33 international business payment terms explained

Too many acronyms, too little time? We know the feeling. But hopefully this article of glossary terms will help. Read on to demystify 33 of the top B2B terms and their meanings.

A

• ACH: ACH is an electronic funds transfer system used by agencies for online payments and deposits in financial institutions.
• AISP: An Account Information Service Provider (AISP) is regulated by the Financial Conduct Authority (FCA) to access customer information on behalf of a bank. They can’t facilitate payments or transfers.
• ASPSP: An Account Servicing Payment Service Provider (ASPSP) is a financial institution, like a bank or a building society, that provides online access to payment accounts for customers using payment services.
• API: An Application Programming Interface (API) allows different software applications to communicate with each other. It’s how Payhawk can integrate with your accounting systems like QuickBooks or Xero.

B

• BACs system: BACs stands for Bankers' Automated Clearing System and can be used interchangeably with the term bank transfer. It’s an electronic payment system that transfers funds from one bank account to another, usually in the same country. Transferring funds this way can take up to three business days to clear.
• BIC: A Bank Identifier Code (BIC) is a code used to identify a bank. Every bank has its own code, which is usually between eight and 11 characters long. These codes ensure funds arrive at the correct bank. The term BIC is interchangeable with the term SWIFT code.

C

• Correspondent bank: A correspondent bank is the middleman (or third party) between domestic and international banks. They act on behalf of the domestic bank to facilitate international payments. Some examples of correspondent banks are HSBC and Barclays.
• Currency Pair: The value of one currency against another. For example, GBP to USD. In this example, the GBP is the base currency, and the USD is the quote or counter currency.
• Cross-Border Payment: A transfer of funds between two parties in different countries, also called an international business payment.

D

• Direct clearer: A direct clearer is an authorised member of a payment system who can enter payments into the system and can affect settlement directly with the bank. Direct clearers ensure fund transfers are secure and efficient.
• Direct debit: A direct debit is when one individual or business automatically withdraws money from another person or company’s bank account. These recurring payments can be used to pay for business subscriptions or utility bills.

E

• Exchange rate: An exchange rate is the rate of exchanging one currency for another. The rates are determined by the state of the economy, amongst other factors.
• Electronic Filing: Also known as e-filing, electronic filing is the process of submitting your tax returns using software to a government agency in the UK; you submit them to HMRC. To do this, you need to use software that is HMRC-approved.

F

• Foreign exchange (FX): Also referred to as Forex, foreign exchange is converting one currency into another. These rates change frequently and can affect how much supplies cost, impacting the bottom line.
• Funds transfer: A funds transfer is the process of moving funds from one account to another. They can be ATM transactions, credit card payments and direct deposits.

G

• Gateway operator: Gateway operators oversee the entry and exit points between two systems, ensuring efficient data transfer and smooth communication. Some payment gateway providers include Stripe, Worldpay and PayPal.

I

• IBAN: IBAN stands for International Bank Account Number and is a number used to identify bank accounts internationally. These numbers are unique to each customer and comprise 34 characters, including a country code.
• Interchange fee: These fees are determined by the card network (i.e. Visa, Mastercard) and are fees paid by the merchant bank to the customer’s bank every time a purchase is made via credit or debit card.
• ISO 20022: In its basic form, ISO 20022 is a set of rules financial institutions must follow to communicate electronic messages efficiently. Adopting these global standards helps reduce costs and improve data quality for financial institutions.

O

• Offline transaction: An offline transaction is one that doesn’t need an internet connection. Offline transaction payment methods can include cheque, cash or credit and debit card payments.
• Omnichannel payment solution: This solution enables businesses to accept multiple payments through the same platform. This means customers can pay for goods via credit or debit cards, e-wallets, and cash.

P

• PCI compliance: These are a set of mandatory security standards that financial institutions must follow when processing and storing card data. Payhawk is fully PCI DSS (Payment Card Industry Data Security Standard) compliant.
• Point-to-Point Encryption (P2PE): A P2PE is a security standard that keeps financial transactions safe by encrypting cardholder information.
• Revised Payment Services Directive (PSD2): This is a European Union regulatory standard for payment services in the EU.[MOU2]
• Payment Service Providers (PSPs): A PSP is an intermediary between the merchant and the payment processor. They enable merchants to accept online payments, from debit card payments to digital wallets.

R

• Routing Numbers: This is a unique nine-digit code to help identify US financial institutions.

S

• Settlement: The transaction completion, where funds are transferred from one party to another.
• Standing order: Set up by the account holder, a standing order is an instruction to pay fixed amounts at regular intervals to another account. Businesses might have standing orders for subscriptions, inventory replenishment, or charity donations.
• SWIFT: SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a network providing secure messaging for financial transactions between global banks.
• SEPA: Single Euro Payments Area is a system of transactions created by the EU to make cashless payments easy between euro countries.
• Strong Customer Authentication (SCA): This regulatory requirement in Europe adds an additional layer of security when managing e-payments. The SCA helps reduce fraud, making contactless payments more secure.

T

• Transaction limit: A transaction limit refers to the maximum amount you can send via an international or cross-border business payment.
• Trade Finance: Trade finance is an umbrella term for various funding products and services that allow businesses to import and export goods both domestically and internationally. Finance types include invoice finance, purchase order finance and letter of credit.

W

• Wire Transfer: A wire transfer is an electronic transfer of funds from one person or entity’s bank account to another.

Looking for a fast, reliable way to manage both your domestic and international payments? At Payhawk we support businesses to pay faster and more efficiently in 50 currencies and +160 countries. Reach a bigger audience and leverage more suppliers with increased global reach via international payments, book a demo to find out more.