Electronic Payments and ACH Network Glossary Quiz
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Questions and Answers

What is an Access Device?

  • A card used by a consumer to initiate electronic fund transfers (correct)
  • A card or code used by a merchant to initiate electronic fund transfers
  • A device used by a consumer to access the internet
  • A code used by a consumer to initiate electronic fund transfers

    • What is an ACH Operator?

  • An entity that acts as a central facility for the clearing, delivery, and settlement of entries between participating DFIs (correct)
  • An entity that issues ACH Cards
  • An entity that supervises state member depository institutions
  • An entity that provides routing information for Fedwire Funds Service, Fedwire Securities Service, and FedACH transactions

    • What is an Administrative Return Rate?

  • The rate at which a consumer's debit entries are returned for administrative reasons
  • The rate at which a bank's debit entries are returned for administrative reasons
  • The rate at which a merchant's debit entries are returned for administrative reasons
  • The rate at which an Originator’s or Third-Party Sender’s debit entries are returned for administrative reasons (correct)

    • What is the role of the Clearing House?

    <p>To facilitate the clearing of checks or electronic items through the direct exchange of funds between members</p> Signup and view all the answers

    What is the Federal Reserve System?

    <p>An organization that provides the United States with a safer, more flexible, and more stable monetary and financial system</p> Signup and view all the answers

    What is the Fedwire Funds Service?

    <p>A wire service operated by the Federal Reserve Bank that moves funds electronically via the wire network for real-time gross settlement</p> Signup and view all the answers

    What is Financial EDI?

    <p>Electronic data interchange for financial transactions/applications between companies and financial institutions</p> Signup and view all the answers

    What is Fraud risk?

    <p>The risk that a payment transaction will be initiated or altered in an attempt to misdirect or misappropriate funds</p> Signup and view all the answers

    What is an Access Device?

    <p>A card, code, or other means of access used by a consumer to initiate electronic fund transfers</p> Signup and view all the answers

    What is the purpose of ACH Operator?

    <p>To act as a central facility for the clearing, delivery, and settlement of entries between participating DFIs</p> Signup and view all the answers

    What is the function of a Clearing House?

    <p>To facilitate the clearing of checks or electronic items through the direct exchange of funds between members</p> Signup and view all the answers

    What is the Federal Reserve System?

    <p>An organization founded in 1913 to provide the United States with a safer, more flexible, and more stable monetary and financial system</p> Signup and view all the answers

    What is the purpose of the FFIEC IT Examination Handbook?

    <p>To provide guidance for examiners, financial institutions, and technology service providers</p> Signup and view all the answers

    What is a Credit Entry?

    <p>An entry to the record of an account to represent the transfer or placement of funds into the account</p> Signup and view all the answers

    What is the function of Authentication?

    <p>To generate a message/data-specific code to identify the sender and protect the message/data from insertion, modification, deletion, or replay</p> Signup and view all the answers

    What is Cash Concentration?

    <p>The transfer of funds from diverse accounts into a central account for more efficient cash management</p> Signup and view all the answers

    The General Payments section carries a weight of 13% in the AAP exam.

    <p>True</p> Signup and view all the answers

    The ACH Network is only used for government payments.

    <p>False</p> Signup and view all the answers

    The ACH Network provides an electronic alternative to paper checks.

    <p>True</p> Signup and view all the answers

    There are only four participants involved in an ACH transaction.

    <p>False</p> Signup and view all the answers

    The ODFI transmits ACH entries to the ACH Receiver.

    <p>False</p> Signup and view all the answers

    The ACH Operator is responsible for posting ACH entries to the accounts of its depositors.

    <p>False</p> Signup and view all the answers

    ACH credit entries occur when the Receiver's account is debited.

    <p>False</p> Signup and view all the answers

    On-Us transactions need to be sent through the ACH Network.

    <p>False</p> Signup and view all the answers

    Study Notes

    ACH Network and Electronic Payments Glossary

    • Access Device refers to a card, code, or other means of access used by a consumer to initiate electronic fund transfers.

    • ACH Card is a card issued by an entity other than the Depository Financial Institution for interbank clearing of electronic entries at the point of sale.

    • ACH Operator acts as a central facility for the clearing, delivery, and settlement of entries between participating DFIs.

    • Administrative Return Rate is the rate at which an Originator’s or Third-Party Sender’s debit entries are returned for administrative reasons.

    • ANSI is the coordinating organization for America’s national standards system, including standards for bank cards and financial communication networks.

    • ASC X9 is the Accredited Standards Committee that deals with standards involving dealings between financial institutions, including the security of financial messages.

    • ASC X12 is the Accredited Standards Committee responsible for the development of uniform standards for inter-industry electronic interchange of business transaction data.

    • Authentication is the process of generating a message/data-specific code to identify the sender and protect the message/data from insertion, modification, deletion, or replay.

    • Authorization is a written agreement between the originating company and the receiver, defining the terms, conditions, and legal relationship between trading partners.

    • Cash Concentration is the transfer of funds from diverse accounts into a central account for more efficient cash management.

    • Clearing House is a voluntary association of depository institutions that facilitates the clearing of checks or electronic items through the direct exchange of funds between members.

    • Credit Entry is an entry to the record of an account to represent the transfer or placement of funds into the account.Overview of E-Payments and the Federal Reserve System

    • The E-Payments Routing Directory provides routing information for Fedwire Funds Service, Fedwire Securities Service, and FedACH transactions.

    • The Federal Reserve System was founded in 1913 to provide the United States with a safer, more flexible, and more stable monetary and financial system.

    • The Federal Reserve System consists of a seven-member Board of Governors, twelve regional Reserve bank districts, and member depository institutions.

    • All national banks are members of the Federal Reserve System, and state-chartered banks may elect to become members.

    • The Reserve Banks supervise state member depository institutions, and reserve requirements apply to both member and nonmember depository institutions.

    • The Fedwire Funds Service is a wire service operated by the Federal Reserve Bank that moves funds electronically via the wire network for real-time gross settlement.

    • The FFIEC IT Examination Handbook includes the Retail Payment Systems Booklet, which is one of several booklets in the IT Handbook.

    • A field is one or more consecutive character positions within an ACH entry mapped to contain specific information.

    • A file is a group of ACH batches initiated into the ACH Network or sorted for delivery to ACH receiving points.

    • A file header record is the first record of an ACH file containing information necessary to route, validate, and track the ACH entries contained within the file.

    • Financial EDI is electronic data interchange for financial transactions/applications between companies and financial institutions.

    • Fraud risk is the risk that a payment transaction will be initiated or altered in an attempt to misdirect or misappropriate funds, while funds availability refers to the time at which the funds resulting from a funds transfer are made available to the receiver.

    Overview of Automated Clearing House (ACH) Network and General Payments

    • The General Payments section carries a weight of 13% in the AAP exam and provides an overview of ACH Network, paper check processing system, wire transfer system, and card payments.

    • The ACH Network is a safe, secure, and reliable network for direct account-to-account consumer, business, and government payments, facilitating billions of transactions annually.

    • The ACH Network is governed by the fair and equitable Nacha Operating Rules and provides an efficient, electronic alternative to paper checks.

    • The ACH Network is a batch processing, store-and-forward system that transmits entries electronically through data transmission.

    • There are five participants involved in an ACH transaction: Originator, ODFI, ACH Operator, RDFI, and Receiver.

    • The Originator is the person or organization that has authorized an ODFI to transmit a credit, debit, or non-monetary entry to the Receiver's account.

    • The ODFI receives payment instructions from Originators or Third-Party Senders and transmits the ACH entries to the ACH Operator.

    • The ACH Operator is the central facility for the clearing, delivery, and settlement of entries between or among participating DFIs and transmits or receives ACH entries on behalf of DFIs.

    • The RDFI receives ACH entries from the ACH Operator and posts the entries to the accounts of its depositors (Receivers).

    • The Receiver is the person or organization that has authorized an Originator to initiate an ACH entry to the Receiver's account with the RDFI.

    • Third-Party Service Providers and Third-Party Senders perform ACH processing functions on behalf of the Originator, ODFI, or RDFI.

    • ACH credit entries occur when an Originator initiates a transfer to move funds into a Receiver's account, while ACH debit entries occur when the Receiver's account is debited.Overview of ACH Transactions and Processes

    • ACH credit transactions involve transferring funds from an Originator to a Receiver's account.

    • Consumers use ACH credit for Direct Deposit of payroll, while corporates use it for payments like employee salaries.

    • ACH debit transactions collect funds from a Receiver's account and transfer them to an Originator's account.

    • Consumers authorize ACH debit for regular, recurring payments like mortgage payments and insurance premiums.

    • Same Day ACH debits can be initiated for amounts up to $100,000 and must meet the deposit window deadline.

    • Reversing debits cannot have an earlier effective date than the related credit entry.

    • On-Us transactions occur when the sending and receiving accounts are at the same financial institution.

    • On-Us transactions need not be sent through the ACH Network.

    • Dynamic Bank and General Manufacturing have an ACH Agreement that dictates their rights and responsibilities.

    • The agreement includes information about file delivery to Dynamic Bank.

    • Dynamic Bank removes "on-us" entries destined for accounts within its institution and transmits the remaining entries to the originating ACH Operator.

    • The ACH Operator sorts the entries by RDFI routing number and transmits payment information to the appropriate RDFI(s) for posting.

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    Description

    Test your knowledge of electronic payments and the ACH Network with our glossary quiz! This quiz covers key terms and definitions related to access devices, ACH operators, authentication, authorization, clearing houses, and more. Whether you're a seasoned professional in the electronic payments industry or just starting out, this quiz is a great way to brush up on your knowledge of the terminology and concepts used in this field. Take the quiz now and see how well you know the language of electronic payments!

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