PCI compliance
PCI compliance refers to compliance with the PCI DSS, the Payment Card Industry Data Security Standard. PCI DSS is an information security standard that applies to all entities involved in processing, storing, and/or transmitting payment card information. Any merchant that accepts card payments must comply with PCI mandates. Failure to achieve and maintain PCI compliance can leave a merchant vulnerable to a data breach and the ensuing negative fallout including fines, fees, and lost business.
PCI compliance is complex and depends on various factors. Some payment processors offer PCI compliance tools and assistance to their merchants. The type of offerings can include security check-lists, hands-on help, breach coverage, and more. Because PCI mandates are updated regularly, it’s a good idea to work with an experienced processor that offers a complete PCI compliance assistance program.
#5. EMV chip cards
EMV chip cards have become more commonplace since the fraud chargeback liability shift that took place in October 2015. The liability shift placed new responsibilities on merchants for card-present fraud. Basically, if a business processes a chip card without using an EMV-enabled terminal, it could be held responsible for any fraud that results.
EMV is not a mandate like PCI (e.g. merchants will not be fined for not using an EMV-enabled device). But it is a necessity for merchants in reducing their fraud and chargeback rates for card-present transactions. It’s important to note, however, that EMV does not protect against a data breach— that’s where PCI comes in. So be sure to ask your payment processor about both EMV and PCI compliance solutions.
Now that you know a few of the important payment terms, it’s time to be sure you’re working with the right payment processor for your business. A trustworthy and experienced processor will provide the information, tools, and guidance you need to securely accept card payments.