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Welcome to Learn, where we provide straightforward, easy-to-understand definitions of the payments industry.

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ACH

ACH (Automated Clearing House) is a payment processing network that’s used to send money electronically between banks in the United States.

ACH APIs enable companies with high transaction volumes to write software that automates payments over the ACH network.

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An ACH credit refers to the process of electronically depositing, or “pushing,” funds into a bank account using ACH.

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In an ACH debit, funds are electronically withdrawn, or “pulled,” from a bank account using ACH.

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A Notification of Change (NOC) is used to notify the sender of an ACH payment to correct or change information related to a customer’s bank account.

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A return is a credit or debit entry initiated by the Receiving Depository Financial Institution (RDFI) that returns a previously originated payment to the Originating Depository Financial Institution (ODFI).

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ACH return codes identify the reason an ACH payment was returned by the recipient's bank. They make it easier to spot and resolve payment failures.

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An ACH reversal refers to an erroneous ACH payment that a payment originator requests to take back, or reverse.

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Credits and debits are two kinds of ACH transactions. Whereas a credit involves depositing, or “pushing,” funds into a bank account, for a debit, funds are withdrawn, or “pulled,” from an account.

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FedACH is the automated clearing house (ACH) service of the Federal Reserve Banks.

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Part of the FedACH system, FedGlobal ACH offers low-cost and efficient cross-border ACH payments.

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The two kinds of financial institutions in the ACH network are ODFIs (Originating Depository Financial Institution) and RDFIs (Receiving Depository Financial Institutions).

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A Standard Entry Class or SEC code is a three letter code that describes how a payment was authorized by the consumer or business receiving an ACH transaction.

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US companies moving money internationally will likely weigh the pros and cons of SWIFT vs. Global ACH when it comes to attributes like speed and cost.

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ACH (Automated Clearing House) is a payment processing network that’s used to send money electronically between banks and financial institutions in the United States.

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An electronic funds transfer (EFT), also known as a direct deposit, is the digital transfer of money between bank accounts. As digital transfers, they reduce the need for manual input and paper documents.

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Global ACH can help companies move money from US-domiciled accounts across borders using local rails. Learn how and when to use this payment rail.

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A Request for Payment (RFP) is an ACH Network message that can be used by businesses to send electronic invoices to their customers.

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Same-Day ACH is an improvement to the ACH network that allows the processing of credit, debit, and return transactions several times a day.

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A pre note or prenotification is a zero dollar payment to validate the account and routing details of a bank account before debiting or crediting it.

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An International ACH Transfer—also known as Global ACH—is an ACH payment made cross-border from a US-domiciled account.

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RTP

RTP (Real-Time Payments) is a payment processing network used to send money electronically between banks in the United States.

A Quick Response (QR) Code Payment is a form of contactless payment. A QR code is a scannable barcode containing horizontal and vertical lines, dots, and patterns (unlike a traditional barcode, containing only horizontal lines).

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RTP (Real-Time Payments) is a payment processing network used to send money electronically between banks in the United States. It transfers funds between two bank accounts instantaneously and is available year round.

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Open Loop Payment Systems enable transactions between accounts at different banks without requiring participants to hold an account with any specific app or financial institution.

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FedNow

FedNow is a payment service, designed by the Federal Reserve, that will enable real-time payments (RTP) for financial institutions of any size, in any community—365 days of the year.

FedNow is a new payment rail that enables faster bank payments for financial institutions of any size, in any community, 365 days of the year.

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Real-Time Gross Settlement (RTGS) is a system for electronic payments between two banks, where the transactions process and settle in real time rather than being batched.

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Wire Transfers

A wire transfer is an electronic payment made through a global network, allowing for fast, irreversible, foreign or domestic electronic money transfers.

The Clearing House Interbank Payments System, or CHIPS is the largest private sector USD clearing system for wire transfers.

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Fedwire Funds Services, commonly known as Fedwire, is a real-time gross settlement transfer system that allows participating financial institutions to send and receive same-day fund transfers.

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A SWIFT code, also known as a SWIFT ID or Bank Identifier Code (BIC), is a unique 8-11 character code assigned to a bank for SWIFT wire transfers.

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US companies moving money internationally will likely weigh the pros and cons of SWIFT vs. Global ACH when it comes to attributes like speed and cost.

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SWIFT payments or international wires are global payments made through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.

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A wire transfer is an electronic payment made through a global network, allowing for fast, irreversible, foreign or domestic electronic money transfers.

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Wire fraud is a serious criminal offense that uses electronic or interstate communications methods to defraud someone out of money or property.

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International Payment Rails

Learn how money moves throughout different countries around the world.

A Canadian EFT (or Electronic Funds Transfer) is a bank-to-bank transfer in Canada, similar to ACH in the US.

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Part of the FedACH system, FedGlobal ACH offers low-cost and efficient cross-border ACH payments.

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A SWIFT code, also known as a SWIFT ID or Bank Identifier Code (BIC), is a unique 8-11 character code assigned to a bank for SWIFT wire transfers.

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US companies moving money internationally will likely weigh the pros and cons of SWIFT vs. Global ACH when it comes to attributes like speed and cost.

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Pix is Brazil’s instant payment platform that launched on November 16, 2020. Created and managed by the Central Bank of Brazil, Pix enables fast payments and transfers at any time, year-round.

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SWIFT payments or international wires are global payments made through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.

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Global ACH can help companies move money from US-domiciled accounts across borders using local rails. Learn how and when to use this payment rail.

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The Office of Foreign Assets Control (OFAC) is a financial intelligence and enforcement agency under the jurisdiction of the US Treasury Department.

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Real-Time Gross Settlement (RTGS) is a system for electronic payments between two banks, where the transactions process and settle in real time rather than being batched.

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TARGET Instant Payment Settlement (TIPS) was launched by the Eurosystem in November 2018 as a market infrastructure service that settles instant payments.

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An International ACH Transfer—also known as Global ACH—is an ACH payment made cross-border from a US-domiciled account.

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Originally known as Bankers’ Automated Clearing System (BACS), BACS Payment Schemes Limited clears and settles direct debit, BACS direct credit, and current account switch service in the United Kingdom.

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The Bulk Electronic Clearing System (BECS) is a streamlined electronic payment method used to process low-value, bulk transactions in Australia and New Zealand.

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The Faster Payments Service (FPS) is a banking service in the United Kingdom. The FPS was instituted in order to reduce payment times between accounts held by different customers.

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The Single Euro Payments Area (SEPA) is a system of payment schemas that standardizes cashless transactions in euros.

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Unified Payments Interface (UPI) is a real-time payments system for mobile applications designed and launched by the National Payments Corporation of India.

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Ledgering

Ledgers are foundational to any company that moves money at scale. Explore the accounting fundamentals behind the ledgering process, the differences between application ledgers and general ledgers, and more.

A chart of accounts (COA) is an index of all the different accounts within a company’s ledger.

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A digital wallet (also sometimes called an electronic wallet) is an application that securely stores digital payment information and password data for a user.

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A Ledger Database is a database that stores accounting data. More specifically, a ledger database can store the current and historical value of a company’s financial data.

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Learn the difference between Single-Entry Accounting and Double-Entry Accounting

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Data immutability is the idea that information within a database cannot be deleted or changed. In immutable—or append-only—databases, data can only ever be added.

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In the context of software, concurrency control is the ability for different parts of a program or algorithm to complete simultaneously without conflict. Concurrency controls in a database ensure that simultaneous transactions will be parsed appropriately.

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An API call is idempotent if it has the same result, regardless of how many times it is applied. Inadvertent duplicate API calls can cause unintended consequences for a business, idempotency helps provide protection against that.

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A ledger API allows companies who need to move money at scale quickly and easily access, track, audit, and unify all of their financial data in one place.

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The ledger balance, also called the current balance, is the opening amount of money in any checking account every morning. The ledger balance should remain the same for the duration of the day.

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A ledger (also called a general ledger, accounting ledger, or financial ledger) is a record-keeping system for a company’s financial transaction data.

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A subsidiary ledger is used to keep track of the details for a specific control account within a company’s general ledger.

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Payment Operations

Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company.

Bank reconciliation is the process of verifying the completeness of a transaction through matching a company’s balance sheet to their bank statement.

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A banking API is software that facilitates a digital connection between a company and a bank.

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The term "cash position" pertains to the quantity of cash or assets that can be readily converted to cash, held by an individual, company, or financial institution at any given moment.

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Continuous accounting is the ongoing process of updating a business’s general ledger with reconciled bank statement transactions as soon as they become available.

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Fiat money is a form of currency issued by a government and declared legal tender, though not backed by a commodity.

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Financial reporting empowers businesses to make informed financial decisions by identifying trends and tracking performance. It also offers insights into a company's assets, liabilities, and debt management strategies.

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The Flow of Funds is the movement of money in and out of bank accounts.

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Gross merchandise volume (GMV), also known as gross merchandise value, is the total value of the goods or services retailers sell over a set period.

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An invoicing API allows companies to create, send, manage, and reconcile invoices, as well as track related payments end to end.

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Know Your Business (KYB) is a set of verification procedures that helps companies avoid getting into business with criminals.

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Month-end close is a critical process where the accounting team reviews and records financial transactions to close out the month.

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Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company.

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While both are essential for managing online transactions, there are several differences between payment processors vs. payments gateways.

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Two options for financial transaction settlement—differing in both speed and style—here, we’ll look at how both Net Settlement and Gross Settlement work in action.

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Incoming payment details are notifications that a company is going to receive a payment it didn’t originate—meaning the receiving funds were not initially requested.

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Payment controls help accounts payable (AP) departments avoid losing money due to fraud, late payment fees, and other errors. They are a necessary part of a company’s overall payment operations to keep payments secure, accurate, and authorized.

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Account-to-Account (A2A) banking, sometimes also called Me-to-Me banking, is the transfer of funds from one account to another account.

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Implementing a multi-bank strategy is vital for companies looking to reduce risk exposure. In this article we explain how to reduce financial risk by implementing bank redundancy.

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Batch processing is a method of processing various types of transactions. As the name suggests, transactions are processed in a group or “batch.”

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In business terms, float refers to the time delay between the movement of funds from one account to another.

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Know Your Customer or Know Your Client (KYC) is a set of guidelines for verifying the identity of a customer and gauging the associated risk of working with them.

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Money transmission is the act of one party receiving currency for the purpose of sending it over to another party.

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The 10-K is a comprehensive report mandated by the U.S. Securities and Exchange Commission (SEC) that publicly traded companies must file annually. This report provides a thorough overview of a company's financial performance over the past year.

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A merchant’s bank account must pay an interchange fee to the card-issuing bank each time someone uses a credit or debit card to purchase something from their store.

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Bank Accounts

Bank accounts are monetary repositories maintained by a financial institution.

A clearing account acts as a temporary account that holds transactions before they are finalized or allocated to the correct permanent account.

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Lockboxes are secure bank-run mailing locations where businesses can redirect their paper-check payments, allowing banks to take over the depositing process.

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Virtual accounts are unique account numbers assigned within traditional, physical bank accounts, which are also known as settlement accounts. They can be used to send and receive money on behalf of the settlement account.

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Implementing a multi-bank strategy is vital for companies looking to reduce risk exposure. In this article we explain how to reduce financial risk by implementing bank redundancy.

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The Federal Deposit Insurance Commission was created in 1933 to reinforce the public’s trust in the American banking system. Since the Great Depression, it has successfully prevented widespread loss of consumer deposits in the event of a banking crisis.

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The Federal Deposit Insurance Commission (FDIC) was created to protect deposit holders in the event of a bank failure. In this article we explain how FDIC receiverships work.

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A Client Money Account (CMA) is an account opened by a UK and European Economic Area regulated firm to hold money that belongs to one or more of that institution’s clients.

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When businesses borrow funds, their lenders have options for protecting against the risks of extending credit.

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Popular in the banking and finance world, penny tests are a simple way to verify the validity of a bank account or bank integration, prior to a large finance transaction taking place.

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Sweep accounts are a particular type of bank account where funds are automatically transferred between different accounts to optimize the use of available cash and maximize returns

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An FBO account, or a For Benefit Of account, allows a company to manage funds on behalf of—or for the benefit of—one or more of their users, without assuming legal ownership of the account.

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Treasury Management

Learn about the key processes involved in treasury management.

A clearing account acts as a temporary account that holds transactions before they are finalized or allocated to the correct permanent account.

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Continuous accounting is the ongoing process of updating a business’s general ledger with reconciled bank statement transactions as soon as they become available.

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Financial reporting empowers businesses to make informed financial decisions by identifying trends and tracking performance. It also offers insights into a company's assets, liabilities, and debt management strategies.

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Month-end close is a critical process where the accounting team reviews and records financial transactions to close out the month.

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Recoupment refers to the recovery of spent or lost funds, especially in business operations.

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Treasury Management Systems (TMS) are software applications that serve to help businesses simplify their payment operations by automatically tracking things like cash flow, assets, investments, and more.

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Asset risk management is essentially a fusion of asset management and risk management.

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Cash forecasting is a way for companies to look at “cash in” vs. “cash out” for a business over a window of time.

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Cash pooling is a centralized cash management tool that companies with multiple subsidiaries sometimes use to optimize the cash balances of all legal entities.

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Liquidity management provides visibility into cash positions over past, present, and future dates and provides an overview of the financial health of a business.

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Treasury management is the act of managing a company’s daily cash flows and larger-scale decisions when it comes to finances.

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The 10-K is a comprehensive report mandated by the U.S. Securities and Exchange Commission (SEC) that publicly traded companies must file annually. This report provides a thorough overview of a company's financial performance over the past year.

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Core Banking Systems

Core Banking Systems are codes that ensure accuracy of transactions.

A sort code is a type of routing number used in the United Kingdom and in Ireland. It’s composed of six digits divided into three pairs. It routes money transfers by identifying the banks involved, as well as the location of the specific branches where the accounts are held.

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Core Banking, or a Core Banking System, is a back-end system that processes daily banking transactions across all of the various branches of a given bank.

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Payment Industry Bodies

Payment Industry Bodies are the organizations and institutions that own, operate, or govern certain core payment infrastructures.

The Clearing House Interbank Payments System, or CHIPS is the largest private sector USD clearing system for wire transfers.

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Fedwire Funds Services, commonly known as Fedwire, is a real-time gross settlement transfer system that allows participating financial institutions to send and receive same-day fund transfers.

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The National Automated Clearing House Association (NACHA) is responsible for overseeing the Automated Clearing House (ACH) Network, which is used to send money electronically between banks throughout the United States.

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The Office of the Comptroller of the Currency (OCC) is a federal agency that "charters, regulates, and supervises" all national banks.

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The Clearing House (TCH) is a banking association and payments company owned by 20 of the world’s largest commercial banks.

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The Office of Foreign Assets Control (OFAC) is a financial intelligence and enforcement agency under the jurisdiction of the US Treasury Department.

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The European Payments Council (EPC) is a not-for-profit organization that standardizes payments in the Single Euro Payments Area (SEPA). Through credit transfer, direct debit, card, and mobile payment schemas, the EPC aims to integrate electronic payments across Europe.

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File Standards

File Standards are the payment reporting formats used by banks and payment industry bodies.

BAI2 files are a cash management reporting standard. They are widely accepted by banks across the United States for exchanging data regarding balances and transactions.

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ISO 20022 files are a collection of XML-based schemas which standardize any type of financial message.

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An MT940 (Message Type 940) file is a detailed SWIFT statement that provides information about account transactions.

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NACHA files are the standardized file format that banks use to initiate and manage batches of ACH payments. These files help banks execute large volumes of ACH payments through The Clearing House (TCH) and Federal Reserve.

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IBAN, or an International Bank Account Number, makes it easier and faster for banks to process cross-border financial transactions.

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Compliance

Compliance is a crucial function for any company that moves money on behalf of their customers. Dive into the fundamentals behind key compliance processes like KYC, KYB, transaction monitoring, and more.

Compliance risk management (CRM) is the ongoing process of identifying, assessing, and mitigating potential risks that threaten an organization’s business.

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Customer due diligence (CDD) is a process used at financial institutions (FIs) when working with potential new customers.

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The Customer Identification Program (CIP), part of the Know Your Customer program guidelines, requires that financial institutions in the U.S. verify that customers (both individuals and businesses) are who they say they are when they open new accounts for themselves or other people.

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FinCEN, short for Financial Crimes Enforcement Network, is a government bureau that aims to prevent money laundering and other financial crimes—and punish bad actors that commit them.

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Know Your Business (KYB) is a set of verification procedures that helps companies avoid getting into business with criminals.

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The Office of the Comptroller of the Currency (OCC) is a federal agency that "charters, regulates, and supervises" all national banks.

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According to the Department of Labor (DOL), Personal Identifiable Information (PII) is any information from which a person’s identity can be either directly or indirectly inferred.

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A Politically Exposed Person (PEP) is someone that might be more likely to break the law or be corrupt because of the power their position affords them.

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Specially Designated Nationals (SDN) are individuals and entities tied to countries that the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has hit with sanctions.

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A Suspicious Activity Report (SAR) is a report that a bank or other financial institution must file if it suspects that a customer might be breaking the law and committing fraud, financing terrorism, or laundering money.

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Anti-money laundering (or AML) compliance entails a careful adherence to rules and regulations aimed at combating illicit financial activities.

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Know Your Customer or Know Your Client (KYC) is a set of guidelines for verifying the identity of a customer and gauging the associated risk of working with them.

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The Office of Foreign Assets Control (OFAC) is a financial intelligence and enforcement agency under the jurisdiction of the US Treasury Department.

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PCI DSS certification means your business has met the requirements laid out in the Payment Card Industry Data Security Standard (PCI DSS) to secure payment card data.

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Service Organization Control 2 (SOC 2) is a voluntary auditing procedure that service providers complete to keep their clients’ data secure from cyber attacks.

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Section 314(a) is part of the USA Patriot Act that enables financial institutions (FIs) and law enforcement to work together to fight money laundering and terrorist activity.

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Section 314(b) and Section 314(a) of the USA Patriot Act both relate to information requests under the Banking Secrecy Act (BSA).

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A currency transaction report (CTR) is a report made by U.S. financial institutions aiming to prevent money laundering.

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An Agent of the Payee is a person, entity, or other intermediary specifically appointed by a payee to process and collect payments on their behalf.

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Identity Verification APIs allow businesses to streamline the process of checking the identities of new users by automatically, and in some cases instantly, verifying their provided identifying information.

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The Bank Secrecy Act (BSA)—also known as the Currency and Foreign Transactions Reporting Act—is a piece of legislation designed to help prevent fraud.

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The Electronic Fund Transfer Act (EFTA) is a federal law in the U.S. that regulates electronic transactions to protect consumers.

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Reconciliation

Reconciliation is an essential accounting function for any company that moves money.

Bank reconciliation is the process of verifying the completeness of a transaction through matching a company’s balance sheet to their bank statement.

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Continuous accounting is the ongoing process of updating a business’s general ledger with reconciled bank statement transactions as soon as they become available.

Read more

Financial reporting empowers businesses to make informed financial decisions by identifying trends and tracking performance. It also offers insights into a company's assets, liabilities, and debt management strategies.

Read more

Month-end close is a critical process where the accounting team reviews and records financial transactions to close out the month.

Read more

Recoupment refers to the recovery of spent or lost funds, especially in business operations.

Read more

Incoming payment details are notifications that a company is going to receive a payment it didn’t originate—meaning the receiving funds were not initially requested.

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Account reconciliation is the process of reconciling an account balance against a set of financial records to ensure that the balance is complete and accurate.

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Balance Reconciliation is the process of verifying and ensuring: -That the expected and actual balances in a given account are correct -That the actual balance of an account is sufficient to cover planned transactions

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Batch processing is a method of processing various types of transactions. As the name suggests, transactions are processed in a group or “batch.”

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Multi-step reconciliation is the process of dealing with three or more systems of record, that all need to be reconciled against one another.

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Transaction reconciliation is the process of matching two different data sets at the transaction level. This allows companies to verify that transactions have happened appropriately.

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The 10-K is a comprehensive report mandated by the U.S. Securities and Exchange Commission (SEC) that publicly traded companies must file annually. This report provides a thorough overview of a company's financial performance over the past year.

Read more

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