Glossary: International Money Transfers and Remittance

Understand the commonly used terms in the remittance industry.

Remittance is an ever-growing and attractive industry to be a part of. Anyone looking to start a money transfer business should be familiar with the terminologies used in this space. We developed a resource for understanding the most commonly used in this industry. 

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A

ACH or Automated clearing house network 

A payment system used in the US for electronically moving money between bank accounts. It is run by NACHA. This nationwide electronic payment network is behind wire transfers, direct deposits and payments. It is a secure, low cost and quick payment system. 

API or Application programming interface

A set of programming codes that enables data transmission between two software or applications. In the context of, Machnet, our API enables money transfer companies to have seamless online transactions with their users. 

Read our API docs 

AML or Anti-money laundering 

Set of procedures, tools, and technologies to prevent money laundering and financial crimes. 

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C

Correspondent bank

Third-party bank that acts as a middle man between sending and receiving banks - especially between different countries. They provide funds transfer, settlement, check clearing, and wire transfers services. 

Cross-border remittance

The transfer of funds from one country to another.

Compliance and regulatory requirements

The legal and regulatory requirements that must be met when sending remittances across international borders.

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D

Domestic remittance

Sending money from one place to another within a country. 

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F

Foreign exchange rates

An exchange rate at which one currency can be exchanged for another currency. 

FinCen or Financial crimes enforcement network

A US government bureau dedicated to combat money laundering (domestic and international), and other financial crimes. It collects and analyzes information about financial transactions.

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I

Interchange fee 

A fee that merchants pay to card-issuing banks whenever customers use a credit or debit card to make a purchase. This fee helps to cover the costs of accepting, processing and authorizing credit or debit card transactions.

IMAD/OMAD

Unique numbers that are given to each Fedwire payment and are used to trace wire transfers. These are input and output messages. 

Learn more.

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K

KYC or Know your customer

Process of verifying the identity of (new) individual customers. Financial institutions such as banks, and money transfer companies are required to carry out KYC checks to ensure prevent fraud, corruption, money laundering and other financial crimes.

KYB or Know your business

KYB is the process of verifying the identity of (new) business customers. Additional regulations have been developed to deal with cases where the customer is any type of business or corporate entity. Any company offering B2B services will find itself using these KYB regulations.

KBA or Knowledge-based authentication

A method of authentication that seeks to prove the identity of someone accessing a service such as a financial institution or website by asking them to answer specific security questions. For instance, in this method, users are asked to answer a personal question before they can log in. 

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M

A third-party financial services provider for merchants that facilitate payments between merchants and consumers. It signs up merchants under its own Merchant Identification Number (MID) as sub-merchants and makes it possible for them to accept payments through various methods, such as bank transfers and credit , debit cards immediately . 

It is a type of business bank account that allows businesses/merchants to accept payments via various methods, such as bank transfers. Merchants that expect volume and don’t mind spending some time on negotiating optimal terms for each separate agreement, go with a merchant account.

Mobile Money

A service in which mobile devices are used to transfer money or make payments.

MTL or Money transmitter license

A type of license issued by the government to money transfer businesses that allow them to legally transmit money- that includes wire transfer, money order, cheque cashing, and related activities. 

Money Transmitters 

People or entities that receive money from one party and transmits it to another- whether P2P or B2B. These could be companies that offer digital wallets , transferring funds electronically, cross-border remittance companies.

MSB or Money service business 

Money services businesses (MSBs) are non-bank businesses that let customers store, transfer, and exchange money or other stores of value. A business can count as an MSB if it does one or more of the following: Deals or exchanges foreign currency, Cashes checks, Issues or sells traveler’s checks, money orders, or stored value, Provides or sells prepaid access (e.g. prepaid cards), Is a money transmitter, Is the US postal service

MT103

MT103 is a standard SWIFT payment message used for cross-border payment. It includes the beneficiary’s information along with all other important details of the transaction. It acts as a confirmation when a sender send funds from one country to another.

Learn more.

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P

Payfac or Payment facilitator

PayFacs and Payment Aggregators provide online processing services to merchants for accepting digital payments by a variety of payment methods including credit cards, debit cards, bank transfers. They allow businesses to accept payments from customers without having to set up their own merchant accounts. 

Payment Gateway

It is also the software in POS systems or card readers that processes the customer’s payment data in a brick-and-mortar setting.  It allows merchants to collect payments online. 

A service that is responsible for communicating between the merchant, bank and credit card company. It transfers card data from the point customers enter their credit card details and the various financial institutions that participate in the transaction.

Payout Network

A network of banks, financial institutions, and other regulated organizations that enable the transfer of funds to the recipient.

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R 

Remittance

The process of sending money from one place to another, usually from one country to another.

Remittance as a service (RaaS)

A cloud-based platform that allows companies to send, receive and manage remittances from different countries.

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S

Sponsor Bank

A federal or state chartered bank, which is a member of one or more of the credit card associations, who provides money-movement and compliance oversight for fintechs, since most of them are not banks. Sponsor banks are responsible for ensuring their partners have strong compliance programs in place, including a process for suspicious activity reporting, and ultimately assume the risk for the fintech’s customers and transactions.