definitions of industry terms

Definitions of Industry Terms

ATM (Automated Teller Machine) is an electronic terminal that allows a customer to access his/her bank or credit card account and: 1) receive cash that is dispensed from the terminal, 2) transfer funds from one account to another, and 3) view account balances.
Networks (ATM) are composed of financial institutions and other members who issue ATM cards and share common communication/authorization systems for ATM access by members. Networks are usually either national (Plus®, Cirrus®, American Express®, Novus®) or regional (Star®, Honor®, Gulfnet®, NYCE®, MAC®, etc.). ATM cards typically carry a national and a regional logo on them to identify which networks they have access to.
Acquiring Processor is the host computer connection between the ATM and the networks. When a customer ("cardholder") inserts his/her card into the ATM, the ATM calls the acquiring processor, which routes the ATM transaction from the ATM to the appropriate network, according to the network logo(s) on the card. The network routes the transaction to the card-issuing bank for authorization and returns the authorization code to the acquiring processor. The acquiring processor then sends the command to the ATM to dispense cash. The acquiring processor keeps a record of all authorizations for the day and sends a daily settlement file at the end of the day to the clearing bank for transmission into the Federal Reserve System for settlement.
Authorization is the process in which a financial institution verifies the availability of a specified amount of funds in a cardholder's account and "blocks" that specified amount for later settlement.
Settlement is the process in which previously authorized funds are transferred from the cardholder's account, through the Federal Reserve System, to the account of the party providing the cash for the ATM (usually the merchant).
Clearing Bank is the bank used by the acquiring processor for transmitting settlement requests to the Federal Reserve System and for receiving settlement funds from the Federal Reserve System.
ACH (Automated Clearinghouse) is the part of the Federal Reserve System that transfers funds between banks. All banks transfer funds to/from each other via ACH.
Lease Line refers to a dedicated, constant communication data phone line between the ATM and the acquiring processor. Lease lines provide faster communication (since they are already "connected") than dial-up lines but are very costly. A typical lease line ATM transaction takes 6-8 seconds to receive authorization. Lease lines are primarily used for ATMs at bank branch offices.
Dial-Up Line refers to the use of a standard phone line for communication between the ATM and the acquiring processor. When a cardholder inserts his/her card into the ATM, the ATM "dials-up" the acquiring processor. Dial-up lines are much more affordable than lease lines but provide slower communication (since they must "connect" on each transaction). A typical dial-up line ATM transaction takes 10-15 seconds to receive authorization. Dial-up lines are used for the vast majority of ATMs at retail and other non-bank locations.
ATM Transaction is a transaction initiated at an ATM terminal and routed through an ATM network on which interchange income is generated and that, in most instances, can be surcharged. Usually a cash withdrawal, balance inquiry, or a transfer of funds from one account to another.
Point of Sale (POS) Transaction is a transaction initiated at a POS terminal (e.g., credit card swipe machine) and routed through a POS network on which no interchange income is generated and for which a merchant may be charged a processing fee. Usually a purchase of goods or services or "cash back at the time of purchase". Most ATM cards allow both ATM transactions for cash and POS transactions for purchases.
Interchange refers to the fee charged for network usage. When a cardholder uses his/her ATM card at a non card-issuing bank ATM (e.g., a Bank of California customer uses a Bank of New York ATM), the network handling the transaction charges the card-issuing bank a fee for using the network. The card-issuing bank usually passes this fee along to the cardholder as a "fee for using non (card-issuing bank) ATM". A portion of the fee collected by the network is then paid to the ATM owner. (Also called "bank fee" or "back-end fee".)
Surcharge refers to the fee charged for terminal usage. An ATM owner may set a fee to be charged for each withdrawal transaction processed at his/her terminal (only cash withdrawals can be surcharged). Each customer using that terminal for a cash withdrawal will have his/her account debited for the amount of the withdrawal plus the amount of the surcharge (e.g., a customer withdrawing $60.00 cash at an ATM with a $1.50 surcharge would have his/her account debited $61.50). (Some customers will not be charged, such as military personnel and non-US cardholders.) A portion of the fee collected is then paid to the ATM owner. (Also called "convenience fee" or "front-end fee".)
Terminal is another name for referring to an ATM or POS device.
Merchant refers to a retailer.
Card-Issuing Bank is a financial institution that issues ATM cards to its customers.
Bug/Logo refers to the trademarked sign/logo identifying an ATM network.
Logo Panel refers to the panel posted on an ATM that shows the network logos for the networks that are accepted/accessible at that ATM
Cardholder refers to a customer who uses an ATM card.
First Line Maintenance refers to the acts of loading cash, replacing receipt paper and ink ribbons, and clearing paper jams in an ATM.
Second Line Maintenance refers to the repair of mechanical or electrical problems in the ATM, including warranty repairs.
Monthly Settlement refers to the monthly payment to merchants of their surcharge and interchange income. These payments are made the last business day of the current month for amounts collected the preceding month (e.g., January income is paid the last day of February).

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