Banking & Payments

50 Banking & Payments terms, defined in plain English — part of the 1345-term Finicade finance glossary. Each one has its own page, and links to the free game that teaches it.

ACH: ACH is the batch network behind US direct deposits, direct debits and most bill payments — cheap, reversible, and slower than a wire.
Anti-Money Laundering (AML): AML is the framework of rules requiring financial firms to detect and report attempts to disguise criminal proceeds as legitimate funds.
Bank Charter: A bank charter is the licence to take deposits and call yourself a bank, granted by a regulator against capital, governance and business plan requirements.
Banking as a Service: Banking as a service lets a non-bank offer accounts, cards and payments on a licensed bank's infrastructure.
CAMELS Rating: CAMELS is the confidential supervisory rating US regulators assign banks on capital, assets, management, earnings, liquidity and market sensitivity.
Capital Adequacy Ratio: The capital adequacy ratio compares a bank's capital to its risk-weighted assets — the buffer available to absorb losses before depositors are hit.
Card Network: A card network runs the rails between the bank that issued your card and the bank that serves the merchant, setting the rules and the interchange rates.
Card-Not-Present Fraud: Card-not-present fraud is unauthorised use of card details in transactions where the physical card isn't presented — online, phone, mail order.
Central Bank Digital Currency (CBDC): A CBDC is central bank money issued digitally to the public — a direct claim on the central bank rather than on a commercial bank.
Chargeback: A chargeback reverses a card payment when a cardholder disputes it, and the burden of proof sits with the merchant.
Commercial Bank: A commercial bank takes deposits and makes loans, earning the spread between them.
Correspondent Banking: Correspondent banking is one bank holding an account for another so it can make payments in a currency or country where it has no presence.
Covered Bond: A covered bond is debt issued by a bank and secured on a ring-fenced pool of mortgages that stays on the bank's balance sheet.
Credit Union: A credit union is a member-owned cooperative that takes deposits and lends, returning surplus to members through better rates rather than to shareholders.
Cross-Border Payments: Cross-border payments move money between countries, typically through a chain of correspondent banks, each adding cost, delay and an FX margin.
Debit Card: A debit card spends money you already have, drawing directly from a checking account.
Deposit Beta: Deposit beta measures how much of a policy rate rise a bank passes on to depositors.
Deposit Insurance: Deposit insurance guarantees deposits up to a limit if a bank fails, which removes the rational basis for a run.
Digital Wallet: A digital wallet stores payment credentials on a device and authorises payments with biometrics, transmitting a token rather than a card number.
FDIC: The FDIC insures US bank deposits up to $250,000 per depositor, per bank, per ownership category, and resolves failed banks — usually over a weekend.
Fractional Reserve Banking: Fractional reserve banking is the practice of holding only a fraction of deposits as reserves and lending out the rest, which is how bank lending creates money.
IBAN: An IBAN is the standardised international account number used across Europe and much of the world, encoding country, bank and account with a checksum.
Interbank Lending: Interbank lending is banks lending reserves to each other, usually overnight, to manage day-to-day liquidity.
Interchange Fee: The interchange fee is what a merchant bank pays the card issuer on every transaction — typically 1.5–3% on US credit cards, far less where capped.
Investment Bank: An investment bank advises on deals, raises capital, and trades securities, earning fees and spreads rather than interest on loans.
Know Your Customer (KYC): KYC is the obligation to verify who a customer is, understand their expected activity, and keep that knowledge current.
Liquidity Coverage Ratio: The liquidity coverage ratio requires a bank to hold enough high-quality liquid assets to survive 30 days of severe outflows.
Loan Loss Provision: A loan loss provision is the charge a bank takes for loans it expects to go bad.
Loan-to-Deposit Ratio: The loan-to-deposit ratio compares a bank's loan book to its deposit base.
Merchant Acquirer: A merchant acquirer is the bank or firm that signs up merchants to accept cards, routes their transactions and settles the funds.
Neobank: A neobank is a digital-only bank with no branches, usually built on modern software and often operating on someone else's banking licence.
Net Interest Margin: Net interest margin is the gap between what a bank earns on assets and pays on funding, as a percentage of earning assets.
Non-Performing Loan: A non-performing loan is one where payments are 90 days or more overdue, or repayment in full is otherwise unlikely.
Open Banking: Open banking requires banks to let customers share account data and initiate payments through licensed third parties, via APIs.
Payment Processor: A payment processor handles the technical work of authorising and capturing a transaction between merchant, acquirer and network.
Payment Rails: Payment rails are the networks that actually move money — ACH, card networks, wire systems, real-time schemes and blockchain settlement.
Peer-to-Peer Payments: Peer-to-peer payments move money directly between individuals through an app, usually instantly.
Prepaid Card: A prepaid card is loaded with funds in advance and spends only what's on it, requiring no bank account or credit check.
Real-Time Payments: Real-time payment systems settle irrevocably in seconds, around the clock, between bank accounts.
Remittance: A remittance is money sent home by someone working abroad, and in aggregate it exceeds foreign aid to developing countries by a wide margin.
Routing Number: A routing number identifies the US bank an account sits at — nine digits, printed on every cheque alongside the account number.
Sanctions Screening: Sanctions screening checks customers and transactions against government lists of prohibited people, entities and countries.
Settlement Risk: Settlement risk is the danger you deliver your side of a trade and the counterparty fails before delivering theirs.
Shadow Banking: Shadow banking is credit intermediation outside the regulated banking system: money market funds, securitisation, repo, private credit funds.
Suspicious Activity Report: A suspicious activity report is a confidential filing a bank makes to authorities when a transaction may involve criminal proceeds.
SWIFT: SWIFT is the secure messaging network banks use to instruct each other across borders.
Tier 1 Capital: Tier 1 capital is a bank's highest-quality loss-absorbing capital, dominated by common equity and retained earnings.
Tokenization: Tokenisation replaces a card number with a substitute value that's useless outside its specific context.
Wholesale Funding: Wholesale funding is money a bank borrows from markets and other institutions rather than from retail depositors.
Wire Transfer: A wire transfer moves money individually and in near real time through a central bank system, settling with finality — meaning it generally cannot be reversed.

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