The cross-border payments lexicon is not only large—it’s constantly expanding.
To speak the language of international payments with confidence, it’s essential to understand the industry’s most common terms.
This article provides an introductory payments glossary to help you study and review payments terms. At UniTeller, our hope is that you will use this resource whenever questions arise, or to even bookmark it on your devices for quick reference.
Keep in mind that this is a living and breathing document. As the payments ecosystem continues to evolve, we will update this glossary to accurately reflect the state of the industry.
1. Basic Terminology
As complex as cross-border payments may be, the entire industry rests on just a few fundamental terms.
Presented in alphabetical order, these are the industry’s most foundational concepts.
Cross-border payment: The transfer of funds between two parties in two separate countries.
Exchange rate: The price of one nation’s currency in relation to another nation’s currency.
Foreign exchange (FX): The global market where currencies are traded. “Forex” is the world’s largest financial market.
Money transfer: The transmission of funds to a designated beneficiary.
Real-time settlement: Electronic payment systems that enable the instant transfer of funds between financial institutions.
Remittances: Any form of payment completed between two parties. However, modern remittances are typically classified as non-commercial transfers of money sent by a foreign worker to their home country.
Settlement: The final step in a payment when funds are officially acquired by the recipient.
2. Key Players in Cross-Border Payments
When payments travel between two countries, they do more than simply move from A to B.
Between the sender, the intermediary, and the recipient, cross-border payments require multiple steps before completion.
Correspondent bank: The third-party intermediary between a domestic and foreign bank. Correspondent banks provide a number of core functions, like accepting deposits, gathering documents on behalf of the financial institution, and executing business transactions (like check clearing and FX services).
Recipient: The person or entity who receives money from the sender. In the cross-border payments ecosystem, recipients are frequently referred to as a “beneficiary.”
Paying agent: An entity appointed to pay out financial transactions in the recipient country.
Selling agent: A business entity that provides convenient payment services to its customers, while facilitating, expediting, and overseeing those transactions.
Sender: The person, company, or entity responsible for initiating a payment.
3. Payment Methods and Channels
Cross-border payments is simply an umbrella term for the various methods and channels used to send money worldwide.
As you will see, it’s a rather large umbrella.
Presented in alphabetical order, here are some of the most popular cross-border conduits.
ACH transfer: An Automated Clearing House (ACH) network provides a range of electronic transactions, including direct deposits, peer-to-peer (P2P) payments, and remittances. In the payments ecosystem, “clearing” generally refers to the process of transmitting, reconciling, and confirming payment instructions. The National Automated Clearing House Association (NACHA) develops and enforces all ACH regulations.
Cryptocurrencies: Decentralized digital currencies, like Bitcoin, operate independently of financial intermediaries. Therefore, they can be processed much faster than most traditional payment methods.
Digital invoice: An electronic bill delivered via mobile apps, email, text message, or pay-by-link.
Direct debit: A transaction where an individual or business entity automatically withdraws money from another banking account.
Digital wallet: An electronic mobile device (i.e. smartphone, tablet or smartwatch) that allows users to make purchases and transfer funds. Digital wallets are also known as “mobile wallets” and “e-wallets.”
Dynamic currency conversion (DCC): A payment card feature that enables purchases in foreign countries to be completed with the buyer’s home currency.
Electronic funds transfer (EFT): The automatic transfer of money between two bank accounts. Direct deposit is a popular application of EFT technology, in which payroll funds are electronically added to an employee’s bank account.
Faster payments service (FPS): A British banking tool that reduces transaction times from days to seconds.
International money orders (IMO): Generally used for smaller transactions, IMOs are paper-based payment methods that can either be sent electronically or through the mail. In the United States, IMOs can be purchased at local post offices and sent overseas.
Push-to-card (P2C): A real-time payments method that transmits funds to a credit card on a preferred card network. Funds are delivered instantly and up to the card’s stated credit limit.
SWIFT: The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a cooperative network that curates a secure messaging platform for over 8,000 global banks.
Wire transfer: A near real-time electronic transfer of funds between two bank accounts.
4. Compliance and Regulation
The financial services sector is America’s most regulated industry.
Therefore, whether a payment is sent locally, nationally, or between two countries, it will be subject to many of the following regulations.
Anti-money laundering (AML): The evolving best practices and procedures used to identify illegitimate transactions and defend against criminals. According to the Bank Secrecy Act (BSA), most financial institutions are required to observe AML best practices and report suspected money laundering activities.
Know your employee (KYE): Organizational procedures used to detect potential conflicts of interest, money laundering schemes, and prior criminal activity of employees, vendors, and contractors.
Know your customer (KYC): Regulations designed to help financial institutions and payment facilitators verify the identities of customers and merchants before completing a transaction. KYC guidelines are leveraged to guard against criminal activity, like terrorist funding and money laundering.
Office of Foreign Assets Control (OFAC): A subsidiary of the U.S. Treasury Department that enforces sanctions against traffickers, terrorists, and countries stockpiling nuclear weapons.
Payment screening: A security measure that ensures every financial transaction is compliant with regulatory expectations. Payment screening is a key component of anti-money laundering (AML) protocols.
PCI-DSS compliance: Payment Card Industry Data Security Standards (PCI-DSS) include the mandatory security rules for any financial institution handling consumer credit card information.
Built to limit credit card fraud, PCI-DSS standards are typically reviewed and validated on an annual basis.
Zero fraud guarantee: Liability protection that absolves cardholders from paying for fraudulent transactions. All major credit card issuers (and some smaller companies) offer this guarantee.
5. Technology and Security
Cross-border payments are more secure than ever.
Here are a few of the state-of-the-art technologies supporting cross-border payments at UniTeller (and around the world).
Application programming interface (API): Advanced protocols that allow separate software applications to seamlessly communicate with each other.
Encryption: The process of securing financial transactions by scrambling sensitive data into unreadable code. This tactic prevents criminals and hackers from accessing proprietary data.
Tokenization: A security technique that exchanges sensitive financial data for surrogate values called “tokens.” For example, the tokenization of an online credit card payment would replace a 16-digit card number with a random string of letters, numbers, and symbols.
Transaction screening: Comprehensive protocols that analyze payments for suspicious activity before transactions are approved.
Near-field communications (NFC): A set of contactless communication protocols that enable two devices to communicate in close proximity. NFC technology is commonly utilized when consumers hover a mobile device or credit card over a payment terminal.
Payment gateway API: Digital protocols that allow businesses to integrate with multiple payment processors and expedite transaction processing.
White label solution: A payment gateway built by one company and rebranded by another. White label solutions allow selling agents to provide custom payment processing services without needing to invest in extensive research and development.
6. Fees and Costs
While cross-border payments are more affordable than ever, they still aren’t complimentary.
Presented in alphabetical order, here are the four primary fees and costs commonly incurred with international payments.
Cross-border online payment processing fee: Costs incurred when a merchant processes payments through an international service provider or foreign payment gateway.
Foreign currency exchange fee: The cost of converting one currency into another. Most foreign transaction (FX) fees range between 1% and 3% of the total transaction amount.
Hidden costs: The fees and charges that are smuggled into a transaction. Hidden costs are often concealed until after the person or company has already authorized a payment.
Interchange fee: The money a merchant pays to credit card issuers. Also known as a “swipe fee,” interchange fees cover the costs of processing and authorizing card transactions.
UniTeller: Unlocking the Power of Cross-Border Payments
This glossary offers a glimpse into the complexity of cross-border payments.
In reality, however, payments terms only begin to describe the underlying process at hand.
Once a cross-border payment is set in motion, a spectrum of powerful technologies, protocols, and regulations initiate in both the sending and recipient countries—all under the close observation of intermediaries and liaisons.
That’s why UniTeller is regarded as a leading payment solution: because our global payment gateway empowers businesses of all sizes to send money around the world, in real-time.
After all, UniTeller offers cross-border payments to over 120 countries, over 70 currencies, and over 100 partners. That’s why our network pays out more than $17 billion in total volume every single year.
With UniTeller, a streamlined payment experience is just one API integration away. Find out how to join one of the most competitive payments networks in the world.
