glossary of electronic payment terms

8/2/2019 Glossary of Electronic Payment Terms

1/11

GLOSSARY ELECTRONIC PAYMENT TERMS

ACH (Automated Clearing House)A computer-based clearing and settlement facility for theinterchange of electronic debits and credits among financiinstitutions. Basically acts as an intermediary that clearstransactions through two or more financial institutions, sim

the Federal Reserve System.

ACH Associations

ACH Associations - provide rules and guideline for theefficient operation of the ACH Network. There are 20regional ACH associations whose memberships includefinancial institutions and affiliates. NACHA, the National

Automated Clearing House Association forms thegoverning foundation for the regional associations.

Addenda RecordAddenda Record An ACH record type that carries thesupplemental data needed to completely identify anaccount holder(s) or provide information concerning apayment to the RDFI and the Receiver.

Affidavit

Affidavit - A sworn statement by a consumer declaring

that a particular ACH transaction was authorized or thatthe authorization for that transaction has been revoked.Authentication A reliable process that determines the identity of a party.

Authorization

Authorization An agreement by a receiver to allow forthe posting of debit or credit items to their account.

Authorizations for credit transactions may be orallygiven, but debit transactions must be authorized inwriting or similarly authenticated if by other means (forexample, by digital signature or PIN if by computer.)

Availability Availability The number of days required to collectitems before the customer has use of the funds.

Banking DayBanking Day Any calendar day except Saturday,Sunday and legally defined holidays (as defined in

Regulations D and CC)

BatchThe accumulation of captured (sale) transactions waitingto be settled. Multiple batches may be settled throughoutthe day.

Batch ProcessingA type of data processing and data communicationstransmission in which related transactions are groupedtogether and transmitted for processing, usually by thesame computer and under the same application.

Business DayBusiness Day Any day on which a participatingDepository Financial Institution (or ACH Operator) isopen for carrying on substantially all of its businessfunctions (as defined in Regulation E).

CAI (Customer Account Information)A detail field within Remittance Information, usually the

account number assigned to that customer by the Biller.This can also be used to mean the Customer's billingname and address as well as any other information thatthe Biller uses to identify the Customer.

CaptureConverting the authorization amount into a billabletransaction record within a batch. Transactions cannotbe captured unless previously authorized and the goodsor services have been shipped or transmitted to theconsumer.

Capture Date The date on which a transaction is processed by anacquirer.


2/11

CAR (Courtesy Amount Recognition)The technology that reads and recognizes thehandwritten or typed courtesy (numeric) amount onchecks.

Cash Concentration Companies that have decentralized units use the ACH toconcentrate cash into a centralized bank account -replaces wire transfer.

Check ConversionCheck Conversion Using payment information from acheck tendered for payment to initiate an electronic debitto the checkwriters account. The electronic debitbecomes an electronic transaction subject to therequirements of Regulation E.

Check DigitCheck Digit The final digit of a routing/transit numberwhich may be used to test the validity of a specificrouting/transit number.

Check Truncation Check Truncation - stopping or truncating a paper checkby turning it into an electronic item at the Point of Sale(POD) or in lockbox check truncation.

CIE (Customer Initiated Entry)CIE (Customer Initiated Entry) An automatedconsumer transaction that allows consumers to originatean ACH bill payment through their financial institution ora third party bill payment service.

Commercial RelationshipAn agreement between parties to do business togetherfor the purpose of EBPP. It may or may not include acontract.

Commercially Reasonable Time FrameA period of time generally considered acceptable for aprocess within a given industry, taking into considerationthe circumstances of the parties to the transaction.

Company Batch/Header RecordCompany Batch/Header Record The record(s)contained within an ACH file which described theoriginator(s) of an ACH transaction(s) and the types oftransactions within that batch.

Company Identification NumberCompany Identification Number The number in thecompany Batch/Header Record which identifies theoriginating company to the ODFI.

Consumer AccountConsumer Account A deposit held by a participatingDFI and established by a natural person primarily forpersonal, family, or household use, and not forcommercial use.

Content Management

The delivery of business-critical information toconsumers or business-to-business customers bydrawing data from disparate sources. The composeddocuments may contain billing data, customer serviceinformation, marketing messages or other types ofcontent.

Corporate PaymentsBusiness to business ACH Network collection anddisbursement of funds. The Federal government ismandating this form of payment for corporate taxes andpayments to government vendors.

CreditCredit An entry to the record of an account torepresent the transfer or placement of funds into theaccount.

Credit Transaction A payment transaction that pushes funds from the CSPor CPP to the BPP.

CustomerAn individual or entity that receives goods or services,which are subject to bills or statements. The typicalreceiver of a bill.

Customer Transactions Outbound invoices, statements and bills from clients to


3/11

their customers and inbound payments received fromcustomers to clients.

Data Encryption

The scrambling of sensitive information, such as accountnumbers or access codes, to prevent unauthorized use.The Data Encryption Standard (DES), the encryptionformat adopted by the financial industry, requires thatinformation scrambling take place in a computer orterminal before transmission.

Debit Debit An entry to the record of an account to representthe transfer or removal of funds from the account.

Debit TransactionA payment transaction authorized by the Customer,originated by the Biller that pulls funds from theCustomer's account.

Demand DraftA single payment check without a scannable remittancedocument attached. This draft may be drawn on theCustomer's account or the CPP account.

Depository Financial InstitutionDepository Financial Institution A financial institutionable to receive deposits from its customers or creditsfrom the Federal Reserve Bank.

Direct DepositThe disbursement of funds to consumer accounts.Includes payroll, interest, trust disbursements, expensepayments, dividends, pension payments, etc. This is themost widely used ACH service.

Direct Payment

The collection of funds from consumer of businessaccounts. This normally would be used to collectpayments for monthly dues as in: health clubmembership, rent, phone, utility bills, newspaper bills,trash collection, mortgage payments, lease payments,etc.

EBPP (Electronic Bill Presentment andPayment)

The electronic presentation of statements, bills, invoicesand related information sent by a company to itscustomers, and corresponding payment for goods orservices.

ECA (Electronic Check Acceptance)

A system, which captures banking information off apaper check and converts it into an electronic item,processed through the Automated Clearing Housenetwork. With ECA, checks are processed similarly tocredit cards, and the paper check is returned to theconsumer at the point of sale.

E-CashElectronic cash is a payment mechanism designed forthe Internet. It is electronic money that can be passedalong from person to person like cash. It is anonymouslike cash, and has value immediately - it's cash, not apromise to pay later.

ECK (Electronic Check)

ECK (Electronic Check) The electronic equivalent of apaper check. A payment transaction which originallystarted out as a paper check, but which has beencompletely converted to an ACH transaction at the pointof purchase or in the case of a redeposited paper check,reinsertion into the financial system. The original paperitem is either returned to the check writer at the point ofpurchase or retained by the collecting agency.

E-commerce (Electronic Commerce) E-commerce (Electronic Commerce) - The transacting ofbusiness electronically rather than via paper.

EDI - FinancialFinancial EDI - Electronic exchange of payments,payment information or financially related documents instandard formats between business partners.


4/11

EDI (Electronic Data Interchange)

EDI (Electronic Data Interchange) - The electroniccommunication of business transactions; specifically theexchange of trade-related documents, such as purchaseorders, invoices and corporate Electronic FundsTransfer (EFTs) in a standard format. With EDI,electronically transmitted data replaces paperdocuments in the business accounts receivable cycle.

EFS (Electronic Financial Services)Financial services that are provided via electronicdelivery channels (e.g. PCs, telephones, screen phonesand ATMs). These services may be transaction and/orinformation oriented and may be provided by bank andnon-bank providers.

EFT (Electronic Funds Transfer)A transfer of funds between accounts by electronicmeans rather than conventional paper-based paymentmethods. EFT is any financial transaction originatingfrom a telephone or electronic terminal, or from acomputer or magnetic tape.

Electronic BankingForm of banking in which funds are transferred throughan exchange of electronic signals between financialinstitutions, rather than an exchange of cash, checks orother negotiable instruments.

Electronic Check Representment

Electronic Check Representment - An ACH Networkservice that allows for the electronic representment of areturned paper check marked non-sufficient funds(NSF). Provided that certain guidelines are fulfilled thecheck can be collected electronically.

Electronic Funds Transfer Act

Electronic Funds Transfer Act The law passed by theUS congress in 1978 which set out the rights andobligations of consumers and their financial institutionsregarding the use of electronic systems to transferfunds. This act is implemented in the Federal ReserveBanks Regulation E.

Electronic Payment

An alternative to paper checks for paying bills.

Consumers can use PCs, telephones, screen phones orATMs to send electronic instructions to their bank or billpayment provider to withdraw funds from their accountsand pay merchants. Payments may be made eitherelectronically or by a paper check issued by the billpayment provider.

Element Element The smallest item of information in atransaction set. Analogous to a field of information.

ESP (Electronic Statement Presentment) The process by which companies bill customers over theInternet.

Exception ItemException Item Any entry that requires specialattention or processing, such as return entries, stoppayments, notifications of change, dishonored returns,

etc.Federal Reserve Bank

The bank of the United States of America. Loans andprovides money to banking institutions and establishesinterest borrowing rates.

FieldField One or more consecutive character positionswithin an ACH entry mapped to contain specificinformation.

Field - Fixed Fixed Field A data segment of predetermined lengthand positioning within an electronic message

Field - Mandatory Mandatory Field A mandatory field is necessary to


5/11

ensure the proper routing and/or posting on an ACHentry. Any mandatory field not included in an ACHrecord will cause that entry, batch or file to be rejectedby the ACH operator before it ever gets sent to theRDFI.

Field - Operational

Operational Field The inclusion or omission of anoptional field is at the discretion of the originator of anach transaction. While the omission of optional fieldswill not affect the processing of the item, the Originatormust still fill optional fields with blanks or othercharacters if they do not fill the field with actualinformation.

File File A group of ACH entries stored for delivery to anACH receiving point.

File Header RecordFile Header Record The last record of an ACH filecontaining information necessary to route, validate, andtrack the ACH entries contained within the file.

File Trailer Record File Trailer Record The last record of an ACH fileindication termination of the information within the file.

Funds - AvailableAvailable Funds Funds currently available forimmediate use.

Funds AvailabilityFunds Availability The time at which the funds from anelectronic funds transfer are made available to thecustomer.

G No listings for letter 'G' G No listings for letter 'G'

HashHash A mathematical calculation which creates asingle number from critical fields in each transactionentry, as a check against inadvertent alteration of datacontents due to hardware failure or program error.

HTML (Hypertext Markup Language)The set of markup symbols or codes inserted in a fileintended for display on a Web browser page. Themarkup tells the Web browser how to display a Webpage's words and images for the user.

IBOP (Internet Bill Delivery and Payment)

An Internet-based service that securely and reliablydelivers richly formatted bills, statements, invoices,notices and associated advertising to any onlineconsumer or business, and returns payment, remittanceinstructions and related information to the Biller and/ordesignated payee.

IFX (Interactive Financial Exchange)A standard for the exchange of financial data andinstructions independent of a particular networktechnology or computing platform.

Individual Identification NumberIndividual Identification Number The number used inan ACH transaction by the originator to identify theReceiver.

Internet Check AcceptanceA payment system that allows consumers to enter theirchecking information on-line; electronic items arecreated and processed through the Automated ClearingHouse network.

Internet HostingAn Internet Service Provider (ISP) that stores Web siteson a server. ISPs generally charge a monthly fee to"host" a Web site.

Internet Initiated Entries - (WEB)Internet Initiated Entries - (WEB) a consumer authorizesa Receiver or Merchant to debit their account via theinternet.

ISP (Internet Service Provider) A company that provides a connection to the Internet.


6/11

Service providers sell access to the network.

J No listings for letter 'J' J No listings for letter 'J'K No listings for letter 'K' K No listings for letter 'K'LAR (Legal Amount Recognition) The technology that reads and recognizes the

handwritten or typed legal (written) amount on checks.

Lockbox

Lockbox A financial institution which facilitates rapidcollection and posting of corporate receivables.

Typically, customer payments are mailed to the bankslockbox for collection, sorting, totaling and recording bythe bank rather than by the company that issued the bill.

Lockbox Check TruncationLockbox Check Truncation - also called AccountsReceivable Truncation System (ARTS) is the process ofturning checks received in the mail by a Biller intoelectronic items.

Lockbox Payment Processing

A collection and processing service provided to clientsby third-party providers. These providers collectbusiness-to-corporate (B2C) payments from a dedicatedpostal box to which clients have directed customers tosend payment. (See Remittance Processing.) Thepayment stream is typically low dollar and high volume,with a high incidence of OCR scannable coupons andbar-coded return envelopes.

Magnetic Ink Character Recognition (MICR)Line

Magnetic Ink Character Recognition (MICR) Line Thepreprinted bottom line of paper check contains therouting transit number of the financial institution thecheck is drawn on, the account number of the draweeand the check number printed in machine readablemagnetic ink.

Matched PaymentsPayments that equal the amount due. The amount duecan be either a minimum payment amount or a totalbalance due (e.g., in the case of a credit card account).This term is typically used in retail lockbox processing.

MICR (Magnetic Ink Character Recognition)The technology that uses high-speed magnetic and/oroptical recognition equipment to recognize magnetic inkprinted characters. Usually associated with readingrouting, transit and demand information from checks.

MICR Line Example

NACHA (National Automated Clearing HouseAssociation)

The national association that establishes the standards,rules and procedures that enable depository financialinstitutions to exchange ACH payments on a nationalbasis.

NACHA FormatThe ach record format specifications described in thenacha operating rules and guidelines, which are theaccepted and warranted payment format standards forpayments delivered through the ach network.

Net SettlementAchProcessor.com produces one net settlement entryinto the Merchants account that includes the settlement(reconciliation) of debits, credits, returns, and fees ifapplicable, in one file (batch).The net settlement featureprovides for easy reconciliation, transaction erroridentification, and heightened security.

NOC (Notification of Change)Notification of Change Information sent by an RDFI tonotify the ODFI that previously valid information for areceiver has become outdated or that informationcontained in a Prenote is erroneous. These items have


7/11

the standard entry class code correction.

Non-Recurring Payment AuthorizationNon-Recurring Payment Authorization - an individual orcompany authorizes the debit of their account for avarying period and/or amount. Notification must be sent10 days before the effective date with the amount to bedebited.

NSF CheckNSF Check - A paper check that has been returned bythe banking system due to Non Sufficient Funds. Thesecan be electronically represented through the ACHNetwork using Electronic Check Representment.

OCR (Optical Character Recognition)

The technology by which characters and symbolsimprinted in non-reflective ink are optically read byremittance processing workstations. The OCR systemreads characters by detecting differences in the reflectedlight from the document as it passes through theprocessing workstations. These differences areinterpreted by OCR electronics, converted to a binarycode, and transferred to the system processor. This termis usually associated with retail lockbox processing.

ODFI (Originating Depository FinancialInstitution)

ODFI - is the Originating Depository Financial Institution,

the bank that initiates an Electronic funds transferthrough the ACH Network on behalf of the Originator.

OFX (Open Financial Exchange)

A standard for the exchange of financial data andinstructions independent of a particular networktechnology or computing platform. Major financialinstitutions and service providers. Enables electronicexchange of financial data between customers andthemselves.

One Time Payment AuthorizationOne Time Payment Authorization - an individual orcompany authorizes a one-time debit of their account.The authorization is usually a written authorization but insome instances a recorded telephonic authorization maybe used.

On-UsOn-Us entries within an ach file destined to accountsheld at the ODFI. These entries are removed from thefile before the file is sent to the ACH operator and areposted internally to the appropriate accounts.

Operating Rules

Rules and business practices meant to increaseconsistency and interoperability among the variousfinancial service providers that will interact with eachother and end-users. Examples of operating rulesinclude: Settlement Timing Requirements, Authorizationprocedures, Audit and accounting rules, Credit limits

Original Entry Original Entry - a debit or credit ACH transactiondirected to an account at an RDFI.

Originating ACH OperatorOriginating ACH operator the ach operator which

receives entries from the ODFI.Origination Origination the process of creating ach entries for

submission through an ODFI to the ACH operator.Originator A financial institution that initiates a wire transfer or

automated clearing house (ACH) payment.

OriginatorOriginator The person or organization who hasauthorized an ODFI to transmit a credit or debit entry tothe account of a receiver with an RDFI, or if the receiveris also the RDFI, to such receiver. In some cases theODFI may also be the originator.


8/11

ParticipantParticipant A company or financial institution that hassigned the appropriate agreements to participate in thepilot.

PaymentA vehicle to affect the transfer of value. Typically, atransfer of funds from one bank depository to another,but may also transfer funds to or from a debt instrument,such as a credit card. Also Funds Transfer.

Payment ConcentrationPayment Concentration - The process of that takespayments from multiple banks and payment networksand concentrates them into a single format (e.g. lockbox,EDI, and ACH).

Payment Due Date Payment Due Date - The date by which the Billerrequires payment from the Customer.

Payment InstructionsPayment Instructions - The Instructions forrouting/posting the payment (e.g. into the bank accountthat the funds should be deposited).

Payment Method Payment Method - Method used to facilitate and processpayment.

Payment Posted Date Payment Posted Date - The date by which a payment isposted to an account.

Payment System Payment System - A set of instructions and proceduresused for the transfer of ownership and settlement ofobligations arising from the exchange of goods andservices.

Payment System Payment System A communication system having theprovisions to provide financial settlement information.

Payment SystemsPayment Systems - A system or network used toprocess payments (e.g. ACH, debit card and credit cardnetworks).

PDF (Portable Document Format)PDF (Portable Document Format) - A file format that hascaptured all the elements of a printed document as anelectronic image that you can view, navigate, print, orforward to someone else. PDF files are created using

Adobe Acrobat, Acrobat Capture, or similar products.

POS (Point of Sale)POS - Point of Sale is a term used to describe an ACHtransaction at the time of purchase - for example at thesupermarket check out counter. Usually at a merchantsbrick and mortar location but also includes telemarketing(phone) and Internet sales.

PPD (Prearranged Payment or Deposit)

PPD (prearranged payment or deposit) An automatedconsumer payment application, usually in the context ofa standing obligation, which debits or credits theconsumers account at their financial institution to satisfythat obligation. Examples of PPD transactions are directdeposit of payroll, direct payment of charitablecontributions and so forth.

PPD+ (PPD plus)PPD + (PPD plus) An automated consumer paymentapplication which carries additional information about thetransaction in the single attached addenda record.

Prenotification - or PrenotePrenotification - or Prenote is an ACH entry with novalue that is sent to an RDFI to verify accountinformation prior to sending a live entry.

Q No listings for letter 'Q' Q No listings for letter 'Q'RCK (Represented Check)

RCK - Refers to Returned Check and represents theelectronic check process for electronic representment ofpaper NSF checks - Electronic Check Representment.

RDFI (Receiving Depository Financial Receiving Depository Financial Institution A financial


9/11

Institution) institution, which receives ach entries directly orindirectly from its ach operator.

ReceiverReceiver an individual, corporation or other entity whohas authorized a company or an originator to initiate acredit or debit entry to a transaction account held at anRDFI.

Receiving ACH Operator Receiving ACH Operator The ach operator whichpasses entries to the RDFI.

Recurring Payment AuthorizationRecurring Payment Authorization - an individual orcompany authorizes the periodic debit of their accountfor the same period and amount.

Regulation CCRegulation cc The regulation by the federal reservebank to implement the law which mandates the timelimits for funds availability on deposited items.

Regulation ERegulation E The regulation published by the federalreserve bank to implement the electronic fund transferact mandating consumer rights and obligation withregard to electronic fund transfers.

Remittance Information Remittance Information - The information required by theBiller to effectively post customer bill payments.

Remittance Method Remittance Method - The method used to deliver fundsand remittance information.

Remittance ProcessingRemittance Processing - A collection and processingservice provided to clients by third-party providers.These providers collect payments from a dedicatedpostal box, to which clients have directed customers tosend payment.

Required FieldRequired Field the omission of a required field will notcause rejection of the entry at the ach operator level, butmay cause rejection of the entry at the RDFI level (forinstance, omission of the receivers account number.)

Return EntryReturn Entry - the return of an original entry that eithercould not be posted or was not able to be identified bythe RDFI - closed account, NSF, wrong account number,etc.

Return ItemReturn Item any item which cannot be processed andis being returned by the RDFI to the ODFI for correctionor re-initiation.

Return Reason Codes Return Reason Codes - or R Codes are rejections oforiginal ACH entries by the RDFI.

ReversalReversal Any ach entries or files sent within requireddeadlines to correct or reverse previously originatedentries or files.

Routing/Transit Number

Routing/Transit Number Also known as routingnumber, transit/routing number and ABA number. Anine digit number (eight digits pus a check digit) which

identifies a specific financial institution. Routing numbersare administered by the routing number administrativeboard under the sponsorship of the American Bankers

Association and officially maintained and published byThomson Financial Publishing.

RPS (Remittance Processing Service)RPS (Remittance Processing Service) - An electronicrouting and settlement service that accepts previouslycaptured and authorized payment transactions frommembers for delivery to other financial institutions.

SEC (Standard Entry Class) codes SEC (standard entry class) codes - the three charactercode within an ach company/batch header which


10/11

identifies the type of transactions within that batch (e.g.CCD, CTX, PPS, etc.)

Service Initiation Service Initiation - The overall term encompassingregistration, enrollment and activation.

SettlementSettlement - As the sales transaction value moves fromthe merchant to the acquiring bank to the issuer, eachparty buys and sells the sales ticket. Settlement is whatoccurs when the acquiring bank and the issuerexchange data or funds during that function.

Statement/NoticeStatement/Notice - An electronic or paper documentsent to a customer/agent that does not have a paymentdue associated with it.

TEL - Telephone Initiated Entry

Telephone-Initiated Entry - (TEL) is an entry initiatedthrough a telephone authorization for a one-time debitfor collection of funds for payment of goods andservices. A TEL is valid only when their is an existingrelationship between the parties or if no existingrelationship, the consumer initiates the telephone call.

Telephone Bill PaymentTelephone Bill Payment - A service that permits acustomer to pay bills electronically. The customer givesa corporation the authority to debit his or her account fora specific amount within a specified range of amounts.

Third Party Processor

Third Party Processor A party which processes achfiles and/or items on behalf of one of the participants inthe ach system. Examples of third party processors arepayroll processing companies which create ach files fortransmission to the ach operator on behalf of anoriginator or ODFI, a data processing company whichreceives incoming ach files and processes them for anRDFI, or a correspondent bank which processes achfiles for its correspondent. Under the ach rules, thirdparty processors are essentially invisible; the party theyare processing for bears virtually all of the liability andrisk for their third party processors actions.

TransactionTransaction - Activities affecting a deposit account,carried out at the request of the account owner. Oneexample of a transaction is the process that takes placewhen a cardholder makes a purchase with a credit card.

Transaction Risk

Transaction Risk The possibility that a loss will besustained due to the incorrect transfer on funds.Transaction risk usually arises when a large dollartransaction is treated as if it were a small dollartransaction without transferring all the procedures andsecurity associated with the large dollar transaction tothe small dollar system. An example of this would be atransaction that would normally be processed as a wiretransfer, with all of the normal associated security

procedures for wire transfers, converting to an achtransaction without having the same security proceduresin place.

TRC (Truncated (Check) Entry)

TRC (truncated (check) entry) An entry which originallyrepresented a check, in which the actual check is safekept by one of the financial institutions in the chain ofdeposit and the MICR information is converted to anelectronic entry and processed through the ach networkback to the issuing institution. These items carry thestandard entry class code TRC.


11/11

glossary of electronic payment terms

Documents