Glossary of Financial Terms

An arranged overdraft occurs when a person and a financial institution agree in advance on the availability of an overdraft facility. It does not imply that you have unlimited spending power. It indicates that you can only spend a particular amount of money.

The Automated Clearing House (ACH) is a batch-processing technology that facilitates the immediate transfer and payment of payments between bank accounts. Recurring payments, such rent, salary, and bills, are commonly paid through ACH payments direct debit only.

ACH transfers are a safe and dependable electronic payment solution that sends money electronically from the payee’s bank to your own. This kind of business-to-business payment is widely employed since it streamlines the process of exchanging money between companies.

A2A on a bank statement signifies Account to Account transfer. It indicates that funds were transferred from one account to another, either within the same bank or between banks. It is possible that you made the transfer, but it is also possible that someone else with access to your account made it.

The Annual Equivalent Rate (AER) is an important concept for everyone who has a savings account or is thinking about starting one.

AER analyses and quantifies the annual interest rates of various savings accounts, giving depositors an accurate representation of the possible return on their investment over a year.

Anti-money laundering (AML) checks are precautionary steps taken by companies to protect against money laundering – the process by which illegally obtained ‘dirty’ money is made to seem lawful.

These checks are designed to identify and manage risk by looking at the nature of the transactions and the clients involved. Anti-money laundering inspections so serve as a deterrent to financial crime and, by extension, as a tool for fostering a more safe and transparent corporate environment.

In the Banking as a Service (BaaS) concept, conventional banks make their systems and services available to FinTech startups and other companies. The system provides Application Programming Interfaces (APIs) for integrating a bank’s system with a company’s existing infrastructure.

BaaS providers are organizations that make available BaaS-embedded finance services infrastructure, technology, and capabilities) to FinTech and other types of enterprises.

Typically, the providers work in tandem with formally recognized financial institutions. Through this alliance, they will be able to take use of the bank’s regulatory credentials, infrastructure, and knowledge.

The BIC code was created as an alternative to the SWIFT code. This is why the terms SWIFT code and BIC code are often used interchangeably. Bank Identifier Codes (BICs) are used in conjunction with the SWIFT network to facilitate international monetary transactions.

B2B payments are monetary transactions used to fund the exchange of products or services between businesses. They take place between wholesalers, manufacturers, retailers, service providers, small companies, and corporations in all industries.

Cash flow management is the process of analyzing, monitoring, and optimizing the money movement in and out of a firm (accounts receivable and accounts payable). It entails keeping track of revenue and spending, such as bills, wages, and property expenses, in order to maintain a clear picture of costs and income. It is, in general, a component of financial health.

Card networks, such as Visa and Master Card, enable users to move payments between retailers and cardholders. Card networks handle millions of transactions every day, making them one of the most extensively utilized forms of payment.

The nine-digit credit protection number (CPN) is a number that certain credit repair organizations claim may be used in place of a social security number when applying for credit or a loan.

Crypto withdrawal refers to the action of moving cryptocurrencies from one wallet or account to another. Moving Bitcoin from one service, exchange, or digital wallet to another is what this means. Withdrawing cryptocurrency gives consumers back control of their funds, whether they choose to keep or convert their holdings and put them to use in whichever way they see fit.

New users must go through a customer onboarding procedure before they can begin making full use of your service. In this part of the customer journey, new users register and become acquainted with your service or product, discovering its benefits and how it might improve their life.

Credit protection number (CPN) is a nine-digit number that, according to the claims of certain organizations that repair credit, may be used in place of a social security number when applying for credit or a loan.

Contactless payments, sometimes known as ‘tap-and-go’ transactions, allow users to quickly and easily make purchases by tapping or waving a contactless-enabled card or device over a scanner. Faster than using a credit card, debit card, or even cash, the payment procedure may be completed in as little as ten seconds.

CVC stands for card verification code. On the reverse side of most credit and debit cards, you’ll find a three-digit number that serves as this code. On some cards, such as those issued by American Express, the security code could include four digits at times.

A debit card is a plastic card, similar to a credit card, that is carried in a wallet and used to pay for goods and services. When you make a purchase with a debit card, the money is taken immediately from your bank account and placed in the account of the seller.

Unauthorised use of a debit card is known as debit card fraud. In addition, it refers to the fraudulent use of debit cards. When someone else gets their hands on your debit card information and uses it without your knowledge, they have committed debit card fraud.

Debt financing is frequent in asset purchases, with the loan secured by property. It enables small business owners to maintain control while retaining ownership rights.
Furthermore, firms frequently utilize credit cards or lines of credit to fill short-term cash flow gaps.

A digital wallet, also known as a mobile wallet, is a payment program that stores your payment information, such as credit or debit card details, bank account information, and shipping address. Google Pay, Apple Pay, and Samsung Pay are examples of popular digital wallets.

A data breach happens when thieves circumvent security measures to obtain access to huge volumes of card data kept by merchants and other data holders. To counteract this dilemma, the banking sector is making strides in creating safe data storage solutions. However, fraudsters continue to seek ways to attack flaws.

The process of handling transactions through direct deposit is completely automated. Direct deposits are electronic payments issued by the payer and deposited directly into the payee’s bank account. Money can be transferred between parties without a physical check or a trip to the bank.

Embedded finance, additionally referred to as embedded banking or finance-as-a-service, is the incorporation of financial services into non-financial platforms such as e-commerce websites, mobile applications, and other digital platforms.

Equity financing refers to the process of collecting funds from angel investors or venture capitalists. Because the investment does not need to be returned in the event that the firm is unsuccessful, the risk involved is lower.

An exchange rate is the value of one currency expressed in terms of another currency. Exchange rates play a vital role in international trade and finance. They determine the relative value of different currencies and affect the flow of goods, services, and capital between countries. Exchange rates are calculated based on supply and demand in the foreign exchange market.

A family spending plan, often known as a family budget, is a record that helps you keep track on your finances and organize your spending for the week, month, or entire year. Creating a budget makes it simple to keep track of your spending and manage your finances, which enables you to improve your spending patterns and increase your savings.

Fiat money refers to currency that has been issued by a government but is not supported by a physical object such as gold or silver. The relationship between supply and demand determines the value of a fiat currency, which is dependent on the stability and credibility of the government that issued it as well as the supply and demand situation.

A fiat wallet, such as a USD fiat wallet, bridges the gap between the traditional financial system and the realm of cryptocurrency. A fiat wallet allows users to rapidly sell their crypto holdings for US dollars, which are then safely held in the wallet.

A flat rate pay system is one in which you charge the customer a fixed amount for the scope of work accomplished, regardless of the number of activities necessary to finish the project. Flat charges are excellent for projects with specific deliverables and a clear scope of work.

Flexible exchange rates are governed by the market dynamics of supply and demand in the foreign currency market. Flexible exchange rates are frequently used by developed nations including the United States, Japan, and the United Kingdom.

Google Pay is a type of digital wallet. It is comparable to other digital wallets such as Apple Pay and Samsung Pay, however it is mostly used by Android users. You can use Google Pay to shop online, make in-app purchases, pay at contactless businesses, and even send and receive money.

The term gross salary refers to the total amount of money that an employee makes prior to any deductions being made, including but not limited to income tax, payroll taxes, and employee benefits.

The term hard money is used to describe a currency that is either manufactured of or backed by a valued commodity. This sort of currency is believed to have a high exchange rate with “softer” currencies and a steady value compared to commodities and services.

Private investors and reputable financial institutions are the sources of hard money loans. Rather of considering the borrower’s credit history, the lender determines the loan amount based on the value of the collateralized property. The loan amount is based on either the estimated value after repairs or the estimated value at the time of sale.

Hijacked terminals are a type of debit card fraud that breaches the operating system. ATMs with remote control features left in their default (and unsecure) settings are the targets. Bank ATMs that have been hacked may potentially be changed and utilised instead of undamaged terminals.

International Bank Account Number (IBAN)
IBANs, short for International Bank Account Numbers, are essential for making or receiving fast, secure, and error-free cross-border payments. Unique to each individual and account, the IBAN acts as a safeguarding system by verifying account data before transferring funds between international banks.

The IBAN consists of up to 34 alphanumeric characters. Each section of the IBAN provides specific information about your account and helps to ensure its accuracy during transactions.

The insufficient funds refers to a circumstance in which an account holder does not have enough money in their bank account to satisfy a certain transaction or payment demand. When this happens, the bank refuses to execute the transaction or payment request and charges the account holder an inadequate funds fee, often known as a non-sufficient funds (NSF) fee.

Interchange plus is a method of payment in which a predetermined markup is added to the interchange charge that the merchant already pays to execute each transaction. Since the markup and transaction costs for retailers are clearly displayed, this pricing structure is viewed as transparent.

Mandatory payroll deductions are sums that an employer is compelled by law to take from an employee’s salary and send to the proper government agency.

Federal and state income taxes, Social Security taxes, and Medicare taxes are all instances of obligatory payroll deductions. Employees may also have deductions taken out for state disability insurance, unemployment insurance, or workers’ compensation in rare situations.

The use of mobile banking as a component of online banking is another facet of this banking model that is gaining ground. The introduction of mobile banking has also contributed to the sector’s overall transformation. The number of individuals utilizing banking applications continues to rise.

Money mules play an important role in the smurfing process. These people, whether consciously or unknowingly, shift money around, frequently between many bank accounts. The goal is to make detection more difficult for authorities.

Money laundering is the process of transforming unlawfully obtained funds into legitimate currency and then depositing them into a legitimate financial institution. Money launderers and corrupt actors’ primary goal is to conceal the origin of their illicit earnings.

NFC, which stands for near field communication, is a wireless technology that enables two electronic devices to interact with one another while they are in close proximity to one another. Transactions, such as mobile payments, are made more easy and safe thanks to advancements in payment technology.

The Near Field Communication (NFC) technology is used in mobile payment systems like Apple Pay, Google Pay, and Samsung Pay. This technology enables contactless transactions to take place between NFC-enabled handsets and NFC-enabled readers.

Negative cash flow happens when an organization’s money leaves faster than it comes in. It is a big barrier to growth for ambitious businesses. Negative cash flow is frequent in new businesses and is unsustainable in the long run. When expenditures constantly surpass earnings, finances run out. It eventually leads to even more financial stress.

Neobank is a banking platform that is exclusively available online and does not have any physical branches or a banking license. This particular banking organization is one of the businesses that use Banking as a Service, often known as BaaS.

Non-bank financial technology businesses are what are known as neobanks. Instead than engaging in traditional lending operations, they concentrate on certain aspects of the banking industry, such as the provision of checking and savings accounts in addition to the issuance of credit cards.

Net salary refers to the amount left over after taxes and other deductions have been taken out of an employee’s paycheck. To distinguish between the two, examine your pay stub’s breakdown. Gross pay is on top, while net pay is at the bottom.

Non-operating revenue is the entire amount of profit or loss that cannot be attributed to primary company activity. Companies can record it as part of their income statement to provide an exact amount of how much money the firm makes outside of the regular boundaries of its industry.

Online banks have become an important part of modern banking. Customers can, for example, undertake different banking operations through websites or mobile apps. Many conventional banks now provide internet banking. However, some modern banks are solely available online and do not have physical locations.

Open banking is a financial term that relates to the exchange of financial data across various financial institutions, third-party developers, and existing consumers. Individuals can use open banking to grant authorized parties safe access to their financial information on flexible savings accounts, e-money accounts, debit cards, and other data.

Operating revenue is the revenue created by a company’s operational activity. When a company puts its product or service into the hands of a customer, it creates revenue, which is also known as sales revenue. Operating revenue is defined as the entire value of products or services sold.

An overdraft is a form of debt attached to a bank account. It allows you to access additional money and spend more than the actual balance in a current account. In a sense, overdrafts are loans, but unlike many personal loans, it is not subject to any fixed repayment plan.

If your account balance becomes negative due to overspending, you will be overdrawn and owe a certain amount of money to the bank. As good as it sounds, it also has another side.

The payment rails are the systems in place to facilitate the exchange of funds between a payer and a recipient. A payment rail is analogous to a train’s rails, which is fitting given the name. They’re essential for a train to get from A to B. The rail enables the transfer of funds between financial institutions.

A proof of address is a document that verifies your present residence. These address documents are required in a variety of situations, most notably when opening a bank account or establishing a service with a firm. A energy bill, a council tax letter, a leasing agreement, or even a credit card statement are examples of such documents.

Push payments are a form of account-to-account (A2A) transaction in which the account proprietor initiates the transfer from their own bank account to another account. In this instance, the account proprietor is “pushing” the payment from their account to the account of the recipient. It can be initiated via multiple channels, including online banking, mobile banking applications, and even ACH (automated clearing house) transfers.

Pull payments are an A2A payment form in which the receiver starts the transaction and withdraws monies from the payer’s bank account. In this instance, the payer gives the receiver with the relevant account details and approves the withdrawal of funds.

Pull payments are frequently utilized in scenarios involving subscriptions, such as monthly utility bills or gym memberships. The beneficiary can withdraw cash from the payer’s bank account at predetermined intervals, making the payment procedure more comfortable and simplified for both sides.

Real-time payments (RTP) are the same thing as immediate payments. Electronic payments are those that are carried out with the assistance of a clearing and settlement network, which makes it possible for payment procedures to be completed in a timely manner.

Using a recurring payment model, you can tell a seller to take money out of your bank account or credit card issuer on a regular basis to pay for goods or services that will continue.

The term soft money refers to donations made to political parties rather than candidates with the intention of influencing the outcome of an election. There are no limits placed on the creation or circulation of soft money. Spending it on anything that falls under the broad category of “increasing the vote” is fair game for political parties.

A soft money loan is a loan from a typical lending source, such as a bank. The borrower’s credit history, income, and other financial criteria will all be taken into account as part of a typical underwriting process for this type of loan.

A bank transfer through the SEPA (Single Euro Payments Area) is a payment mechanism that enables euro-denominated cash to be moved between bank accounts in SEPA nations. SEPA stands for the Single Euro Payments Area.

Smurfing is a deceptive method used to avoid regulatory scrutiny in the financial sector. Money mules are frequently used as conduits for this subtle yet effective kind of financial crime. Smurfing in money laundering is the practise of dividing large quantities of money into multiple smaller transactions.

A SWIFT code can be used to specify which bank is involved in an international money transfer. The Swift code is an alphanumeric string of eight or eleven characters that specifies a financial institution, its nation, its region, and its branch. SWIFT is still the most popular way to send money abroad because of its wide messaging capabilities. There is a great deal of financial information that may be transferred between banks thanks to this system.

Skimming devices can be either standalone, overlay, or included into a system. Separate card skimming devices provide thieves the opportunity to temporarily possess your card. The card may then be swiped through a reader to get the information. Overlay devices are card readers that thieves put on top of real readers to steal PINs and manufacture counterfeit debit cards for use in fraudulent transactions.

Traditional banks are distinguished by physical branches, regional offices, own-branded ATMs, a large workforce, and personalised customer care delivered by specialised account managers. While conventional banks provide internet services, their primary concentration remains on physical presence.

Because of the direct client interaction, many consumers choose conventional banking. The cause behind this decision was discovered by a global consumer banking study. According to the study results, real touch fosters confidence and trustworthiness.

Turnover is the total amount of money made through sales during a given time frame. It explains how quickly a company’s assets turn around. The efficacy of a company’s management of its resources may be gauged by looking at its turnover rate.

An unarranged overdraft happens when a person continues to take funds from their account after the balance of the bank account approaches 0 or the predetermined overdraft limit. It’s important emphasizing that the bank hasn’t agreed to it ahead of time.

With a wire transfer, a person or company may instantly move money from one bank account to another. In order to facilitate big transactions, overseas payments, and foreign exchange payments for real estate, wire transfers are frequently employed.

The 3D Secure Authentication system was developed to give an extra layer of safety to online purchases. It requires customers to prove their identities using a procedure known as two-factor authentication, which is an additional step in the payment process. This is done by inputting a secret code provided to a user’s registered mobile device, or by providing a password.