Globalfy's ABC - a guide

to understanding business in

the United States

Learn your way by getting familiar

with terms when doing business in the United States.

Terms to simplify your path to the US

A

Used within the United States, the American Banking Association (ABA) Routing number may also be called the Routing Transfer Number (RTN). It is the identification code of your bank, is nine digits long and is composed of numbers only.

When making a direct deposit or direct payment of consumer bills, you can find it on your check as the first nine numbers preceded by your bank account number.

The ABA is also used for wires and electronic automatic clearing house (ACH) transactions such as electronic funds transfers, e-checks, and tax payments, among others. In this case, it may be different than the routing number printed on your bank checks, so please contact your bank for the appropriate ABA number. Use the ABA with the account number to perform the transaction.

The Automated Clearing House (ACH) Network is an electronic funds-transfer system run by the former National Automated Clearing House Association (NACHA) since 1974. The ACH payment system provides ACH transactions for use with payroll, direct deposit, tax refunds, consumer bills, tax payments, and many more payment services in the U.S. The ACH Network is an electronic system serving financial institutions to facilitate financial transactions in the U.S. It represents more than 10,000 financial institutions and ACH transactions totaled more than $55 trillion in 2019 by enabling nearly 25 billion electronic financial transactions.

Anti-money laundering (AML) refers to the laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. Anti Money Laundering (AML) seeks to deter criminals by making it harder for them to hide ill-gotten money. AML regulations require financial institutions to monitor customers’ transactions and report suspicious financial activity.

B

A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes. There are several different kinds of banks including retail banks, commercial or corporate banks, and investment banks. In most countries, banks are regulated by the national government or central bank.

Banking as a Service (or BaaS for short) describes a model in which licensed banks integrate their digital banking services directly into the products of other non-bank businesses. This way, a non-bank business, such as your airline, can offer its customers digital banking services such as mobile bank accounts, debit cards, loans, and payment services, without needing to acquire a banking license of their own.

C

The C Corp is a more traditional company model that follows some specific rules. A C Corp adopts bylaws, holds frequent meetings among shareholders, fills annual reports, and issues shares. In addition, it is subject to state and federal taxes.

Challenger banks tend to be digital only with no physical branches, renowned for driving innovation, personalization, new operational models, and customer centricity but the term is not widely agreed upon and in the UK is also used to describe mid-tier banks, specialist banks, and non-bank brands. Challenger banks are often known for delivering niche aspects such as real-time transactions or no foreign transactions fee.

A chargeback is a charge that is returned to a payment card after a customer successfully disputes an item on his account transactions report.

CHIPS stands for the Clearing House Interbank Payments System Universal Identifier. The CHIPS Uid is a six-digit code that contains all the information that is necessary to identify the person who is wiring the money. Thus your name, address, routing number, account number, and so forth are all contained in this CHIPS code. The Clearing House Interbank Payments System confidentially stores the code, or information, as it does that of all individuals.

A card brand (sometimes called a card network or association) is an organization that facilitates payment card transactions. It regulates who, where, and how cards are used. Examples of card brands include Visa®, Mastercard®, American Express®, Discover®, China UnionPay®, and JCB®.

A credit card is a card issued by a financial institution, typically a bank, and it enables the cardholder to borrow funds from that institution. Cardholders agree to pay the money back with interest, according to the institution’s terms.

D

A debit card is a payment card that makes payments by deducting money directly from a consumer’s checking account, rather than on loan from a bank. Debit cards offer the convenience of credit cards and many of the same consumer protections when issued by major payment processors such as Visa or Mastercard.

Neobanks operate solely online and through mobile apps. Customers are able to carry out traditional banking processes such as money transfers, loans, and reviewing savings accounts without the need for a physical bank branch. A neobank won’t necessarily have its own banking license but may instead be a partner of a traditional bank.

A domestic wire transfer is any type of wire payment that takes place between two different banks or institutions within the same country. Domestic transfers can be either inter- or intra-bank. Senders may require a code or the recipient’s branch number if they want to execute a transaction.

E

EMV cards use a smart chip instead of a mag stripe to store the data needed to process a transaction.

F

The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices. As of 2020, the FDIC insures deposits up to $250,000 per depositor as long as the institution is a member firm. It is critical for consumers to confirm if their institution is FDIC insured.

The Financial Crimes Enforcement Network (FinCEN) is a government bureau that maintains a network whose goal is to prevent and punish criminals and criminal networks that participate in money laundering and other financial crimes.

FinTech, short for Financial Technology, is the word used to describe the emerging industry that aims to modernize, improve and automate the delivery of financial services. Through the use of modern software and infrastructure, FinTech solutions aim to compete with traditional methods to deliver financial solutions

Fintech Charters refer to the Office of the Comptroller of the Currency’s (OCC) new federal charters that will enable fintech businesses to operate nationwide under a single set of national standards, without needing to seek state-by-state licenses or joining with brick-and-mortar banks.

An FBO account, or a For Benefit Of account, allows a company to manage funds on behalf of—or for the benefit of—one or more of their users, without assuming legal ownership of the account.

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I

IBAN stands for The International Bank Account Number and is a 34-digit long code that carries all the identifying information about your bank, its branch, its location, and your account number in both digit and letter form. Its purpose is to improve cross-border money transactions and to reduce the risk of transcription errors, where processors misread the font or content.

The IBAN is used in most European countries as well as in many parts of the Middle East and the Caribbean. As of 2016, 69 countries use this code to make or rely on transactions.

This term and its synonym, instech, come from combining the words “insurance” and “technology”. Both are related to how technology is changing the insurance business.

An international wire transfer is any type of wire payment that takes place between bank accounts based in two different countries.

Credit card issuers are financial institutions that provide cards and credit limits to consumers. Issuers manage numerous features of credit cards, from the application and approval process to distributing cards, deciding terms and benefits (such as annual fees and rewards), collecting cardholder payments and more.

Card issuers also determine how much credit to extend to you and have the final decision on whether a transaction you make is approved or denied (more on how transactions are processed below).

K

Know Your Business (KYB) verification is a company’s Anti-Money Laundering compliance. Companies must protect their interests before doing business with another business. Companies need to know if their income is misused by corrupt business owners, shareholders, and money launderers. For this, the Know Your Business applications determine whether corporate businesses deal with a legal or shell company. KYB verifies the companies’ potential customers’ corporate information and the personal information of the high management that manages the operations of that customer company.

Know Your Customer. This term is used in several different economic areas, but it is especially important in the financial sector. In the banking and fintech industries, KYC refers to the rules that institutions must follow regarding customer identity and the legality of their funds.

L

LLC stands for Limited Liability Company. This business model combines some advantages of corporate structure with elements of tax partnership. By creating an LLC in the United States, you can partially protect your natural person from potential financial issues or lawsuits against your legal entity. A Limited Liability Company is a type of company in the United States in which all profits are distributed among partners at the end of the year.

M

A merchant account is a type of bank account that allows businesses to accept payments in multiple ways, typically debit or credit cards. A merchant account is established under an agreement between an acceptor and a merchant acquiring bank for the settlement of payment card transactions.

Multi-factor Authentication, also known as MFA, is a type of security system that requires a user to verify their identity through more than one method of authentication. Most typically, you will see this in use as Two-Factor authentication whereby a user will enter the password and then need to enter a code (or similar) from their phone.

O

The Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United​ States.

Open Banking is a term that references the practice of sharing financial information securely, and in a way in which the customer approves of. This is achieved through the use of open APIs, which enable developers to build applications and services. This allows users to share data such as spending habits and payments with authorized providers such as budgeting apps, other banks, and challenger banks.

P

A payment processor is some sort of transactor for financial calculations, technically an invertible currency exchange (often a third party) appointed by a merchant to handle transactions from various channels such as credit cards and debit cards for merchant acquiring banks.

Payment Card Industry Compliance is a set of security standards designed to protect card information during and after financial transactions. All card brands are required to comply with these industry standards, and, though not always explicitly required, many FinTech companies are being pushed into PCI compliance in order to assure a certain security standard.

Any representation of information that permits the identity of an individual to whom the information applies to be reasonably inferred by either direct or indirect means. Further, PII is defined as information: (i) that directly identifies an individual (e.g., name, address, social security number or other identifying number or code, telephone number, email address, etc.) or (ii) by which an agency intends to identify specific individuals in conjunction with other data elements, i.e., indirect identification. (These data elements may include a combination of gender, race, birth date, geographic indicator, and other descriptors). Additionally, information permitting the physical or online contact of a specific individual is the same as personally identifiable information. This information can be maintained in either paper, electronic or other media.

In the US you can go to sites like https://www.walmart.com/cp/check-printing/1229853 and print your own checks. No security verification is required.

P2P is the acronym for peer to peer – a network of computers without customers or fixed servers, made up of a series of nodes without any hierarchy. In this case, we’re referring to loans among individuals, from peer to peer, with no intervention from a financial institution. These “social loans”, as they are also called, have been regulated in Spain since last year as part of the crowdfunding phenomenon.

S

When you deposit the check at your bank, they will send the check, or an electronic image of the check, to the payer’s bank. Some large banks work directly with each other to clear checks. But many others will send a check through an intermediary called a clearing house in order to process it.

The Bank Identifier Code (sometimes called SWIFT) contains information about the receiving country, bank and branch. It contains numbers and letters and is eight to 11 digits long.

The acronym SWIFT refers to the Belgian Society for Worldwide Interbank Financial Telecommunication that developed the code as part of its mission to help global financial institutions send and receive information about financial transactions in a secure, standardized and reliable manner.

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