Payment Processing Terms Untangled

Payment Processing Terms Untangled

We’ve been in the merchant services business for more than 10 years, and even we get confused with our industry’s terms from time to time. What the difference between a payment service provider and a credit card processor? What’s an ISO? Some terms are so similar to one another, other terms mean the same thing, and some are completely unrelated to what you may think. Here are some definitions that we know will help clear up your confusion.

Payment Service Provider

A payment service provider connects a merchant with an acquiring bank to open a merchant account. After an acquiring bank approves a merchant for an account, the merchant integrates a payment gateway into their website allowing them to accept credit cards, debit cards, e-checks and bank transfers.

Merchant Account Provider

A merchant account provider is the same as a payment service provider. The two names are interchangeable.

Merchant Service Provider

A merchant service provider is very similar to a payment service provider and merchant account provider. The merchant service provider connects a merchant to an acquiring bank, but also provides the payment gateway and credit card processing services. Merchant service providers also offer supplemental services that may include shopping cart integrations, offshore company incorporations, fraud prevention services, and connecting merchants to solution providers for SSL certificates and PCI compliance.

Some payment service providers specialize in solutions for one type of transaction, such as point-of-sale, online, mail order, or telephone order. Others offer solutions for a combination of transaction types, or even all types of transactions.

Acquiring Bank

An acquiring bank is a type of bank or financial institution that provides merchant accounts so businesses can accept and process electronic payment transactions, such as debit cards, credit cards, e-checks, and bank transfers.

Non-Acquiring Bank

A non-acquiring bank is a bank or financial institution that does not offer merchant accounts.

Credit Card Processor

A credit card processor is the service provider responsible for processing the electronic payment transactions between the merchant, credit card issuing bank, and acquiring bank. A merchant service provider is also a credit card processor.

Independent Sales Organization (ISO)

An independent sales organization, or ISO, is an organization that resells products or services to other businesses. ISOs often partner with payment service providers and merchant service providers to connect their merchants with acquiring banks.

Credit Card Issuing Bank

A credit card issuing bank is the bank that distributes credit cards.

Credit Card Association

A credit card association is the company who provides the credit card service, such as Visa, MasterCard, American Express, Discover, Diners Club, and JCB International.

For more terms, check out our payment processing glossary!

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