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Insights & guides into the world of finance
Insights & guides into the world of finance
Explore insightful and uncomplicated information on various aspects of the payment industry.
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ACH
ACH
From direct deposit to bill payments, the ACH network shapes the landscape of electronic fund transfers. ACH extends its influence across various areas to move funds between businesses, individuals, and financial institutions.
The Automated Clearing House (ACH) network is an electronic payment system that facilitates the transfer of funds between financial institutions in the U.S.
The National Automated Clearing House Association (NACHA) governs and establishes the rules and standards for the ACH network.
An Automated Clearing House operator, or ACH operator, is a financial institution or organization that acts as an intermediary between banks and other financial institutions to facilitate the processing of electronic payments through the Automated Clearing House (ACH) network.
An ACH originator is essentially someone or a business entity that starts the process of electronically moving money through the Automated Clearing House (ACH) network. This could involve actions like setting up direct deposits, making bill payments, or initiating other electronic fund transfers.
An Automated Clearing House application programming interface (ACH API) is a technology that enables businesses to seamlessly integrate with the ACH network to initiate and manage ACH transactions directly from their software, eliminating the need for manual processing.
Automated Clearing House Notification of Charge (ACH NOC) is a term used in the banking industry to refer to a notice informing a company or individual about a transaction returned or rejected by the receiving bank.
Simply put, an ACH Notification of Change is a notification sent to the account holder when an ACH transaction still needs to be completed.
An ACH return occurs when the Receiving Depository Financial Institution (RDFI) or receiving bank can’t process the transaction due to insufficient funds, incorrect account information, issues with the account holder’s authorization, or other reasons.
Automated Clearing House (ACH) return codes are standardized codes used in electronic payment processing to indicate why a transaction was rejected or returned.
An Automated Clearing House (ACH) reversal is a transaction that cancels a previously authorized electronic funds transfer.
Automated Clearing House (ACH) credit and debit transactions differ in initiator roles: ACH credits are triggered by the sender, whereas ACH debits are initiated by the recipient.
Originating Depository Financial Institutions (ODFI) initiate electronic payments, transmitting funds from clients to recipients, while Receiving Depository Financial Institutions (RDFI) receive and process these payments, ensuring accurate details and fund availability.
Standard Entry Class codes, or SEC codes, are a classification system used in the U.S. for electronic payments. These three-letter codes determine the transaction type and provide processing instructions for funds transfers.
By categorizing each transfer with a specific SEC code, financial institutions can easily identify the purpose of the transaction and handle it accordingly.
Global ACH and SWIFT are different approaches to sending money internationally. Global ACH is region-specific and cost-effective, suitable for various transactions, while SWIFT is a global messaging network, mainly used for high-value cross-border financial activities.
Global Automated Clearing House (ACH) is a system that enables businesses and individuals to send and receive payments electronically across borders.
Global ACH simplifies international transactions by providing a secure and cost-effective way to transfer funds in different currencies.
Request for Payment (RFP) is a formal process in which a company or organization requests payment for goods or services rendered.
Same Day Automated Clearing House (ACH) is a payment method that allows businesses to send and receive funds within the same business day.
An international Automated Clearing House transfer, or international ACH transfer, is a cost-effective method of electronically sending funds between bank accounts in different countries.
An Automated Clearing House prenotification or ACH prenote, is a preliminary transaction that verifies and validates bank account information before initiating an electronic fund transfer.
A wire transfer is a method used to electronically send money between two parties, typically through banks or credit unions.
ACH pull and ACH push payments refer to who initiates the transaction. With ACH pull, the recipient starts the transfer by pulling funds from the sender’s account, whereas ACH push requires the sender to initiate the payment, pushing funds to the recipient’s account.
FedNow
FedNow
FedNow is a new payment system developed by the Federal Reserve that provides instant, around-the-clock interbank transactions to ensure the immediate availability of funds.
FedNow is a new payment system developed by the Federal Reserve that provides instant, around-the-clock interbank transactions to ensure the immediate availability of funds.
While it’s new to the finance industry, FedNow works with ACH transactions to revolutionize the industry.
Real-time gross settlement (RTGS) is a vital component of a country’s financial system, which allows for the instant transfer of funds between banks and other financial institutions.
FedNow is a payment infrastructure developed by the Federal Reserve to provide faster and more efficient instant payments.
Ledgering
Ledgering
A ledger provides a detailed summary of a company’s financial records. Explore the fundamental accounts associated with the general ledger and how to record entries in the books.
A ledger or general ledger provides a detailed and organized record of a company’s financial records — all company accounts and entries — and is essential for accounting.
A general ledger is a central repository in an accounting system that captures and organizes all transactions. The general ledger also serves as a comprehensive record of revenues and expenses, providing a detailed overview of the company’s financial activities.
A Chart of Accounts (COA) in accounting lists and organizes all types of money-related activities to simplify where the money is coming from and where it’s going.
A ledger database is a system that stores accounting data in a secure, immutable, and transparent archive for companies to reference transaction history.
Single-entry and double-entry accounting are two methods of recording financial transactions. Single-entry records each transaction once, while double-entry records it twice, as a debit and a credit.
Immutable data is information in a database that can’t be changed or modified after creation. Once data is assigned a value, it can’t be altered during the lifetime of the program or system.
A ledger balance, or current balance, is the amount of money in a business’s checking account at the beginning of every day.
While the general ledger summarizes financial transactions at the account level, a subsidiary ledger offers a more granular breakdown. The subsidiary ledger is a supportive document that provides specific information on individual transactions, such as dates, amounts, and parties involved.
A general ledger account (GL account) records a company’s financial transactions for specific accounts in areas such as accounts receivable, inventory, and more.
General ledger coding (GL coding) is a handy tool that organizes the general ledger by assigning alphanumeric codes to financial entries within an organization’s ledger.
Assets or liabilities not listed on a company’s balance sheet are called off-balance sheet (OBS) items. Off-balance sheet items, such as operating leases and accounts receivable factoring, aren’t directly visible on the balance sheet but can be found in the footnotes of financial statements and still impact a company’s finances.
Retained earnings (RE) are the amount of net income or loss left over from the previous year after the business has paid out dividends to its shareholders.
Accumulated depreciation is under fixed assets on a balance sheet. It’s a credit balance deducted from the total cost of property, plant, and equipment, reflecting decreasing asset value over time for a more accurate net value.
Total revenue is the overall income generated from selling products or services before expenses are deducted. It’s calculated by adding recurring income to non-recurring income.
Payment Operations
Payment Operations
Payment operations cover everything that happens behind the scenes to make sure financial transactions go smoothly—from processing payments to balancing the books. It’s all about keeping things accurate, efficient, and secure.
Bank reconciliation is the process of comparing a company’s financial records with its bank statements to ensure both match. It helps identify and correct any discrepancies, such as missing transactions or errors, to keep the financial records accurate.
Application Programming Interfaces, or banking APIs, are tools that allow different software applications to communicate with a bank’s systems, enabling third-party developers to access financial data or perform banking transactions securely.
The “Flow of Funds” describes how capital moves through an economy, impacting everything from basic transactions to complex investment strategies.
Net settlement is when financial institutions consolidate and reconcile multiple transactions at the end of a designated period, typically at the end of the business day.
Incoming payment details provide information about funds received by a business or person, such as the payment amount, date received, payer’s identity, payment method, and relevant transaction or reference numbers.
Payment Security
Payment Security
Payment security is essential for safeguarding sensitive financial information during transactions. Discover the key technologies and best practices that ensure secure payment processing and how to protect against fraud and data breaches.
Three-Domains (3D) Secure is a security protocol that enhances the safety of online transactions by adding an additional layer of authentication for credit and debit card transactions to prevent unauthorized use.
EMV (Europay, MasterCard, and Visa) is a global standard for chip-based payment cards and terminals that use microchips to authenticate transactions, improving security over traditional magnetic stripe cards by reducing fraud.
Encryption is the process of converting readable information into unreadable code to keep it secure from unauthorized access.
Real-Time Payments
Real-Time Payments
Real-time payments, facilitated through the RTP (Real-Time Payments) network, involve instantaneous transactions between bank accounts, with funds initiated, cleared, and settled within seconds, even on holidays and weekends.
Real-time payments (RTPs) are payment methods that allow funds to be transferred almost instantly between financial institutions.
An open-loop payment system refers to a type of payment network that enables transactions to be processed and authorized by multiple entities beyond the issuing bank or card issuer.
