An ABA routing transit number (ABA RTN) is a nine-digit code printed on the bottom of checks in the United States to identify the financial institution on which it was drawn. It is named after the American Bankers Association (ABA), who developed the system in 1910. It's purpose is to facilitate the sorting, bundling, and delivering of paper checks to the drawer's (check writer's) bank for debiting.
In Canada, banks use an eight-digit routing number. This number consists of the five-digit transit ID for the branch and three-digit institution ID of the bank. The number appears on the bottom of the check in the order of Transit ID followed by the Institution ID.
Also known as an “acquiring bank”, an acquirer is a type of bank or financial institution that facilitates payment acceptance for businesses (aka merchants). They are the one that provides and underwrites the merchant account.
They are called “acquirers” because they acquire the payments that the merchant accepts and passes them into the interchange network. The speed of information is a lot faster than the speed of money. When the merchant receives a deposit the next day for the previous day’s sales, it is the acquirer that has fronted this money while they wait several more days before the money sent from the consumer's card issuing bank is received.
Another role the acquirer plays is that of a kind of “underwriter”. When a chargeback occurs, if there is no money in the merchant’s account it is the acquirer who pays it. This is why merchant accounts are not as quick and easy to open as normal commercial bank accounts because there is risk involved.
A basis point (plural: basis points), also known as bps or "bips", is simply one one-hundredth of one percent (0.01% or 0.0001). This is a very common term in payment processing, especially with interchange-plus pricing. This is because the interchange-plus rate is always denoted in basis points.
For example, a rate of "cost + 0.20%" is the same thing as saying "cost plus 20 basis points (bps)".
Cryptocurrencies are an interesting new technology (digital currency, software) invented in 2008 with the release of the white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System". Bitcoin is the first and most popular of the cryptocurrencies but there are many hundreds or thousands more. All are still undergoing constant development as open source projects.
Cryptocurrencies are named as such because cryptography plays a large role in how the underlying protocols work. They are often referred to simply as "crypto". Cryptocurrencies are decentralized. This means that there is no central issuing entity or single server where all ledgers of accounts are kept. Instead, they use what's called a blockchain database.
Cryptocurrencies operate on an entirely different set of "rails" (metaphorically) than other forms of payment such as credit and debit cards. As such, traditional payment processors do not currently offer cryptocurrency payment acceptance.
Cryptocurrency is true digital "cash". What gives cash its value is a different topic entirely, but one of the defining characteristics of cash is that it doesn't require a third party to mediate. Two people alone in a room can exchange cash for goods or services. On the contrary, digital payments (such as credit and debit) and all forms of digital money require many hardware, software, and institutional intermediaries to perform the transaction and track what goes where (money to accounts) and who has what (money, credit, etc.).
The challenge with digital currency is what's called the double spend problem. If you take something digital like a PDF and try to treat it as money, you could send that same PDF to endless people - essentially giving you infinite money. This obviously wouldn't work. Cryptocurrency solves this problem with cryptography and blockchain technology. Everything about how to transfer funds, and what amounts reside where, is held inside the software protocol. So while there are technological intermediaries in a cryptocurrency transaction, it is true digital cash because it operates peer-to-peer without the necessity of a single institution to mediate the transaction. It just needs the internet to continue to exist to continue to operate, similar in concept to how current cash needs a particular government to continue to exist for it to continue to have value.
As such, we believe that eventually cryptocurrencies will become more ingrained in traditional commerce activities. Businesses accept cash and POS systems account for it just fine. With the growing popularity of smart terminals, this makes it entirely possible one day to also accept cryptocurrency with such a machine - even while the underlying protocols are entirely different from that of credit and debit networks.
A gateway (online gateway, payment gateway, gateway account) is a software that connects your Merchant Account with the "online world".
Just like you need a physical machine (like those from Clover, Verifone, Ingenico, etc) to take payments in the physical world, you need a software machine (the gateway) to take payments in the software world. Just like the hardware device has technology to securely read and transmit payment information, the same is true for gateways.
Two gateway products Discount Payments works with and offers as options to our merchants are those by Bambora and Authorize.net.
If you're looking to take payments online then you've probably heard of Stripe, a popular competitor of ours. Stripe is an example of a gateway, but not just a gateway. Stripe is what's known as a Payment Facilitator (or PayFac, Payment Aggregator, Payment Service Provider). They are a Payment Facilitator who's offering is a gateway. Square (another popular competitor of ours) is also a Payment Facilitator but their offering instead focuses more on in-person sales and hardware devices.
A Payment Facilitator means that you don't have a Merchant Account directly with any bank, you have an account with the facilitator and they have a Merchant Account with the bank. They aggregate all payments from their users and submit them through their Merchant Account. This is why they were once call aggregators and now facilitators, those terms are very fitting.
The upside to a facilitator is that things look a little more streamlined. The downside is that they are more expensive because they add a significant markup on the cost in their flat rate pricing.
This is how Discount Payments is able to provide such amazing cost-plus rates. We set you up a Merchant Account directly with an acquiring bank through our financial services partner First Data (now Fiserv). The only downside is that you see all these individual pieces and it might seem confusing. Not to worry though because we simplify everything by being the only one you need to talk to. We administer everything, control all the fees and help you get set up from end to end.
Who is a merchant? The word "merchant" sounds so old-timey, as if you should be selling fish down at the market in the 16th century or be performing a barter trade before you head over to get some ale from the Inn Keeper. The Oxford Dictionary defines merchant as "a person or company involved in wholesale trade, especially one dealing with foreign countries or supplying merchandise to a particular trade".
In the context of payment processoring though, "merchant" simply refers to any business taking card payments. Payment processors call their customers "merchants". So if you are a business that works with a payment processor to accept card payments, you are a merchant.
A Merchant Account is a special type of bank account for businesses that accept card payments. It's not like a normal bank account that stores money and you can perform transactions with, though. It doesn't hold money and it is strictly one directional.
Whereas a business chequing account is held at a commercial bank, a merchant account is held at an acquiring bank. They're called "acquiring" banks because they acquire the payments from you and through their connections with the various networks (Visa, Mastercard, AMEX, Interac, etc) they retrieve the money from the consumer account to give to you.
Merchant Accounts are a little harder to get than a simple consumer bank account where you just walk in and open one up. They require an application process and banks are more discerning in giving them out because of the risks involved. First, deposits are made the next business day but it takes longer than a day for the money to actually be transferred from the issuing (consumer) bank. This means that every deposit is essentially advanced to the merchant by the acquiring bank (acquirer). Next, if there are ever any chargebacks and the merchant is unable to fulfill them then the acquiring bank pays it. This could be because of a fraudulent merchant who took payments, got paid and then disappeared, but also an honest merchant who may not be able to pay a chargeback for various reasons.
This is why during the application process basic measures are taken to ensure that the business and owners are legitimate, as well as check credit among other things.
Discount Payments offers Merchant Accounts directly with an acquiring bank through our financial services partner First Data (now Fiserv). This is how we are able to provide such amazing cost-plus processing rates. We administer the accounts and control all the fees.
There is some confusion around what constitutes a receipt. Countless times when I’m at a store I get handed the “receipt” but it’s really just the printout from the payment terminal. This is not a receipt.
To be a receipt, the paper needs to contain certain things:
- the date of the purchase
- the name and address of the seller
- itemized list / description of the goods or services, with prices
- the vendor's business number if they are a GST/HST registrant
- separated subtotal, tax, and total amounts
There’s so little attention paid to this confusion that I’m not sure there is a consensus or official name for the piece of paper the payment terminal prints, most businesses just assume it’s a receipt because they don’t totally understand what a receipt is. For the sake of clarity, I will refer to this piece of paper as a “payment slip”, which is different from a receipt.
A payment slip does indicate the date, name, and address of the seller but it never indicates the products purchased, itemized prices, business number for sales taxes, or breakdown of the total amount. It’s purpose is simply to say that X amount was taken from X card (Visa, Mastercard, Interac, etc).
The moment you think about the scenario of returning something you immediately understand that the payment slip is not a receipt. How could it be?
Think of the receipt (the itemized record of sale) almost as an invoice, and the payment slip as the proof of payment. The total amount on each matches up and the payment slip also indicates how it was paid - from what card.
Many other stores I’ve been to provide both pieces of paper (often stapled together), this is the correct method of doing things. The receipt (“invoice”) and payment slip (“proof of payment”) come together and the transaction is complete.
So where does the receipt come from then?
The receipt comes from your POS (Point of Sale) system. A POS is the hardware/software where the business records the sale. It’s where inventory, tax amount collected, items sold and much more is housed for internal record keeping, reporting and accounting purposes.
A payment terminal’s only purpose is to take payment from cards. Similarly to when a customer pays cash for something, the $20 bill doesn’t “tell” the business anything. It doesn’t tell the business what items were bought with it, or what portion of that amount is revenue vs. sales tax to be remitted. That’s the job of the POS, or some other paper method if you don’t want to pay for any additional hardware or software. It’s the same for card payments. The card payment machine simply connects your business to the card payment network so you can collect money from customers in this manner.
This is what’s called the standard or stand-alone setup for card payment acceptance. It is where the card payment device is separate from the POS system. There’s nothing wrong with this setup, many many businesses work this way. It’s easy to reconcile (just match the total amount from your merchant statement to the total amount of sales indicated as collected by card in your POS) and it means you can choose any POS system and any payment provider without worrying about compatibility.
The other possible scenario is what’s called an integrated setup. This is when both the sale and payment information is printed on a single piece of paper. Big companies like Walmart have paid big bucks to tightly integrate their custom POS system and payment acceptance to streamline things as much as possible. This is why you only get one receipt from a big store like Walmart and others. This option has always been available to small businesses as well, but it wasn’t cheap and there was also the consideration of which POS system could connect to which payment provider.
In recent years, however, rather than the industry improving connectivity between all POS systems and payment providers, things have instead become more vertically integrated. POS and payment acceptance are now being offered as one combined system, such as Clover.
When you get a Clover device, it’s default is a payment terminal that can be used in any setting. However, you have the option to upgrade to one of Clover’s POS softwares (Register Lite, Counter Service, or Dining) and then you can enjoy the full benefits and features of a POS system all on the same single device and print integrated receipts (sale and payment info).