PaymentsPayments GlossaryPart 4 of 6
Paying Out Glossary
44 terms from the Payments book's Paying Out part, each defined in a line and linked to the chapter that explains it.
- 1099-K, 1099-NEC: US tax forms reporting payments settled to a merchant, and payments to a contractor or vendor for services (Payments for Software Platforms, Vendor Payouts).
- Account validation: confirming a bank account exists and can take entries before the first debit or payout, by prenote, micro-entries or a validation service (ACH & Bank Transfers).
- Backup withholding, B-notice: 24% withheld from payments to a payee without a correct TIN, and the IRS notice that starts it (Payments for Software Platforms).
- BAI2, MT940, camt.052, camt.053, camt.054: bank reporting formats: BAI2 in the US, MT940 elsewhere, and ISO 20022's intraday report, prior-day statement and individual debit and credit notifications (Ledger & Reconciliation, Treasury & Bank Operations).
- Banking day, calendar day: windows in the rules are counted in one or the other, and they're different types (Treasury & Bank Operations).
- Break, break age: anything the matching engine couldn't match, or matched with a difference, kept as a record with a type, an owner and a deadline; its age is the control (Ledger & Reconciliation).
- Clawback: recovering funds from a merchant after payout, usually by ACH debit (Payouts & Settlement).
- Confirmation of Payee, Verification of Payee (CoP, VoP): the UK's and the EU's checks that the payee's name matches the account before a transfer is sent (Payments in the EU & UK, Fraud & Risk).
- Escheatment: turning unclaimed money over to the state after a dormancy period (Vendor Payouts).
- Expected record: a record created before money moves, so an arriving deposit is matched to what was expected rather than identified from scratch (Ledger & Reconciliation).
- External record: one row of a processor file or bank statement in a canonical shape, with the raw row it came from (Ledger & Reconciliation).
- Fast Funds: Visa's program requiring issuers to make pushed card payments available within 30 minutes (Vendor Payouts).
- FBO account (for-benefit-of): a bank account in the provider's name holding money for its merchants (Treasury & Bank Operations).
- Gross and net settlement: paying merchants the full amount and collecting fees separately, or deducting fees from each payout; the same words describe how an acquirer settles to the provider (Treasury & Bank Operations).
- Instant payout: a payout to a debit card or over RTP or FedNow, final on arrival and priced and limited as its own product (Payouts & Settlement, Vendor Payouts).
- Nacha: the association that writes the ACH rules; a Nacha file is the 94-character format entries travel in (ACH & Bank Transfers).
- Negative balance: a merchant owing the platform more than its balance holds (Payouts & Settlement).
- NOC (notification of change): an RDFI's correction to outdated account details, posted instead of a return (ACH & Bank Transfers).
- OCT, AFT: a card network original credit transaction (pushing money to a card) and an account funding transaction (pulling money from one to fund something else); not the same as Canada's Automated Funds Transfer (Vendor Payouts).
- ODFI, RDFI: the originator's bank, which sends entries, and the receiver's bank (ACH & Bank Transfers).
- Originator, Receiver: the business that starts an ACH entry, and the account holder it credits or debits (ACH & Bank Transfers).
- Pass-through insurance: FDIC coverage that reaches each owner of a pooled custodial account, if the records allow it (Treasury & Bank Operations).
- Payment settlement entity (PSE): the party that files Form 1099-K for the payments it settles: the merchant acquiring entity for card payments, or a payment facilitator filing in its place (Payments for Software Platforms).
- Payout: money leaving a merchant's balance for their bank account (Payouts & Settlement).
- Pending, available balance: money captured but not yet settled, and money past its availability date that can be paid out (Payouts & Settlement).
- Per-owner balance file: the daily file of each owner's balance in a custodial account, summing to the account's closing balance to the cent (Ledger & Reconciliation).
- Positive pay: a file of issued checks the bank uses to reject altered or counterfeit ones (Vendor Payouts).
- Prefunding, sweep: moving money into an account ahead of payouts, and moving earned fees out of a custodial account (Treasury & Bank Operations).
- Prenote, micro-entries: a zero-dollar test entry, and small credits used to verify an account (ACH & Bank Transfers).
- Reserve: merchant funds held back against future disputes and refunds: a dated hold, a rolling reserve or a fixed reserve (Payouts & Settlement).
- Return, R-code: an RDFI rejecting an entry, with a reason code such as R01 (insufficient funds) or R10 (unauthorized) (ACH & Bank Transfers).
- Reversal: three different things. On cards, an authorization reversal (a void, ISO 8583
0400) that releases a hold; on ACH, an originator undoing its own erroneous entry within five banking days (ACH & Bank Transfers); in some provider APIs, such as Adyen's, a request that cancels or refunds, whichever applies. - Roll-forward: the check that opening balance plus the day's entries equals the closing balance, and the closing balance equals the bank's (Ledger & Reconciliation).
- Safeguarding: the UK and EU regime protecting customer funds held by payment and e-money institutions, with daily reconciliation in the UK (Treasury & Bank Operations, Ledger & Reconciliation).
- Same Day ACH: ACH entries settled the day they're sent (ACH & Bank Transfers).
- SEC code: the code on an ACH batch stating how the payment was authorized: PPD, WEB, TEL, CCD, CTX, and the check conversion codes ARC, BOC, POP and RCK (ACH & Bank Transfers).
- Standing virtual card: a multi-use card number issued to one vendor with its own limits, as opposed to a single-use card per invoice (Vendor Payouts).
- Suspense account: a liability holding money that has arrived and isn't yet identified, never a plug for a difference (Ledger & Reconciliation).
- Third-Party Sender: a company that originates ACH for others through its own bank relationship (ACH & Bank Transfers).
- Three-way match: ledger to processor files per transaction, processor to bank per batch, and the ledger's cash to the bank's balances daily (Ledger & Reconciliation).
- TIN matching, W-9: checking a payee's name and taxpayer ID against the IRS, and the form on which a US payee provides them (Vendor Payouts).
- T+N: a schedule where money captured on day T is available N business days later (Payouts & Settlement).
- Unapplied cash: money received from a customer and not yet matched to a charge (Payment States & Ledgers).
- Virtual card: a card number issued for one payable, with controls on amount, dates and merchant (Vendor Payouts).