Account Number (UK)
Every bank account in the United Kingdom has an 8-digit account number. An account number, together with the six-digit sort code of a bank account, can be used to set up direct debits payable from the account. A third party will never be able to extract a payment based just on these two factors.
A company that provides acquiring services is a member of Mastercard, Union Pay, and other payment networks, and accepts payments in-store and online. When a credit, debit, or prepaid card is used to make a purchase, the acquirer authorizes or refuses the transaction depending on information provided by the issuing bank (or issuing processor).
Anti-Money Laundering (AML) refers to the rules, regulations, and processes designed to prevent criminals from passing off unlawfully obtained funds as legitimate income. AML is a global word that refers to the rules put in place by regulatory authorities around the world to combat money laundering and terrorism funding. This entails banks monitoring transactions and reporting any suspicious behaviour to the appropriate regulators.
API stands for Application Programming Interface.
An API is a piece of software that allows entities to communicate with one another. Its two main applications nowadays are to ease data sharing and payment initiation. APIs have enabled fintechs to obtain access to banks’ customer data in order to provide third-party services under PSD2 law.
Banking for Agencies (Banking Light or Digital Banking)
A third-party that performs some banking services on behalf of a non-banking organization is referred to as an agency banking partner. They can offer faster payments, BACs, and Direct Debits to their clients’ end customers.
BACS – Bankers’ Automated Clearing System
BACS supports two types of bank-to-bank payments: direct debit and direct credit. Bacs Payment Schemes Limited, a subsidiary of the UK retail payments regulator Pay.UK, is in charge of the schemes that clear and settle these two payment methods. A Direct Debit withdraws money from a consumer’s bank account, such as a bill, whereas a Direct Credit deposits money in, such as a salary. Payments take three working days to clear. To find out if a UK bank accepts BACS payments, utilize Starling’s sort code tracker.
A balance transfer is the procedure through which a consumer transfers monies from one facility to another. It can also refer to transferring a credit card debt to another card. They’re frequently used to lower interest payments or to consolidate many obligations into one.
BIC (Bank Identifier Code)
In a nutshell, a BIC code is the same as a SWIFT code. When a consumer makes an international transaction, the 8-11-digit number is used to identify their bank. “It’s basically like a postcode for your bank,” GoCardless explains.
BIN (Bank Identification Number)
Every credit or debit card has a BIN, which is the first 4-6 digits of a lengthy card number. It is also known as an Issuer Identification Number in 2022. (IIN). The card networks make them available to issuers (Mastercard, etc).
The digits or “range” of a BIN enable issuers to segregate a BIN for country and currency allocation and can identify a corporation producing a card or a specific product.
Firms can issue payment products without spending time or money on direct scheme membership by partnering with a direct scheme member – or “sponsor.” Companies can enter the market faster since they don’t have to raise the collateral required to maintain direct scheme membership, perform settlement and reconciliation, and keep client assets in segregated accounts.
BNPL – Buy Now, Pay Later
BNPL, a payment method that gained traction in 2019, allows customers and businesses to pay for products or supplies in instalments — that is, by breaking their payment up over time. The amount of instalments, the time it takes to pay them, and the interest rates charged differ amongst BNPL suppliers.
The owner of a payment card. The front of the card bears their name.
CHAPS – Clearing House Automated Payment Systems
This bank-enabled payment option is guaranteed to be processed the same day if a consumer or business customer sets up the payment before 3.30 p.m. or online before 5 p.m. on a weekday (excluding bank holidays). CHAPS is defined by the Bank of England as “a sterling same-day system used to settle high-value wholesale payments as well as time-critical, lower-value payments such as buying or paying a deposit on a property.”
Unlike traditional banks, which were created before the 2000s and are based on a traditional branch model, challenger banks were founded during the 2000s and have taken use of technological improvements to offer an alternative, digital-first strategy. Virgin Money, which purchased Church House Trust in 2010, and Metro Bank, which received its banking license the same year, have been dubbed the UK’s first “challenger banks.” However, it was the 2015 wave of Revolut, Monzo, and Starling that truly demolished the perceived requirement for banks to own branches. Metro Bank and Virgin Money continue to operate branches today.
A chargeback, also known as a payments dispute, occurs when a cardholder requests that their card-issuing bank reverse a transaction if a dispute with the merchant cannot be addressed. If a customer’s bank judges in favour of the merchant, the disputed amounts are returned to the cardholder. However, if the bank determines in favour of the merchant, the disputed money will be returned to the seller’s account.
A clearing house or firm is in charge of clearing. It ensures that the correct fund amount is sent to the seller and securities are delivered to the buyer within a specified time range. For funds to clear, clearing data given by parties on both sides of the transaction must match. Trades are subject to settlement risk in the absence of clearing houses.
Funds in a closed-loop payment system can only be used at a limited number of locations or merchants. Single-purpose payment cards, such as a store credit card, gift card, or even a wristband, are only valid in a single store or set of stores operated by a single corporation. The customer may be able to reload monies for future use.
Commercial Card or Corporate Card Commercial cards, which are usually credit cards, are issued by businesses to their employees through a third party and allow workers to make payments on behalf of their employer as well as cover work-related costs.
To register a payment via a point of sale (PoS) terminal, contactless technology employs radio-frequency identification (RFID) or Near Field Communication (NFC). Cards, key fobs, mobile wallets, and wearables are all compatible with the technology.
Country of Issuance
Regardless of where they will be spent, all cards have a nation of issuance. This is the country in which the customer’s card was issued. For example, if your address is in the United Kingdom, the country of issuance will be the United Kingdom because it is where the card is issued.
Credit cards, which are issued by banks and other financial institutions, allow cardholders to borrow funds up to a limit determined by the card issuer and repay the borrowed amounts at a later period with an agreed-upon interest rate. In addition to a conventional credit line, these cards can provide cardholders with a separate cash line of credit (LOC). Customers can borrow money in the form of cash advances as a result of this.
Customer Due Diligence (CDD)
Customer Due Diligence (CDD) is the process of evaluating your customers’ history in order to identify their identification and amount of risk. When a company with AML processes enters a commercial contact with a customer or a potential customer, CDD is required to analyse their risk profile and verify their identification. Financial institutions must conduct Know Your Customer (KYC – see below) and Customer Due Diligence (CDD) checks.
CVV (Card Verification Value)
The three-digit number located to the right of the signature area on the back of a credit or debit card. The CVV is displayed on the front of some debit cards. In this scenario, it can be four digits rather than three.
Unlike a credit card, a debit card deducts money directly from a customer’s checking account. However, there is another sort of debit card that does not require the use of a current account – a prepaid debit card. This form of debit card can only spend the amount on the card and cannot push a consumer into an overdraft, as a conventional debit card can.
Online banking services, such as a mobile banking app, or – more recently – the introduction of messaging apps and keyboard-based banking, are examples of digital banking. Monitox’s Digital Banking solution enables customers to gain quick access to an account by allowing them to create financial propositions without the need for a payment platform. Our Digital Banking solution allows you to make Faster Payments in the UK and SEPA (immediate payments) within the Eurozone in a seamless manner.
E-Account / E-Wallet Account
Ecommerce Corporate Account or E-Wallet Linked to a GBP Account Number and Sort Code or Euro linked to a IBAN Number which are issued to approved Direct Corporate Customers, or Merchant’s, or under Monitox’s Wholesale Agency E-Account or E-Wallet Sponsor Clients which have been issued via Monitox’s white-label E-Account or E-Wallet Sponsorship Products and Services.
European Economic Area (EEA)
The European Economic Area (EEA) brings together EU member states and members of the European Free Trade Association (EFTA—Iceland, Liechtenstein, and Norway) in the same single market.
Embedded Payments are payment methods that are embedded into a product rather than added on top of it. An embedded payment allows a buyer to complete a checkout procedure with a few clicks rather than manually entering card or bank details.
EMI – Electronic Money Institution
Electronic Money Institutions are financial institutions that have been authorized to develop electronic money services. The EMI Directive (Directive 2009/110/EC) allows them to issue and redeem electronic money.
EMIs operate under an e-money license. It enables EMIs to issue and redeem electronic money, which is something that traditional Payment Institutions (PIs) cannot accomplish without this license. Consider electronic money to be a digital equivalent of cash that can be kept electronically – typically via a gadget.
“Faster Payments,” which was introduced in 2008, is a program aiming to make payments between bank clients’ accounts virtually instantly – albeit in some situations, it can take up to 2 hours. Faster Payments processed 2.4 billion transactions in 2019. Today, 32 UK banks are involved in the effort.
The term “Fintech,” which stands for financial technology, refers to any technology-based solution that solves or disrupts a traditional financial function.
In general, “funding” refers to money raised by a corporation or organization, either through a third-party institution or through a crowdfunding effort. To begin with, a large number of start-ups rely on finance. However, some will remain “bootstrapped,” that is, without outside investment, until they generate a profit. Funding is frequently raised to support geographic expansion or growth – whether in products, manpower, or client base.
The “funds flow” of a corporation is the net sum of all cash flows in and out of it.
Foreign Exchange (Forex or FX)
“Forex” or “FX” refers to the conversion of one currency into another at the shifting foreign exchange rate. The foreign exchange market is the world’s largest financial market. It had a daily volume of around $6.6 trillion in 2019.
Gift cards are prepaid stored-value cards that are typically issued by retailers. They are frequently purchased as gifts and are intended to persuade customers to spend more money with a specific retailer.
Host Card Emulation (HCE)
HCE is the technology that allows credit or debit cards to use their mobile phone to make a payment at a PoS terminal. Card credentials can now be kept in a shared repository – such as the issuer’s data centre or a private cloud – rather than on the mobile phone itself.
IBANs (International Bank Account Numbers)
IBANs are used to make or receive international payments. Rather than replacing a person’s sort code or account number, an IBAN works alongside these details to provide additional information when overseas banks identify a customer’s account for payment.
An in-app purchase is any price that an app may ask for in addition to the initial cost of downloading the app (if there is one).” This can include game add-ons or paid memberships. In-app payments are frequently implemented into free apps as a way to monetize after customers have downloaded the app for the first time.
Interchange refers to the domestic and international systems operated by Mastercard® and Visa®. These systems authorize, settle, and pass-through payments, as well as other monetary and non-monetary information linked to bank card activity.
The interchange fee is the fee that card network providers such as Mastercard® and Visa® charge for using their interchange system. The fee is a percentage of each transaction. It addresses issues such as the cost of fraud, the danger of loss, and the instance of accounts paying off monthly balances. Interchange costs might vary depending on the card type, merchant type, and market data requirements.
An issuer is a financial institution that issues cards directly to consumers on behalf of credit and debit card networks. Issuers are liable for billing and collecting funds related to purchases made with any cards they issue. The card issuer – typically a bank, digital banking service, or payments agency – then pays the acquiring bank.
An issuer processor is required to link card networks and card-issuing banks. They will supply the record system, handle card issuance, green light transactions, and notify the settlement companies. They are PCI-compliant and scheme-certified (e.g Mastercard, Visa, etc.)
When a company issues a card directly to a consumer, it enters into a “issuing” contract with the payment service provider who originally issued it to them. Issuing fundamentally refers to the transfer of a card from one entity to another, whether B2B or B2B2C.
The financial institution that offers credit and debit cards to consumers on behalf of card networks such as Mastercard® and Visa®. Consider the issuing bank to be the “middleman” between the consumer and the card network. They negotiate contracts with cardholders to assure transaction payback, which are then matched up with the card networks’ issuing contracts.
JCB, formerly Japan Credit Bureau, is a Tokyo-based credit card company. Its cards are accepted internationally, making it a ‘must-have’ payment option for online companies targeting the Japanese e-commerce sector.
KYB (see CDD which is more commonly used)
Know your business is an extension of “Know Your Customer” laws. It necessitates that businesses authenticate their business customers before providing them with financial services. KYB examines both corporate information and the personal information of their top management.
KYC (Know Your Customer)
KYC, as opposed to KYB, focuses on confirming clients before providing them with financial services. Companies that perform KYC checks comply with legislative standards set in place to reduce instances of fraud and money laundering.
Mobile banking, as an extension of digital banking, refers to the capacity to bank on a mobile device without the use of a desktop computer. It can refer to either in-app mobile banking or browser-based mobile banking.
Using a mobile phone to pay for a digital or hardware service. Direct operator billing (or WAP billing) can be used to make mobile payments, allowing the charges to be added to the user’s mobile bill. A credit card or a mobile wallet can also be used to make mobile payments.
If a company accepts payments in more than one currency or charges for services in more than one currency, it is engaging in multi-currency processing. Businesses do this to minimize the FX risk that comes with pricing things in different currencies and then charging solely in your currency, as there is a danger that you will not be able to sustain your profit margin during currency fluctuation. Merchant Accounts’ whitepaper goes into much information.
Unlike pre-digital banks, “neobanks,” sometimes known as “challenger banks,” have used technological improvements since the year 2000 to provide an alternative, digital-first strategy. In the United Kingdom, the 2015 wave of Revolut, Monzo, and Starling is often referred to as “neobanks.” Monzo and Starling are both UK-licensed banks, whilst Revolut is a Lithuanian-licensed bank.
A “non-bank” in a payment system is a financial institution or corporation that provides some banking services but does not provide the complete range of retail banking services that firms with banking licenses can. In particular, in the United Kingdom, Revolut continues to operate as a payment institution, or “non-bank,” because it provides some services – such as debit and credit cards – but it cannot yet lend on its UK deposits because they are kept with a partner bank.
The process of getting a customer onto your platform is referred to as onboarding. It could be a direct retail consumer or a business customer deploying one of your services for its own customers. Onboarding new consumers in financial services necessitates particular checks – for more information, see the KYC and KYB articles.
The term “open banking” refers to PSD2 – or the Second Payment Services Directive – legislation passed in the United Kingdom in 2018 that requires the country’s “CM9” (or largest) banks, HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske, Lloyds, and Nationwide, to grant third-parties (namely fintechs) access to their customers’ banking data. The free flow of banking data was intended to increase competition in the banking business.
Primary Account Number (PAN)
On a plastic card, this number is imprinted or encoded. It identifies the issuer as well as the specific cardholder account. It is the unique 16–19-digit number assigned to the payment instrument. The issuing processor generates the PAN.
Payment Initiation (PI)
While data sharing was the main motivation for PSD2, or open banking, payments are another use case for the legislation. Payment initiation, often known as “PI,” enables clients to authorize a payment straight from their bank accounts. “To put it simply,” Tink explains, “the primary advantage of payment initiation is that it gives a hassle-free experience.” There’s no need to fumble for credit cards and enter numbers. There’s no need to open their banking app to transfer money between accounts or enter recipient information.”
Payment Processor (see Issuer Processor)
A payment processor is a corporation that facilitates client transactions with a business. According to American Express-acquired Kabbage, “that implies the payment processing provider communicates and sends information from your customer’s credit, debit, or prepaid card to both your bank and your customer’s bank.” The processor is also in charge of the security of each transaction, ensuring that no fraudulent payments are made and clearing out any inadvertent transactions that occur.
PCI DSS Compliance
PCI DSS, which stands for “Payment Card Industry Data Security Standard,” is an information security standard for major card schemes. It is also known as PCI compliance. It was first implemented in the United Kingdom in 2006, and it compels businesses to process, store, or transfer credit card information in a secure environment. Digital Guardian has outlined 12 critical requirements here.
A personal identification number, or “PIN,” is a four-digit code needed to access the funds in your account, whether through an ATM, a card terminal at the point of purchase, or online.
Point of Sale, or Mobile Point of Sale (PoS/MPoS)
The point of sale, or “PoS” – which is synonymous with the point of purchase (PoP) – is the location where a consumer pays for an item or service. This could be a physical PoS, such as a card terminal in a store, a digital PoS, such as a website checkout, or an MPos, such as an in-app checkout.
PSP – Payment Service Provider
PSPs are third-party companies that assist retailers in accepting client payments. PSPs, according to FIS, “link retailers to the broader financial system,” and while “invisible to most,” they are “vital to all.” “Payment service providers enable modern commerce.”
A prepaid card, unlike a debit or credit card, is not tied to a bank account. This means that the cardholder can only spend up to the amount pre-deposited on the card. Reloadable prepaid cards are common. You can read our in-depth analysis of the payment method here.
A financial institution that directly participates in a card network, such as Mastercard®, as an issuing or acquiring member.
Typically, the programme manager is in charge of developing partnerships with processors, banks, payment networks, and distributors. They are also in charge of establishing pooling account(s) at banks. The program manager creates the logistics of the scheme, operates it, markets it to consumers and merchants, and maintains its profitability for organizations that manage a card program on behalf of an issuing bank.
P2P (Peer-to-Peer) Payments
P2P, or peer-to-peer, payments, as defined by NerdWallet, “enable users to send money to one another via their mobile devices using a linked bank account or card.”
An accounting technique that compares two sets of records to ensure that the results are consistent and correct. Reconciliation examines whether an account’s incoming or departing funds match the amount spent or returned. It also ensures that the two values are balanced at the end of a recording period.
The exchange of financial data and funds between a merchant’s (acquirer) and a cardholder’s (issuer) banks.
SEPA (Single Euro Payments Area)
The Single Euro Payments Area, or SEPA, is the format in which cross-border euro-based bank transfers are made. The European Union (EU) plan, which will be completely implemented by November 2009, aims to unify payments across the Eurozone. Its goal is to make cross-border euro-based transfers inside the Eurozone as easy as domestic payments within a European country.
TPP – Third Party Provider An authorized service provider who provides a supplement to a company’s services. In an open banking setting, for example, RBS defines TPPs – or, in this case, fintechs – as entities that operate outside of a client’s relationship with their bank but may be participating in online transactions that the consumer conducts. A TPP, for example, may use its app to automate investments from that account or to email you daily balance updates.
The technique of converting a credit card number into a random sequence of numbers in order to increase credit card security during a transaction.
Every time a company processes an electronic transaction, it pays a charge to the payment ecosystem, which is then divided among the many processing partners. This is why some retailers request cash payments from clients in order to avoid the expenses associated with electronic payments.
Financial institutions must monitor all transactions in order to comply with anti-money laundering legislation. Any questionable transactions, such as big cash deposits or wire transfers, must be reported. Firms can thus detect financial crimes before they occur and prevent them from occurring. According to KYC-Chain, this process might include sanctions screening and customer profiling.
UBO (Ultimate Beneficial Owner)
When an institution begins a transaction, the ultimate beneficiary is the person or entity. It was enacted as part of the Fifth Anti-Money Laundering Directive (5AMLD), which went into effect in January 2020, and it provides clarity to banks and corporations about who they are doing business with.
UnionPay, often known as China UnionPay or “UPI,” is the world’s largest card network, with over 7 billion cards issued by bank issuers. Although the vast majority of these cards are used in China, the card network is beginning to challenge Europe.
A virtual card has all of the same characteristics as a physical card, except that it is kept digitally in a mobile wallet. Mobile wallets, like conventional cards, can be used at card terminals that accept contactless payments. Online, users can link their virtual card to a PayPal wallet, for example, or manually enter the numbers associated with their virtual card.
This is when one company provides services to another. Instead of using the provider’s logo, the firm that has purchased – or pays through a subscription for – this provider’s services might use its own branding when delivering it directly to its own clients.
The name given to a set of protocols meant to add an extra degree of protection to online credit and debit card transactions. The 3D Secure procedures are used by each of the main credit cards in their unique way.