Part II Chapter 4

Question 1

account-to-receiver transfer

Answer 1

Under the FedGlobal ACH Payments system, this
type of transfer allows funds from accounts at a US
depository financial institution to be retrieved by any
receiver either at a participating bank location or at
a trusted, third-party provider in certain receiving
countries.

Question 2

automated clearinghouse (ACH)

Answer 2

An electronic network for low-value credit and debit

financial transactions in the United States.

Question 3

available balance

Answer 3

The available amount of funds available for
withdrawal from an account, based on a bank’s
availability schedule and/or local regulations.

Question 4

certified check

Answer 4

A payment instrument drawn on a depositor’s
checking account; funds are withdrawn from the
depositor’s account at the time of certification to
assure payment with a certification or guarantee by
the bank. It carries the signature of a bank officer
certifying the check to be genuine and guaranteeing
payment.

Question 5

charge-back

Answer 5

The reversal of a prior outbound transfer of funds
from a consumer’s bank account, line of credit, or
credit card.

Question 6

clearing

Answer 6

The process in which financial institutions use the
information contained in a payment instruction,
such as a check or wire transfer, to transfer money
between themselves on behalf of the payor and the
beneficiary, either directly or through some external
network.

Question 7

Clearing House Interbank Payments

System (CHIPS)

Answer 7

A bank-owned, large-dollar funds transfer network

operated by The Clearing House Payments Company

Question 8

clearinghouse

Answer 8

In a payment clearing process, this is a group of
banks or other financial institutions that agree to
exchange payment instruments (paper or electronic)
drawn on the member participants.

Question 9

collected balance

Answer 9

An aggregate of bank account balances that is
calculated as the average ledger balance minus the
deposit float.

Question 10

correspondent bank

Answer 10

In a payment clearing process, this is one of two
banks that have accounts with each other for the
purpose of clearing and settlement of payment items
between the banks.

Question 11

daylight overdraft

Answer 11

A type of overdraft position that occurs when a
financial institution permits a corporation to make
payments that exceed the available balance on the
corporation’s account. These overdraft positions are
usually eliminated by funds that arrive later in the
day.

Question 12

debit card

Answer 12

A card that allows access to funds directly from a
cardholder’s checking or savings deposit account
and can be either signature-based or personal
identification number (PIN)-based.

Question 13

debit transfer

Answer 13

In an electronic payments system, this is the process
of a payor authorizing payees to initiate value
transfers from the payor’s account to the account of
the payee.

Question 14

departmental (unnamed) card

Answer 14

A variation on the purchasing card in which each
department is given its own purchasing card for
general use by that department.

Question 15

deposit deadline

Answer 15

The time within the banking day when an item
must be ready for transit at the depository bank’s
processing center to qualify for the availability stated
in the availability schedule.

Question 16

depository bank

Answer 16

The bank or financial institution in which a check is

deposited for processing and clearing.

Question 17

direct debit scheme

Answer 17

The term used in the Single Euro Payments Area
(SEPA) initiative to describe a pre-authorized debit
program in which one person or company authorizes
another to automatically debit its bank account for
payments that are due.

Question 18

EMV

Answer 18

An acronym that refers to a global standard for the
use of smart cards (or chip cards) as either debit or
credit cards.

Question 19

FedGlobal ACH Payments

Answer 19

A service offered by the US Federal Reserve Bank
to provide a framework for sending cross-border
automated clearinghouse transactions to countries
around the world (over 25 countries as of 2018).

Question 20

Fedwire

Answer 20

A high-value, real-time gross settlement (RTGS)

transfer system operated by the US Federal Reserve.

Question 21

finality

Answer 21

In a payment system, this is the point in time when a
payment can no longer be taken back or retracted by
a payor or payor’s bank, and the payee has full use of
the funds.

Question 22

foreign check

Answer 22

A check deposited at a bank in one country that is

drawn on a bank in another country.

Question 23

ghost card

Answer 23

A variation on the purchasing card that does not
involve the use of an actual card. Also known as a
virtual card.

Question 24

giro

Answer 24

A method of transferring money by instructing
a bank to directly transfer funds from one bank
account to another without the use of checks.

Question 25

government warrant

Answer 25

In government finance, this is an order to pay that instructs a treasurer to pay the holder on demand or after a maturity date.

Question 26

gross settlement

Answer 26

A type of settlement in a payment system in which each transaction results in a separate value transfer between the payor and payee.

Question 27

image replacement document (IRD)

Answer 27

In the United States, this is a paper reproduction of the original check that contains an image of the front and back of the original check and is the legal equivalent of the original check.

Question 28

interchange fees

Answer 28

Fees established by the payment card brands that go directly to the issuing bank to cover its costs in issuing cards and in processing card transactions.

Question 29

ledger balance

Answer 29

A bank balance that reflects all entries to a bank account, regardless of whether the deposited items have been collected and are available for withdrawal.

Question 30

magnetic ink character recognition | MICR

Answer 30

A data capture process that translates the machine readable information on a check into a digital data entry

Question 31

merchant acquirer

Answer 31

The financial institution that processes and settles | payment card transactions on behalf of a merchant

Question 32

merchant discount

Answer 32

A type of bundled merchant card processing fee in which the merchant is charged one fee by its card processor that covers all of the cost components of the transaction.

Question 33

mobile wallet

Answer 33

An emerging payment type that uses smartphones and tablets equipped with near field communication (NFC) chips or a bar code.

Question 34

near field communication (NFC)

Answer 34

A short-range wireless connectivity standard that uses magnetic field induction to enable communication between devices when they are touched together or brought within a few centimeters of each other.

Question 35

on-us check clearing

Answer 35

A type of clearing process that involves a single bank and occurs when a payee deposits a check in an account at the same bank on which it is drawn.

Question 36

on-we check clearing

Answer 36

A type of clearing process that occurs when checks are deposited at a financial institution that are drawn on related financial institutions or on financial institutions that share a common check-processing system, thus eliminating the need to clear the checks through another bank.

Question 37

optical character recognition (OCR)

Answer 37

A processing method for data entry that reads preprinted information on remittance documents and creates a digital data file

Question 38

payable through draft (PTD)

Answer 38

A payment instrument resembling a check that is | drawn against the payor rather than the bank.

Question 39

payee

Answer 39

In a payment system, the one receiving the payment.

Question 40

payment system

Answer 40

A series of processes and technologies that transfer | monetary value from one party to another.

Question 41

payor

Answer 41

In a payment system, the one making the payment.

Question 42

pre-authorized draft

Answer 42

A payment instrument that authorizes the payee to | draw/draft against the payor’s account.

Question 43

proof of deposit (POD)

Answer 43

An availability assignment method used in banking in which availability is assigned to each check as it is processed.

Question 44

purchasing card

Answer 44

A payment card, typically a credit card, used by a business for the purchase of supplies, inventory, equipment, and service contracts.

Question 45

real-time gross settlement (RTGS) | system

Answer 45

A type of payment system in which each transaction results in a separate value transfer between the payor and payee, and the payment to the payee is final and irrevocable at the time the receiving bank’s account is credited or at the time the receiving bank is notified of the payment, whichever is earlier.

Question 46

reject item

Answer 46

A check that is rejected by a bank’s automated | check-processing equipment.

Question 47

remote deposit capture (RDC)

Answer 47

In an over-the-counter field deposit system, this is a process that allows an organization to scan and image checks, then transmit those images to its depository bank for posting and clearing, instead of having to deposit physical checks.

Question 48

settlement

Answer 48

In a payment system, this is the actual movement of funds from the payor’s account to the payee’s account.

Question 49

sight draft

Answer 49

A draft that is payable upon presentment, provided | all of the terms of the draft have been met.

Question 50

single-use card

Answer 50

A disposable credit card number that looks like a regular credit card number, but includes an embedded expiration date and security code, and will only work for one use

Question 51

smart card

Answer 51

A typical payment card with the addition of a computer chip with related circuitry that can be used to store information for security or transaction processing

Question 52

``` Society for Worldwide Interbank Financial Telecommunication (SWIFT) ```

Answer 52

A financial industry-owned, cooperative, interbank telecommunication network that enables banks and corporations to send authenticated electronic messages in standard formats.

Question 53

stored-value card (SVC)

Answer 53

A type of debit card that may be offered by financial institutions, retailers, and other service providers, and can be a branded, open-loop card (e.g., Visa or MasterCard), or a private-label, closed-loop card (e.g., Starbucks or other merchant gift card). Gift cards are one of the most commonly used card of this type.

Question 54

time draft

Answer 54

A draft that is payable at some future date, provided | all of the terms of the draft have been met.

Question 55

transit check

Answer 55

A check deposited with a financial institution that is | drawn on another financial institution.

Question 56

value-dated automated clearinghouse | (ACH) transactions

Answer 56

ACH transactions where the payment instructions | include settlement dates.

Question 57

virtual currencies / cryptocurrencies

Answer 57

A type of unregulated, digital money that is issued and usually controlled by its developers, and is used and accepted among the members of a specific virtual community.