Glossary: A–Z

Adjacencies: Ways in which entities and/or DFSPs realize revenue from services that are not directly associated with a Payment—for example, loans made to Transaction Account holders.

Account ID: A unique identifier associated with a Transaction Account.

Addressing: The use of an identifier to direct a Payment from a Payer to a Payee, typically a mobile phone number or email address.

Agent: An authorized person or entity that handles Transaction Account opening and/or Payments or Transfers on behalf of another entity. The other entity may be a bank, or a non-bank provider of financial services. Cash-in, Cash-Out is a common service provided by Agents.

Aggregator: A specialized form of a merchant services or bill payment provider, that typically handles Transactions for a large number of small merchants. Agent aggregators also exist. Aggregators may connect directly to a Level One Platform or  through a relationship with a DFSP. Scheme rules specify how Aggregators may interact with the system.

Anti-Money Laundering (AML): Initiatives to prevent individuals or entities from using payment systems to disguise illegally acquired funds as legal.

Application Program Interface (API): A methods of communication to allow interaction and sharing of data between different software or Technical Protocols.

Authentication: The mechanism whereby systems securely identify their End Users. Authentication systems provide answers to the questions: “Who is the user?” “Is the user really who she represents herself to be?” In payments systems, PINs and biometrics are common methods of Authentication.

Authorization: The permission given by the Payer or entity to make a Payment. 

Automated Clearing House (ACH): An electronic bank transfer system that processes Credit Push and/or Direct Debit Payments in a batch process.

Biometric Authentication: The use of a physical characteristic of an individual (e.g., fingerprint, IRIS) to Authenticate that individual.

Blockchain: A technology that creates distributed architectures. In payments systems, blockchain is often a reference to a shared ledger that records and validates Transactions.

Bulk Payment: A Payment from a single Payer to multiple Payees, for example cash transfer programs from a government or NGO to a set of beneficiaries.

Cash-In, Cash-Out (CICO): Receiving eMoney credit in exchange for physical cash (CI) or receiving physical cash in exchange for a debit to an eMoney account (CO), typically done at an Agent.

Clearing: The process within a payments system in which a Payer DFSP and a Payee DFSP debit and credit their End User Accounts.

Closed Loop: A payment system with one provider, who has a direct relationship with both the Payer and the Payee. Closed Loop contrasts with Open Loop.

Combatting Terrorist Financing (CFT): Initiatives to prevent individuals or entities from using payment systems to send funds to individuals or entities associated with terrorism.

Credit Transfer: A Payment or Transfer of funds initiated by the Payer DFSP to the Payee DFSP. A Credit Transfer is often referred to as a ‘credit push transfer’ because the funds are ’pushed’ from the Payer’s Transaction account. Credit Transfer contrasts with Direct Debit.

Digital: Electronic communications between two individuals or entities that can occur on various electronic devices (e.g., mobile, tablet).

Digital Financial Services Providers (DFSPs): A financial services provider that is licensed by a regulatory authority to provide Transaction Accounts which hold customer funds and are used to make and receive Payments.  DFSPs have relationships with consumers, merchants, and other enterprises, and provide digital financial services to End Users.

Direct Debit: A Payment or Transfer of funds initiated by the Payee DFSP to the Payer DFSP. A Direct Debit is often referred to as a ‘debit pull transfer’ because the funds are ’pulled’ from the Payer’s Transaction Account. Direct Debit contrasts with Credit Transfer.

Directory: A centralized or decentralized holding of payment identifiers to be used for Addressing, accessible by the payments system or DFSPs.

Digital Liquidity: A practice of keeping value in Digital form, rather than exchanging the Digital value for cash (physical form).

Dispute Resolution: A process specified by a DFSP or by the payment scheme to resolve issues between an End User and a DFSP, or between a Payer and a Payee.

Ecosystem: A term used to describe the end to end value chain and the interactions of a system. For payments, this term is referred to as a ‘payments ecosystem’.

eMoney: Digital funds or value owned by a Transaction Account holder on a payment device such as chip, prepaid card, mobile phone, or on a computer system.  National regulation specifies what types of DFSPs can issue eMoney.

Encryption: The process of encoding a message so that it can be read only by the sender and the intended recipient.

End User: The customer of a DFSP. The customer may be a consumer, a merchant, a government, or another form of enterprise.

Escrow: A means of holding funds for the benefit of another entity. eMoney issuers are usually required by law to hold the value of End Users’ eMoney balances at a bank, typically in what is called a ‘trust account’.  This practice helps to isolate and safeguard funds.

Fees: Fees in payments systems include those sums that are 1) charged by a DFSP to their customer, 2) charged by the system of Scheme to the participating DFSPs and 3) set  by the Scheme and paid by one DFSP to the other: this is called Interchange. Fees may either be a fixed fee, a percent-of-value fee, or a mixture.

Fiat Currencies: Official money issued by the central bank of a country or region as  legal tender.

Financial Inclusion: The sustainable provision of affordable Digital financial services that bring the Low Income End Users into the formal economy.

Fintech: A term used to describe the intersection of finance and technology. ‘Fintechs’ are entities providing innovative solutions in the finance space, leveraging technology.

Fraud: A deception that results in the loss of funds or other harm to someone in the financial Ecosystem. There are many types of fraud in the Financial Ecosystem.

Gross Settlement: A method of settling financial obligations among DFSPs and a scheme. Gross settlement processes each Transaction individually. The details of the Gross Settlement model are specified in scheme rules. Gross Settlement contrasts with Net Settlement.

Governance: The collection of management approaches, decisions, and oversight functions within the Scheme. Scheme governance can set the tone for everything that occurs in the Scheme.

Identity: A set of unique attributes or traits that collectively define an individual.

Immediate Funds Transfer (IFT):
A Payment system in which the Clearing of transactions occurs in Real Time. IFTs are usually Push Payments. Settlement may occur at the same time as the transaction (Gross Settlement) or later, on a net basis (Net Settlement).

Interchange: A type of Fee in an Open Loop payments system.  The Fee is set by the Scheme but paid by one DFSP to another.

Interoperability: The ability of DFSPs participating in a payment Scheme to exchange Transactions with each other. The term may also be used when two systems interconnect.

Irrevocable: A Transaction that cannot be “called back” by the Payer. An Irrevocable Payment, once received by a Payee, cannot be taken back by the Payer.

Know Your Customer (KYC): Regulatory requirements for DFSP to establish the Identity and activities of an End User or entity, both before opening a Transaction Account and over time.

Marketplace Operators: Entities that provide Digital services platforms to End Users, typically providing multiple different services. Examples of Marketplace Operators include eCommerce platforms, social media platforms, and transportation platforms. Marketplace Operators may connect directly to a Level One Platform, through a relationship with a DFSP. Scheme rules specify how Marketplace Transactions may interact with the Platform.

Legacy System: A system that has been in place for some time and likely includes dated technologies or processes.

Low Income: A term used to refer to End Users, typically individuals or merchants, when the End User has few assets, including funds available for transacting.

Merchant: A term used to describe a broad group of entities, including stores, service providers (i.e. ‘billers’), not-for-profit enterprises, and governments. Merchants are often receivers of funds, where Payments are made in exchange for goods and services. Merchants are also often Payers for good and services to sustain their business.

Microfinance Institution (MFI): An entity that offers financial services to Low Income populations. Almost all MFIs give loans to their members, and many offer insurance, deposit and other services. MFI’s are considered DFSPs in a Level One System if they provide Transaction Accounts to their customers. MFI’s who are not DFSPs may connect directly to a Level One Platform, through a relationship with a DFSP. Scheme rules will specify how such MFI’s may interact with the Platform.

Mobile Money Services Provider: A category of DFSPs that use mobile phones as the access method to provide Transaction Accounts to End Users.

National Identity Document: A credential that identifies an End User. National Identity Documents  are issued by national governments.

Near Field Communication (NFC): A communication technology sometimes used to transmit Payment data from an NFC-equipped mobile phone to a terminal capable of reading the data.

Net Settlement: A method of settling financial obligations among DFSPs and a Scheme where Transactions are processed in batches, or windows, and creates Settlement entries for the net (the balance of credits and debits) position of each DFSP for that window. Settlement entries are then posted to the DFSPs account at a common Settlement bank.  The details of the Net Settlement model are specified in the Scheme rules. Net Settlement contrasts Gross Settlement.

Non-Bank: An entity that is not a chartered bank, but provides financial services to End Users. The requirements of Non-Banks to do this, and the limitations of what they can do, are specified by regulation. Some countries permit Non-Banks to be Digital Financial Service Providers.

Not-for-Loss: A cost-recovery model with an additional set of funds available to cover investment requirement to operate the Platform.

Open Loop: A payment Scheme that is open to all participants in given categories—most typically, all banks in a country. Some country Open Loop systems allow licensed Non-Bank Transaction Account providers to belong directly to the system. Open Loop contrasts with Closed Loop.

Operator: An entity that provides and/or manages the Platform of a payments system.

Participants: DFSPs users of a Scheme. Participants are bound to follow Scheme rules.

Payee: An End User that is receiving funds.

Payer: An End User that is sending funds.

Payments Service Provider (PSP): A term used in two ways: generally, as any company involved in the provision of payments services (including DFSPs); or for a provider that offers branded products or services to End Users, including merchants. PSPs may connect directly to a Level One Platform, through a relationship with a DFSP. Scheme rules will specify how PSPs may interact with the platform.

Platform: A term used to describe the software or service used by a provider, a scheme, or a switch to manage accounts and to send and receive transactions.

Processor: An enterprise that manages, on an out-sourced basis, various functions for a DFSP. These functions may include transaction management, customer database management, and risk management. Processors may also do functions on behalf of payments systems, schemes, or switches. Processors may connect directly to a Level One Platform, acting on behalf of a DFSP. Scheme rules will specify how Processors may interact with the Platform.

Pull Payment: A type of payment originated by the Payee’s DFSP. Direct Debits, checks, and card payments are all Pull Payments. Pull Payments can bounce for insufficient funds unless a separate Authorization transaction is done (e.g., cards).

Push Payment: A type of payment transaction initiated by the Payer DFSP. This is sometimes called a Credit Transfer.

Quick-Response (QR) Code:.
A method of Encoding and visualization of data, which are machine-readable. There are multiple QR models.

Real Time Gross Settlement (RTGS):
A term used to describe payments using Gross Settlement, typically a wire transfer system.

Real Time Processing: Processing of transactions as they are initiated, rather than processing in a batch.

Real Time Retail Payments (RTRP): Retail Payments that are processed in real time (as initiated).

Remittances: Payment from one End User to another, either domestically or cross-border.

Retail Payment: A Payment of Transfer between End Users, typically a low value denomination. The term is often used to describe P2P, B2B or P2B payments.

Request to Pay: A message by which a Payee ‘requests’ Payment from a Payer. A Request to Pay in a Level One System is often used to describe a merchant that requests a Push Payment from an End User.

Risk: An area of weakness that may be exploited. Risks may exist in one or many parts of a payment system. End Users and DFSPs have risks to manage, as do Processors, Platforms, and others in the value chain.

Risk-based Approach: A regulatory and/or business management approach that creates different levels of obligation based on the Risk of the underlying Transaction or End User.

Rules: The practice and standards necessary for the functioning of payment services defined by the Scheme.  Rules are sometimes referred to as ‘Scheme Rules’.

Settlement : A process by which DFSPs settle financial obligations with each other, as defined by Scheme rules.

Scheme: A set of rules, practices, and standards necessary for the functioning of payment services.

Shared Service: A common set of services that participating DFSPs collaborate to develop and/or use.

Special Charter Banks: Banks in a country which are permitted to do a limited set of functions, as determined by regulation. Special Charter Banks that can only accept deposits and handle payment Transactions are considered DFSPs in a Level One System.

Switch: A processing entity in a payments system that routes a Transaction from one DFSP to another DFSP. A system may operate its own Switch, or this function may be done by one or more third parties.

Technical Protocols: A set of technical standards in a system, process, or application.

Third Party Connection: Users of a Digital financial services system who access the system through relationships with a DFSP. Third Party Connections may provide services to End Users or to DFSPs. The entities are sometimes called non-licensed specialty Aggregators or Processors.

Transaction Account: Broadly defined as an account at a DFSP that holds End User funds and is used to make and receive payments.

Ubiquity: A term used to describe the ability to pay anyone and be paid by anyone.

Use Case: A term used to describe the purpose of the payment. At the most basic level, use cases are describe by the type of End User acting as the Payer and Payee. For example, when an individual serves as the Payer, these use cases are often identified as Person-to-Person (P2P), Person-to-Business (P2B), Person-to-Government (P2G) Use Cases.

Value-Added Services: Services or products provided to End Users that End Users will pay to use or access. Value-Added Services often used in coordination with Adjacencies.

Women’s Economic Empowerment (WEE): Increasing women’s access and rights to economic resources through decent work opportunities, property and assets, financial inclusion, and platforms.

Next Topic in this Section: Level One Terminology