Fintech glossary

A

A2A (Account-to-Account)

Payments that involve the transfer of funds between two accounts owned by a single party. These accounts may be at the same or different financial institutions.

Accounts payable (AP)

Amounts due to vendors or suppliers for goods or services received that have not yet been paid for.

Accounts receivable (AR)

Amounts owed for goods or services delivered that have not yet been paid for.

ACH (Automated Clearing House)

A U.S. network that coordinates electronic payments and automated money transfers. ACH is a way to move money between banks without using paper checks, wire transfers, card networks, or cash.

ACH authorization

An originator must obtain authorization from a receiver to originate one or more entries to the receiver’s account.

ACH credit

A transaction pushing funds into an account (e.g., payroll direct deposit).

ACH debit

A transaction pulling funds from an account (e.g., monthly mortgage payment).

ACH return

A credit or debit entry initiated by an RDFI or ACH Operator that returns a previously originated credit or debit entry to the ODFI within the time frames established by NACHA rules.

ACH reversal

A credit or debit entry that reverses an erroneous entry. Must be transmitted to or made available to the RDFI within five banking days following the settlement date of the erroneous entry.

ACK

For acknowledging receipt of a CCD entry.

Acquirer / acquiring bank

A financial institution that processes payment transactions, such as credit or debit card payments, on behalf of a merchant. The Acquirer enables businesses to accept credit card payments for the purchase of goods and services.

Acquiring

The process whereby a bank or financial institution processes credit or debit card transactions on behalf of a merchant.

Addenda record

An ACH record that contains supplemental data related to an ACH entry.

Address verification service (AVS)

A security service that checks the street address and zip code against the data on file with the issuer at the time of a card not present transaction.

ADV (Automated Accounting Advice)

An optional service provided by ACH operators that identifies automated accounting advice of ACH accounting information in machine-readable format.

AFT (Account Funding Transaction)

A card network transaction used to pull funds from a payment card to fund an account balance.

Anti-money laundering (AML)

The process of preventing, detecting, and reporting money laundering, which is the illegal process of making money with criminal origins seem like it was obtained legitimately.

API (Application Programming Interface)

A computing interface which defines interactions between multiple software intermediaries.

Approval

A response during the authorization attempt that indicates the card is valid and the transaction amount is secured for the requesting merchant.

Arbitration

The process utilized by credit card issuing companies to ascertain whether an acquirer has definitive responsibility for a chargeback.

ARC (Accounts Receivable Entry)

Occurs when a consumer check is received at a bank lockbox serving a biller and converted into ACH.

ATM (Automated Teller Machine)

A specialized computer that allows users to check account balances, withdraw or deposit money, view account activity, and possibly make purchases.

ATX

For acknowledging receipt of a CTX entry.

B

B2B (Business-to-Business)

Payments between two businesses, for example, between a manufacturer and retailer.

B2B2B (Business-to-Business-to-Business)

A model where a business indirectly sells to another business through a middleman.

B2B2C (Business-to-Business-to-Consumer)

A model where a business accesses the consumer market through another business.

B2C (Business-to-Consumer)

Selling products and services directly to customers without a middleman.

BaaS (Banking as a Service)

A modular approach to supplying complete banking processes that allows brands to embed financial services into their products.

Bank identification number (BIN)

The initial four to six digits that appear on a payment card, identifying the bank or entity that issued the card.

Bank identifier code (BIC)

Also known as a SWIFT code, this is a code that identifies a bank’s location and particular branch for international transfers.

Bank Secrecy Act (BSA)

Referred to as The Currency and Foreign Transactions Reporting Act, it combats criminal activity by requiring financial institutions to assist the U.S. government.

Basis point (BP)

Equivalent to 0.01%, it’s used to reduce ambiguity when defining percentage change.

Batch

The accumulation of captured transactions waiting to be settled.

Batch processing

A type of data processing in which related transactions are grouped together and transmitted en masse for processing.

Beneficial owner

An individual who ultimately owns or controls more than 25% of a company’s shares or voting rights.

BOC (Back Office Conversion)

Occurs when a consumer check is received at a point of sale and converted into ACH during back office processing.

Business day

Any day that is not a weekend or a holiday where the Federal Reserve is closed.

C

C2B (Consumer-to-Business)

A form of commerce that involves consumers providing a product or service to businesses.

C2C (Consumer-to-Consumer)

Payments that involve the transfer of funds between two different consumer accounts for goods or services.

Capture date

The date an authorization is secured and prepared for movement by an acquirer on behalf of a merchant.

Card authorization

The initial electronic request made by a merchant to verify a specific amount is available on a card.

Card not present (CNP)

Payment card transactions where the physical card is not present at the point of transaction.

Card present

Payment card transactions where the physical card is present at the point of transaction.

Card verification code (CVC/CVV/CSC/CVD/CID)

A security code added to a payment card for use during the authorization process.

Cash advance

An amount of cash advanced by a bank teller or ATM to a bank cardholder that is drawn against the cardholder’s line of credit.

CCD (Corporate Credit or Debit)

For B2B transactions, often between a supplier and their corporate customers.

Challenger bank

A small, new, fully-digital bank that typically offers a mobile app and charges low fees.

Chargeback

A reversal of funds initiated by a card issuer made to a merchant.

Check 21 Act

A federal law that allows banks to create equivalent electronic images of paper checks for faster processing.

Check verification

A database service provided to verify a check writer has a valid checking account.

Check/cheque

A document that orders a bank to pay a specific amount from a party’s account to another party.

Checking account

Allows for easy access to funds and often comes bundled with a debit card and checks.

CHIPS (Clearing House Interbank Payments System)

A private-sector alternative to Fedwire that clears payments on a net basis.

CIE (Customer-Initiated Entry)

Used for single bill payments.

Clearing

The process for reconciling a financial transfer by exchanging transaction details.

Closed-loop payment system

Closed loop payment systems operate without intermediaries.

Commercial card

A generic term referring to payment cards issued to businesses for employee use.

COR (Notification of Change)

A non-dollar entry transmitted from RDFI to ODFI in response to outdated or erroneous information.

Counterparty

The entity on the opposite side of any financial transaction.

Credit bureau

A company that collects, researches, and maintains credit information and sells that data as credit reports.

Credit card

A plastic or virtual card with a credit limit used to purchase goods and services.

Credit score

A three-digit number that represents how likely a person is to pay back a loan based on payment history.

Credit transaction (unmatched)

A transaction that gives money back to the cardholder without an existing offsetting sale.

CTX (Corporate Trade Exchange)

A B2B transaction that includes addenda records.

Currency transaction report (CTR)

A report that U.S. financial institutions are required to file for transfers greater than $10,000.

Customer identification program (CIP)

Financial institution procedures for proper KYC/KYB vetting.

Customer relationship management (CRM)

An approach that allows a company to manage and analyze interactions with customers.

D

Data Security Standard (DSS)

Also referred to as PCI DSS, this is a common set of information security policies and procedures for entities handling credit card data.

Debit

A charge to a customer’s deposit account.

Debit card

A plastic or virtual card used to purchase goods and services, with payments made directly from the cardholder’s checking account.

Declined

A response during the authorization attempt indicating the refusal of a credit card issuer to authorize a payment transaction.

Digital wallet

A software application used for electronic payments using a mobile device.

Discount rate

The percentage fee paid by merchants associated with accepting card payments.

Dispute

A formal question of the validity of a payment by a cardholder.

DNE (Death Notification)

A notice made by the federal government to notify an RDFI of the death of a receiver.

Doing business as (DBA)

Refers to a secondary name legally associated with a company.

E

Electronic Benefits Transfer (EBT)

The electronic system enabling government assistance programs to issue benefits to recipientsin the form of payment cards.

Electronic funds transfer (EFT)

Electronic transfer of money from one bank account to another via computer-based systems.

Electronic Payments Network (EPN)

Responsible for ACH transaction switching among banks for the private sector.

EMV (Europay, Mastercard, and Visa)

Payment card technology that uses a chip to transmit data securely.

Encryption

The technique of scrambling sensitive data before transmission for security purposes.

ENR (Automated Enrollment)

A non-dollar entry sent by an RDFI to enroll a receiver in benefit payments.

F

Faster payments

An umbrella term for payment solutions that are always available and provide near-instant updates.

FedNow

A real-time gross settlement system set to release in 2024 for smaller transactions.

Fedwire

A real-time gross settlement funds transfer system operated by the U.S. Federal Reserve Banks.

FinCEN (Financial Crimes Enforcement Network)

A bureau focused on safeguarding the financial system from illicit use.

Funding source

Any financial institution providing liquidity for various payment flows.

G

Good funds

Funds considered equivalent to cash and guaranteed to be available upon demand.

H

Hold

When a final transaction total is uncertain, an authorization hold is placed on a portion of the cardholder’s credit limit.

Horizontal market

A non-specialized market covering a wide range of industries.

I

IAT (International ACH Transaction)

Used for international transactions.

Idempotency

A property that prevents replication of transfers in case of unintended repeated submissions.

Image cash letter (ICL)

See Check 21.

Independent sales organization (ISO)

A third-party payment processing company that resells services from banks.

Instant account verification (IAV)

An account ownership verification tactic where a user provides credentials for their financial institution.

Interchange fee

The fees paid by the acquiring bank to the issuing bank.

International bank account number (IBAN)

An alphanumeric code identifying an individual account in an international transaction.

International Organization for Standardization (ISO)

An international standard-setting organization.

Issuer / issuing bank

A financial institution which offers a payment card directly to consumers.

Issuer identification number (IIN)

See BIN.

Issuer processor

A financial/technological intermediary that connects to card networks and issuing banks.

J

Joint account

An account co-owned by two or more parties, who all have equal responsibilities and permissions.

JSON (JavaScript Object Notation)

A syntax for storing and exchanging data compatible with most programming languages.

K

KYB (Know Your Business)

See KYC.

KYC (Know Your Customer)

A standard banking risk assessment practice.

L

Ledger

A book in which the monetary transactions of a business are posted.

Letter of intent (LOI)

A document declaring the preliminary commitment of one party to do business with another.

M

Magnetic ink character recognition (MICR)

Banking numbers that enable high-speed processing.

Magstripe

The magnetic strip on the back of a payment card.

Maintainer

An open source software developer responsible for a project’s overall health.

Master service agreement (MSA)

A contract reached between parties outlining the chief terms of a deal.

Merchant

A business selling goods or services either in-person or remotely.

Merchant category code (MCC)

A four-digit code that defines a merchant’s business type.

Merchant identification number (MID)

A number that identifies each merchant to the merchant processor.

Microdeposit

A tactic where a small amount is temporarily deposited into a user’s bank account.

Mobile wallet

A type of digital wallet, typically used for electronic payments using a smartphone.

Money market deposit account (MMDA)

A hybrid account providing check writing and debit card privileges with limited access to funds.

Money service business (MSB)

An organization that transmits or converts money.

Money Transmitter License (MTL)

A license for conducting money transfer services defined at the US state level.

MTE (Machine Transfer Entry)

For transactions initiated at ATMs.

N

NACHA (National Automated Clearing House Association)

A nonprofit that manages the ACH network.

NFC (Near Field Communication)

Payment card technology utilizing short-range wireless connectivity.

Non-disclosure agreement (NDA)

A contract establishing a confidential relationship.

Non-sufficient funds (NSF)

Occurs when a payment is attempted but there aren’t enough funds in the account.

O

OCT (Original Credit Transaction)

A card network transaction used to disburse or push funds in real-time.

ODFI (Originating Depository Financial Institution)

Transmits ACH entries to an ACH operator on behalf of an originator.

OFAC (Office of Foreign Assets Control)

The agency that administers and enforces economic and trade sanctions.

Offline debit transaction

A payment method utilizing a debit card without the use of a PIN.

On-us transaction

A transaction where the sender and receiver banks are the same.

Online debit transaction

A payment method utilizing a debit card with the use of a PIN.

Open-loop payment system

Payment systems that require intermediaries to join.

Origination

The multi-step process by which a consumer or borrower applies for a new loan or credit card.

Originator (ACH)

The entity that starts an ACH payment transaction.

OSS (Open Source Software)

Collaborative software where source code is released publicly.

Overdraft

Occurs when more money is spent than is available in a checking account.

Overlimit

When a cardholder exceeds the predetermined credit limit.

P

P2P (Peer-to-Peer)

Payments that involve the transfer of funds between two different parties’ accounts.

Partial authorization

If the full amount of the transaction cannot be approved, the issuer can return a partial authorization.

Payment

The transfer of value from one end party to another.

Payment facilitator (PayFac)

A master merchant account servicing sub-merchants.

Payment for Order Flow (PFOF)

A payment by an exchange to a brokerage for the right to execute a given trade.

Payment gateway

An internet-based system used to transmit payment card information to a credit card processor.

Payment message structure (ISO 20022)

ISO 20022 payment initiation message composed of Group Header, Payment Information, and Credit Transfer Transaction Information.

Payment method

The form of payment a consumer uses to purchase goods or services.

Payment rails

The technological infrastructure for moving money from one party to another.

Payment service provider (PSP)

A third party that provides merchants the ability to accept electronic payments.

PCI (Payment Card Industry) compliance

Adherence to the security regulations set by PCI DSS.

Personal identification number (PIN)

A confidential number used by a cardholder to authenticate card ownership.

Point-of-sale (POS)

The specific time and place where a retail transaction is completed.

POP (Point-of-Purchase)

Occurs when a consumer check is received at a point of sale and converted into ACH immediately.

POS (Point-of-Sale)

Occurs when a consumer initiates a payment at a point of sale.

Positive pay

A fraud-prevention system used by enterprises to match checks presented for payment.

PPD (Prearranged Payment and Deposit)

For preauthorized transactions.

Prepaid card

A payment card not linked to a bank account.

Primary account number (PAN)

A code uniquely identifying a credit cardholder’s account.

Processor

A third party designated by a merchant to handle transactions.

Procure-to-pay

The process of purchasing and paying for goods and services from vendors.

Production environment

The final stage of development where real users interact.

Program manager

Responsible for ensuring all risk and compliance requirements are upheld for a particular card program.

R

Rapid dispute resolution (RDR)

Allows merchants to set rules and respond to pre-disputes with automatic refunds.

RCK (Re-presented Check)

Used by originators to re-present a check returned due to insufficient funds.

RDFI (Receiving Depository Financial Institution)

Receives ACH entries from an ACH operator.

Real-time gross settlement (RTGS)

The continuous process of settling payments on an individual basis in real time.

Reason code

A code providing additional information regarding a chargeback.

Receiver

The intended recipient of an ACH transaction.

Recurring billing

A transaction charged on a periodic basis for recurring goods and services.

Refund transaction

A transaction that gives money back to the cardholder after the initial sale has completed settlement.

Regulation E

Establishes the basic rights, liabilities, and responsibilities of consumers using EFT services.

Remote deposit transfer

The process of customers making deposits remotely by scanning checks.

Retrieval request

A request for detailed information regarding a completed transaction.

Return code

A notification of a payment return or correction.

Risk management

The process of identifying potential sources of risk and attempting to mitigate them.

Routing number

A series of numbers assigned to accounts identifying the financial institution associated with the account.

RTP (Real-Time Payments)

A real-time payments platform for federally insured U.S. depository institutions.

RTP Credit Transfer

The basic payment message used for multiple use cases.

RTP Event

An exchange of related transactions between two financial institutions.

RTP Leg

A transmission from a financial institution to the RTP System.

RTP Message

Transmission of an Instruction or Response from one financial institution to another.

RTP Request for Information

A payment message requesting additional information from a customer.

RTP Request for Payment

A payment-related message requesting an RTP Payment from a customer.

RTP Request for Return of Funds

A payment message requesting the return of funds.

RTP Response to Request for Information

A Request Response Message answering with information requested.

RTP Response to Request for Payment

A Response Request Message answering with information requested.

RTP Response to Request for Return of Funds

A Request Message Response submitting information in response to a request.

RTP Third Party Service Provider

A data processing service organization acting on behalf of another Participant.

RTP Transaction

A full round trip of Instruction and Response messages.

S

SaaS (Software as a Service)

A software licensing and delivery model where software is licensed on a subscription basis.

Same-day ACH

Delivery of available funds within the same business day.

Sandbox environment

A testing environment for trial or experiment.

Savings account

An interest-bearing account encouraging savings goals.

Settlement

The actual movement of funds that completes a transaction.

SHR (Shared Network)

See POS.

Skimming

A type of fraud capturing info from users when they swipe their card through a compromised reader.

Sponsor bank

A licensed financial institution that handles funds transmission for BaaS.

Staging environment

Used for testing or demos very closely resembling a production environment.

Standard entry class (SEC) code

A code to identify the format and application of an ACH transaction.

Standard industrial classification (SIC) code

A code assigned by the United States government that classifies industries.

Straight-through processing (STP)

Payment processing that is completely free of human intervention.

T

TEL (Telephone-Initiated)

For single or recurring debit transactions authorized over phone.

Terminal identification number (TID)

A unique numerical identifier denoting the point-of-sale device.

The Clearing House (TCH)

A banking association providing the only private-sector ACH and wire operators in the United States.

Thin file

The credit report of someone with little or no credit history.

TIN validation

An IRS program matching TINs to the IRS database to avoid penalties.

Tokenization

Data-security technology substituting sensitive data with non-sensitive sequences.

Trace ID

A unique reference number assigned to each ACH entry.

TRC (Truncated Check Entry)

Used for single truncated checks.

TRX (Truncated Check Entries Exchange)

A batch of TRC entries represented as addenda records.

U

Ultimate creditor

The party that is the ultimate beneficiary of a payment.

Ultimate debtor

The party that owes an amount of money to the ultimate creditor.

Unauthorized transaction

The use of a payment method not authorized by the account holder.

Under review

The practice of reviewing a potentially high-risk transaction prior to submission for processing.

Underbanked

Having a bank account but lacking access to additional financial services.

Underwriter

A party that evaluates and assumes another party’s risk for a fee.

V

Value-added reseller (VAR)

An entity reselling a product after adding additional value.

Vertical market

A market focusing on a specific industry or audience.

Void transaction

An authorization canceled prior to settlement preventing money movement.

W

WEB (Web-Initiated)

For single or recurring credit or debit transactions authorized over the Internet.

Webhooks

Automated messages sent from an app when an event occurs.

X

X9

The standard format for image cash letters addressing various criteria like data representation.

XCK (Destroyed Check Entries)

Used by an ODFI when checks are lost or unreadable.

XML (Extensible Markup Language)

A dynamic language used for transporting data.

1

1099

Usually refers to the IRS 1099-NEC form for independent contractors and freelancers.