Part II Chapter 4 Flashcards
account-to-receiver transfer
Under the FedGlobal ACH Payments system, this
type of transfer allows funds from accounts at a US
depository financial institution to be retrieved by any
receiver either at a participating bank location or at
a trusted, third-party provider in certain receiving
countries.
automated clearinghouse (ACH)
An electronic network for low-value credit and debit
financial transactions in the United States.
available balance
The available amount of funds available for
withdrawal from an account, based on a bank’s
availability schedule and/or local regulations.
certified check
A payment instrument drawn on a depositor’s
checking account; funds are withdrawn from the
depositor’s account at the time of certification to
assure payment with a certification or guarantee by
the bank. It carries the signature of a bank officer
certifying the check to be genuine and guaranteeing
payment.
charge-back
The reversal of a prior outbound transfer of funds
from a consumer’s bank account, line of credit, or
credit card.
clearing
The process in which financial institutions use the
information contained in a payment instruction,
such as a check or wire transfer, to transfer money
between themselves on behalf of the payor and the
beneficiary, either directly or through some external
network.
Clearing House Interbank Payments
System (CHIPS)
A bank-owned, large-dollar funds transfer network
operated by The Clearing House Payments Company
clearinghouse
In a payment clearing process, this is a group of
banks or other financial institutions that agree to
exchange payment instruments (paper or electronic)
drawn on the member participants.
collected balance
An aggregate of bank account balances that is
calculated as the average ledger balance minus the
deposit float.
correspondent bank
In a payment clearing process, this is one of two
banks that have accounts with each other for the
purpose of clearing and settlement of payment items
between the banks.
daylight overdraft
A type of overdraft position that occurs when a
financial institution permits a corporation to make
payments that exceed the available balance on the
corporation’s account. These overdraft positions are
usually eliminated by funds that arrive later in the
day.
debit card
A card that allows access to funds directly from a
cardholder’s checking or savings deposit account
and can be either signature-based or personal
identification number (PIN)-based.
debit transfer
In an electronic payments system, this is the process
of a payor authorizing payees to initiate value
transfers from the payor’s account to the account of
the payee.
departmental (unnamed) card
A variation on the purchasing card in which each
department is given its own purchasing card for
general use by that department.
deposit deadline
The time within the banking day when an item
must be ready for transit at the depository bank’s
processing center to qualify for the availability stated
in the availability schedule.
depository bank
The bank or financial institution in which a check is
deposited for processing and clearing.
direct debit scheme
The term used in the Single Euro Payments Area
(SEPA) initiative to describe a pre-authorized debit
program in which one person or company authorizes
another to automatically debit its bank account for
payments that are due.
EMV
An acronym that refers to a global standard for the
use of smart cards (or chip cards) as either debit or
credit cards.
FedGlobal ACH Payments
A service offered by the US Federal Reserve Bank
to provide a framework for sending cross-border
automated clearinghouse transactions to countries
around the world (over 25 countries as of 2018).
Fedwire
A high-value, real-time gross settlement (RTGS)
transfer system operated by the US Federal Reserve.
finality
In a payment system, this is the point in time when a
payment can no longer be taken back or retracted by
a payor or payor’s bank, and the payee has full use of
the funds.
foreign check
A check deposited at a bank in one country that is
drawn on a bank in another country.
ghost card
A variation on the purchasing card that does not
involve the use of an actual card. Also known as a
virtual card.
giro
A method of transferring money by instructing
a bank to directly transfer funds from one bank
account to another without the use of checks.
government warrant
In government finance, this is an order to pay that
instructs a treasurer to pay the holder on demand or
after a maturity date.
gross settlement
A type of settlement in a payment system in which
each transaction results in a separate value transfer
between the payor and payee.
image replacement document (IRD)
In the United States, this is a paper reproduction
of the original check that contains an image of the
front and back of the original check and is the legal
equivalent of the original check.
interchange fees
Fees established by the payment card brands that
go directly to the issuing bank to cover its costs in
issuing cards and in processing card transactions.
ledger balance
A bank balance that reflects all entries to a bank
account, regardless of whether the deposited items
have been collected and are available for withdrawal.
magnetic ink character recognition
MICR
A data capture process that translates the machine readable information on a check into a digital data entry
merchant acquirer
The financial institution that processes and settles
payment card transactions on behalf of a merchant
merchant discount
A type of bundled merchant card processing fee in
which the merchant is charged one fee by its card
processor that covers all of the cost components of
the transaction.
mobile wallet
An emerging payment type that uses smartphones
and tablets equipped with near field communication
(NFC) chips or a bar code.
near field communication (NFC)
A short-range wireless connectivity standard that uses
magnetic field induction to enable communication
between devices when they are touched together or
brought within a few centimeters of each other.
on-us check clearing
A type of clearing process that involves a single bank
and occurs when a payee deposits a check in an
account at the same bank on which it is drawn.
on-we check clearing
A type of clearing process that occurs when checks
are deposited at a financial institution that are
drawn on related financial institutions or on financial
institutions that share a common check-processing
system, thus eliminating the need to clear the checks
through another bank.
optical character recognition (OCR)
A processing method for data entry that reads
preprinted information on remittance documents and
creates a digital data file
payable through draft (PTD)
A payment instrument resembling a check that is
drawn against the payor rather than the bank.
payee
In a payment system, the one receiving the payment.
payment system
A series of processes and technologies that transfer
monetary value from one party to another.
payor
In a payment system, the one making the payment.
pre-authorized draft
A payment instrument that authorizes the payee to
draw/draft against the payor’s account.
proof of deposit (POD)
An availability assignment method used in banking
in which availability is assigned to each check as it is
processed.
purchasing card
A payment card, typically a credit card, used by a
business for the purchase of supplies, inventory,
equipment, and service contracts.
real-time gross settlement (RTGS)
system
A type of payment system in which each transaction
results in a separate value transfer between the
payor and payee, and the payment to the payee is
final and irrevocable at the time the receiving bank’s
account is credited or at the time the receiving bank
is notified of the payment, whichever is earlier.
reject item
A check that is rejected by a bank’s automated
check-processing equipment.
remote deposit capture (RDC)
In an over-the-counter field deposit system, this is
a process that allows an organization to scan and
image checks, then transmit those images to its
depository bank for posting and clearing, instead of
having to deposit physical checks.
settlement
In a payment system, this is the actual movement
of funds from the payor’s account to the payee’s
account.
sight draft
A draft that is payable upon presentment, provided
all of the terms of the draft have been met.
single-use card
A disposable credit card number that looks like
a regular credit card number, but includes an
embedded expiration date and security code, and
will only work for one use
smart card
A typical payment card with the addition of a
computer chip with related circuitry that can be
used to store information for security or transaction
processing
Society for Worldwide Interbank Financial Telecommunication (SWIFT)
A financial industry-owned, cooperative, interbank
telecommunication network that enables banks
and corporations to send authenticated electronic
messages in standard formats.
stored-value card (SVC)
A type of debit card that may be offered by financial
institutions, retailers, and other service providers,
and can be a branded, open-loop card (e.g., Visa
or MasterCard), or a private-label, closed-loop card
(e.g., Starbucks or other merchant gift card). Gift
cards are one of the most commonly used card of
this type.
time draft
A draft that is payable at some future date, provided
all of the terms of the draft have been met.
transit check
A check deposited with a financial institution that is
drawn on another financial institution.
value-dated automated clearinghouse
(ACH) transactions
ACH transactions where the payment instructions
include settlement dates.
virtual currencies / cryptocurrencies
A type of unregulated, digital money that is issued
and usually controlled by its developers, and is used
and accepted among the members of a specific
virtual community.
