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Key terms and definitions in payments, chargebacks, and risk management.

Common Questions​

What is a chargeback ratio and why does it matter? : Your chargeback ratio is the percentage of your transactions that become disputes. Visa and Mastercard track this number. Processors typically start flagging you around 0.9%, and network programs (VAMP, ECM) kick in at higher thresholds with per-dispute fees that escalate. It's the single most important number in payment risk. → Chargebacks Overview | Network Programs

Why is Visa threatening to fine me? : You've likely exceeded your processor's chargeback threshold (typically ~0.9%) and they're passing through VAMP per-dispute fees or requiring a remediation plan. You need to reduce disputes fast (within 3 months) or your processor may drop you. → Reduce Chargebacks Fast | Network Programs

Why was my merchant account terminated? : Your processor terminated you, most commonly for excessive chargebacks, excessive fraud, or violating their terms. If you've been placed on the MATCH list (an industry blacklist), no processor will onboard you for 5 years. → MATCH/TMF List

How do I lower my processing fees? : Calculate your effective rate first (total fees ÷ total volume). If it's above 2.9% on card-not-present, you may be overpaying. Negotiate with your processor, optimize interchange by sending correct transaction data, and consider interchange-plus pricing instead of flat rate. → Buying Payments | Interchange

What does the charge description on my customer's statement mean? : That's your billing descriptor, the text that appears on credit card statements. If customers don't recognize it, they'll dispute the charge. Make sure it clearly shows your business name and a phone number or URL. → Descriptors and Comms

What's the difference between fraud and friendly fraud? : "Real" fraud means a criminal used a stolen card on your site. Friendly fraud means a real customer made a real purchase, then disputed it, claiming they didn't authorize it, never received it, or weren't satisfied. Different problems, different solutions. → Fraud Types | Friendly Fraud

Should I fight this chargeback or just accept it? : It depends on the amount, reason code, and the evidence you have. Under $25, it's rarely worth the effort. Over $100 with strong evidence (delivery confirmation, 3DS authentication), fight it. Match your evidence to the specific reason code. → Chargebacks Overview | Compelling Evidence

What is interchange and can I negotiate it? : Interchange is the fee the customer's bank charges on every transaction, typically 1.5-3.5% of the sale. You can't negotiate interchange itself (it's set by Visa/Mastercard), but you can negotiate your processor's markup on top of it. → Interchange

How do I know if my processing fees are too high? : Calculate your effective rate: total fees ÷ total volume. For online businesses, 2.7–3.0% is typical. If you're above 3.5%, something's wrong. Compare against industry benchmarks for your business type. → Reading Statements | Benchmarks

What is 3D Secure and do I need it? : 3D Secure (3DS) is an extra verification step during online checkout. The customer confirms via their bank's app or a one-time code. It shifts fraud liability from you to the bank. If you process online and have a fraud problem, it's the single most effective tool. → 3D Secure

  • Chargeback - Forced transaction reversal initiated by the cardholder's bank
  • Authorization - The process of verifying a transaction can proceed
  • 3DS (3D Secure) - Authentication protocol for card-not-present transactions
  • Interchange - Fee paid by acquiring bank to issuing bank per transaction
  • PCI DSS - Security standard for handling cardholder data

A​

AAV (Accountholder Authentication Value) : Mastercard's authentication verification value generated during Identity Check (3DS) authentication.

ABU (Automatic Billing Updater) : Mastercard's service that automatically updates stored card credentials when cards are replaced or renewed.

ACH (Automated Clearing House) : Electronic network for financial transactions in the United States, including direct deposits and bill payments. → ACH Operations

Acquirer : The financial institution that processes card transactions on behalf of merchants. Also called "acquiring bank" or "merchant bank." → Payment Ecosystem

Allocation : Visa's dispute process where liability is automatically assigned based on transaction data without merchant response.

ARN (Acquirer Reference Number) : A 23-digit number assigned by the acquirer to uniquely identify a transaction. Critical for dispute tracking.

ATO (Account Takeover) : Unauthorized access to and control of a legitimate user's account. → Account Takeover

Authorization : The process of verifying a transaction can proceed by checking available credit/funds and card validity. → Authorization & Capture

AVS (Address Verification Service) : Fraud prevention measure comparing billing address provided by customer to cardholder's address on file with issuer. → AVS & CVV

B​

BIN (Bank Identification Number) : First 6-8 digits of a card number identifying the issuing bank. Also called IIN (Issuer Identification Number).

BRAM (Business Risk Assessment and Mitigation) : Mastercard program for high-risk merchant category oversight. → Network Programs

Bust-Out : Fraud pattern where credit is built legitimately over time, then all available credit is maxed out before disappearing. → Fraud Rings

C​

CAVV (Cardholder Authentication Verification Value) : Visa's cryptographic value proving cardholder authentication during 3D Secure.

Central Site Business Date : Mastercard's reference date found in PDS 0158, subfield 5, used for calculating chargeback time frames.

Chargeback : Forced reversal of a transaction initiated by the cardholder's bank. Also called "dispute" in some contexts. → Chargebacks Overview

CIT (Cardholder Initiated Transaction) : A transaction initiated directly by the cardholder, as opposed to merchant-initiated.

CNP (Card Not Present) : Transactions where the physical card is not present, such as online, phone, or mail orders. → Payments Overview

Collaboration : Visa's dispute process where merchant can respond to disputes with evidence before final decision.

Compelling Evidence : Documentation that proves cardholder participated in or benefited from a disputed transaction. → Winning Evidence

CP (Card Present) : Transactions where the physical card is used at a terminal or point of sale.

CVV/CVC (Card Verification Value/Code) : 3-4 digit security code on card used for CNP verification. CVV2 specifically refers to the printed code. → AVS & CVV

D​

DE (Data Element) : Specific field in ISO 8583 message format used for payment card transactions. Example: DE 72 contains message text.

DPD (Days Past Due) : Number of days a payment is overdue from its due date.

E​

ECI (Electronic Commerce Indicator) : Value indicating the authentication level of an e-commerce transaction. Key values: 05 (fully authenticated), 06 (attempted), 07 (not authenticated).

ECP (Excessive Chargeback Program) : Mastercard's monitoring program for merchants exceeding chargeback thresholds. → Network Programs

EMV (Europay, Mastercard, Visa) : Global standard for chip card payments providing enhanced security over magnetic stripe. → EMV & Contactless

F​

False Positive : A legitimate transaction incorrectly flagged or blocked as fraud.

First-Party Fraud : Fraud committed by the actual customer using their own identity, with intent to defraud. → First-Party Fraud

Friendly Fraud : Legitimate cardholder disputing a valid transaction they actually made. Also called "first-party misuse." → Friendly Fraud

FRR (First Ride Risk) : Mastercard transit program allowing initial ride without prior authorization.

G​

GCMS (Global Clearing Management System) : Mastercard's transaction clearing system.

I​

Identity Check : Mastercard's brand name for 3D Secure authentication. → 3D Secure

Interchange : Fee paid by merchant's acquiring bank to cardholder's issuing bank for each transaction. → Interchange

IPM (Integrated Product Messages) : Mastercard's clearing message format.

Issuer : The bank that issues cards to consumers and is responsible for cardholder accounts. → Payment Ecosystem

K​

KBA (Knowledge-Based Authentication) : Identity verification using questions only the user should know.

KYC (Know Your Customer) : Process of verifying customer identity, required by regulations. → AML Basics

L​

Liability Shift : Transfer of fraud loss responsibility between parties based on EMV/3DS compliance. When implemented correctly, liability shifts from merchant to issuer. → 3D Secure | EMV Liability

M​

Mastercom : Mastercard's online dispute management platform.

MCC (Merchant Category Code) : Four-digit code classifying merchants by business type. → MCC Codes

MFA (Multi-Factor Authentication) : Authentication requiring multiple verification methods.

MIT (Merchant Initiated Transaction) : A transaction initiated by the merchant without cardholder interaction, such as recurring billing. → Subscriptions & Recurring

Metro 2 : Standard format for reporting credit information to bureaus.

N​

No-Show : Hotel/travel charge when customer makes reservation but doesn't arrive and doesn't cancel.

P​

PAN (Primary Account Number) : Full card number, typically 16 digits.

PCI DSS (Payment Card Industry Data Security Standard) : Security standard for handling cardholder data. → PCI-DSS Compliance

PDS (Private Data Subelements) : Mastercard's extended data fields in ISO messages.

PII (Personally Identifiable Information) : Data that can identify a specific individual.

POI (Point of Interaction) : Location/device where card transaction occurs (terminal, website, etc.).

Pre-Arbitration : Dispute stage after representment where issuer challenges merchant's response before arbitration. → Chargeback Lifecycle

Q​

QMAP (Questionable Merchant Audit Program) : Mastercard program listing merchants with concerning fraud/chargeback patterns. → Network Programs

R​

RDR (Rapid Dispute Resolution) : Visa's program allowing pre-dispute resolution before chargebacks file. → Chargeback Alerts

Reason Code : Code indicating the specific category/reason for a chargeback. → Reason Codes Reference

Representment : Merchant's response to a chargeback with evidence disputing the claim. Also called "second presentment" (Mastercard). → Representment Workflow

ROC (Record of Charge) : American Express's term for transaction record.

S​

SafeKey : American Express's brand name for 3D Secure authentication. → 3D Secure

SCA (Strong Customer Authentication) : EU requirement under PSD2 for multi-factor authentication on certain transactions. → 3D Secure

Second Presentment : Mastercard's term for representment - merchant's response to a chargeback.

SLI (Security Level Indicator) : Mastercard's indicator of authentication level. Values: 1 = first-party authenticated, 2 = delegated authentication.

Stand-In : Network-level authorization when issuer is unavailable.

Synthetic Identity : Fabricated identity combining real and fictitious information, not belonging to any real person. → Synthetic Identity Fraud

T​

Third-Party Fraud : Fraud committed using stolen identity of an innocent victim. → Third-Party Fraud

TLID (Transaction Link Identifier) : Mastercard's identifier linking related transactions.

3DS (3D Secure) : Authentication protocol for card-not-present transactions providing liability shift. → 3D Secure Guide

U​

UCAF (Universal Cardholder Authentication Field) : Mastercard's authentication data field containing AAV and authentication details.

V​

VAU (Visa Account Updater) : Visa's service that automatically updates stored card credentials.

VCR (Visa Claims Resolution) : Visa's dispute resolution system including Allocation and Collaboration workflows. → Chargeback Lifecycle

VDMP (Visa Dispute Monitoring Program) : Visa's program monitoring merchants exceeding dispute thresholds. Now consolidated into VAMP. → Network Programs

Velocity : Rate of transactions or activities over time. Velocity rules detect unusual transaction patterns. → Velocity Rules

VFMP (Visa Fraud Monitoring Program) : Visa's program monitoring merchants exceeding fraud thresholds. Now consolidated into VAMP. → Network Programs

Visa Secure : Visa's brand name for 3D Secure authentication. → 3D Secure

VROL : Visa Resolve Online - Visa's dispute management platform.

X​

X-Code : Network authorization when issuer declines but network approves based on risk assessment.

See Also​

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