PayOps™

Payment Operations & Solutions

GLOSSARY


  • ABA number: a nine digit routing and transit number (eight digits and a check digit) under the sponsorship of the American Bankers Association that identifies a specific financial institution.

  • ACH (Automated Clearing House): a computer-based clearing and settlement operation, established for the exchange of electronic transactions among participating depository institutions. Such electronic transactions can be substituted for paper checks used to make recurring payments such as payroll or pre-authorized insurance premiums.

  • ACH credit: a transaction through the ACH network originated to pay a receiver (deposit funds into an account).

  • ACH debit: a transaction through the ACH network originated to remove funds from the receiver (withdrawal from account)

  • ACH operator/processor: a central clearing facility that receives batches of ACH credit and debit transactions from originating depository institutions; edits, sorts, and distributes the transactions to receiving depository institutions; and facilitates the settlement among participants. Currently, there are two ACH operators in the US: the Federal Reserve and The Clearing House.

  • banknote: currency issued by a government or central bank and consisting of printed paper

  • BIC (Business Identifier Code): a code that is used in automated processing and identifies a financial entity. The International Standardization Organization (ISO) has designated SWIFT as the BIC registration authority.
  • cash letter: group of checks, accompanied by a paper listing sent to a clearing house or the Federal Reserve check collection system. A cash letter contains a number of negotiable items, mostly checks, accompanied by letter that lists the amounts and instructions for transmittal to other banks. A foreign cash letter consists of checks drawn (written) in U.S. dollars or in a foreign currency and issued on a foreign bank. These are usually cleared though a correspondent bank.

  • CHIPS (Clearing House Interbank Payment System): a private-sector electronic funds transfer system run by the New York Clearing House Association (NYCHA) used primarily for international payments.
    commercial bank: a financial institution that offers a broad range of deposit accounts, including checking, savings, and time deposits, and extends loans to individuals and businesses. Commercial banks are owned by stockholders and operated for profit.

  • correspondent bank: a bank that--by arrangement--holds the deposits of another bank and provides payments and other services for that bank.

  • Credit Union: financial cooperative organizations of individuals with a common affiliation (such as employment, labor union membership, or place of residence). Credit unions accept deposits of members, pay interest (dividends) on them out of earnings, and primarily provide consumer installment credit to members.

  • Documentary Collection: the collection of a sum of money due from a buyer by a bank against delivery of certain documents. The bank acting as trustee and intermediary between exporter and importer presents documents–by order of the exporter–which are proof of the actual delivery of a product or service rendered and in exchange receives payment of the amount owed or obtains acceptance of a bill of exchange.

  • EFT (electronic funds transfer): a generic term describing any transfer of funds between parties or depository institutions via electronic data systems (i.e., does not use cash or checks).

  • exchange rate: the price of a country's currency in terms of another country's currency.

  • Federal Reserve Bank: one of the twelve operating arms of the Federal Reserve System, located throughout the nation, that together with their twenty-five Branches carry out various System functions, including operating a nationwide payments system, distributing the nation's currency and coin, supervising and regulating member banks and bank holding companies, and serving as banker for the U.S. Treasury.

  • fedwire: payment system operated by the Federal Reserve or payment transactions that are electronically initiated and settled on the same day; Fedwire is the primary United States network for large-value or time-critical domestic and international payments, and it is designed to be highly resilient and redundant.

  • financial institution (FI): a State or Federally chartered depository institution, such as a bank, savings and loan, or credit union.

  • FX option: is a derivative financial instrument where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.

  • foreign check collection: presentment of a check or draft drawn in U.S. dollars or a foreign currency and drawn on a foreign bank for final payment.

  • IBAN (International Bank Account Number): an international standard for identifying bank accounts across national borders. The IBAN was originally developed to facilitate payments within the European Union but the format is flexible enough to be applied globally and it’s primary purpose is to facilitate routing and avoid routing errors. The official IBAN registry is currently at SWIFT.

  • IVR (Interactive Voice Response): a technology that allows a computer to detect voice and keypad inputs. IVR systems are typically used to service high call volumes, reduce cost and improve the customer experience.

  • Letter of Credit (LC or L/C): a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking (it can also be revocable, confirmed, unconfirmed, transferable or others e.g. back to back: revolving but is most commonly irrevocable/confirmed) to a beneficiary against complying documents as stated in the Letter of Credit.

  • mobile payment: a new and rapidly-adopting alternative payment method. Instead of paying with cash, check or credit cards, a consumer can use a mobile phone to pay for wide range of goods and services or as an alternate mean to pay individuals.

  • NACHA (National Automated Clearing House Association): develops and enforces operating rules for the ACH Network and for electronic payments in the areas of Internet commerce. NACHA Operating Rules govern corporate and consumer ACH credits and debits. NACHA issues an updated edition of the ACH Rules annually to incorporate rules amendments approved during the year.

  • ODFI (Originating Depository Financial Institution): an ACH term for the bank that delivers an ACH file to the ACH Network. The ODFI submits the transaction on behalf of its customer, the Originator.
  • payment system: collective term for mechanisms (both paper-backed and electronic) for moving funds, payments, and money among financial institutions throughout the nation. The Federal Reserve plays a major role in the nation's payments system through distribution of currency and coin, processing of checks, electronic transfer of funds, and the operation of automated clearinghouses that transfer funds electronically among depository institutions; various private organizations also perform payments system functions.

  • P2P payment: acronym for person-to-person funds transfer, sometimes used when referring to mobile payments.

  • RDFI (Receiving Depository Financial Institution): a financial institution that receives ACH entries directly, or indirectly through a third party, from an ACH Operator.

  • remittance: transfers of money by foreign workers and residents to their home countries.

  • Savings and Loan Associations (S&L): historically, depository institution that accepted deposits mainly from individuals and invested heavily in residential mortgage loans. Although still primarily residential lenders, S&Ls may now offer checking-type deposits and make a wider range of loans.

  • SDN (Specially Designated Nationals): individuals and organizations with whom United States citizens and permanent residents are prohibited from doing business.

  • SEPA (Single Euro Payments Area): a payment-integration initiative of the European Union for simplification of bank transfers denominated in Euro.

  • STP (Straight-through Processing): represents the ratio of payment transactions that can be processed without stopping for human review or manual intervention.

  • Standby Letter of Credit: an instrument representing a bank’s promise to answer for the payment obligation of another should the other default. Proof of default is not needed and issuers are not concerned with the underlying contract.

  • SWIFT (Society for Worldwide Interbank Financial Telecommunication): an international financial payment cooperative organization that operates a network that facilitates the exchange of payment and other financial messages between financial institutions throughout the world. Frequently, the SWIFT message is only part of an international payment process which might also employ a system such as CHIPS or Fedwire to fully implement the transaction.

  • wire transfer: a method of transferring electronically money from one entity to another; usually involves large dollar payments.
  • TEST