Payment Systems Overview

Question 1

ACH Network

Answer 1

Processing/Delivery system providing distribution/settlement of electronic credits and debits

Question 2

When Did the ACH Movement Begin

Answer 2

Began in 1968, California Bankers formed the Special Committee of Paperless entries (SCOPE)

Question 3

NACHA

Answer 3

National Automated Clearing House Association
Created in 1974 to coordinated ACH movements nationwide

Question 4

Main Benefit of ACH Network

Answer 4

Cost Reduction and improved productivity over checks

Question 5

ACH Operator

Answer 5

A central clearing facility that receives Entries from an ODFI, distributes Entries to the appropriate RDFI, and performs the settlement functions for the financial institutions.

Can be a Private Companies or the federal reserve

Question 6

Electronic Payments Network

Answer 6

Current Private company that is the ACH Operators

Question 7

Payment associations

Answer 7

provide management, education, assistance to all types of financial institutions across the US

Question 8

Batch Processing

Answer 8

ACH network is a store and forward system, transactions received during the day are stored and processed later in the day

Question 9

Automated Clearing House Operator

Answer 9

Central clearing facility operated by private organization/fed on behalf of designated financial institution

Question 10

Originating Depository Financial Institution (ODFI)

Answer 10

Entity that receives instructions from the Originator and forwards ACH entries to the ACH Operator

Question 11

Originator

Answer 11

the entity that agrees to initiate ACH entries into the payment system according to an arrangement with the receiver

Question 12

Receiver

Answer 12

Natural Person/organization that has authorized an originator to initiate ACH entries to their account at the RDFI

Can be a company or consumer depending on the type of transaction

Question 13

ACH Entry

Answer 13

Can be a debit, credit or non-monetary entry

(checks are always debit entries)

Question 14

ACH Credit Ex

Answer 14

Dividends, payroll, government vendor payments

Question 15

Agreements

Answer 15

Between an originator and ODFI executed to the ACH network to originate payments

Binds originator to the NACH Operating Rules

Question 16

NACHA Operating Rules

Answer 16

Parameters of the relationship between the 2 parties, identify processing requirements and establish liabilities

Question 17

Checks

Answer 17

One of the oldest and most common forms of payments in the US and internationally

Always a debit instrument

Question 18

Fedwire

Answer 18

Not batch processed

Held and transferred in electronic form know as book entry securities

Irrevocable

Question 19

Fedwire securities service

Answer 19

a debit pull system

Question 20

Fedwire funds service

Answer 20

credit push system (only ODFI can remove funds)

Question 21

Credit cards

Answer 21

Dont result in direct transfer of funds from Payor to payee

does not equal payment instructions

Paid later

Question 22

Debit cards

Answer 22

cost of goods paid now against DDA

Question 23

PIN Debit

Answer 23

Immediate transfer

Question 24

Routing Number/MICR

Answer 24

advanced paper check processing

Question 25

Bank of first deposit (BOFD)

Answer 25

Payees Depository Financial institution

Question 26

Truncating bank

Answer 26

1st check participant who creates an image of the check of the 1st bank to transfer present or return images of check

Question 27

Transit Check

Answer 27

check sent to another depository institution for collection

Question 28

Prepaid card

Answer 28

Not associated with DDA