Core Banking Glossary

Payments

Accrued Interest

“Accrued interest is the accumulated interest that has been recognized and recorded but has not been paid as of a specific date… The total accrued interest should be recognized and recorded in the income statement even before the payment is received. The amount of interest that has been recognized as an expense by the borrower but has not yet been paid to the lender is known as accrued interest payable, which is recorded in the income statement as an expense… The accrual accounting concept requires that transactions should be recognized when they occur even if the payment has not been made. It ensures that the accumulated accrued interest is recognized and recorded in the right period when it occurs rather than when it is paid. It is contrary to the cash accounting concept, which requires that revenue and expense transactions be recorded when cash changes hands.” – CFI

Issuer Processor

“Connects directly with the networks and issuing bank to provide the system of record, manage issuance of cards, authorize transactions and communicate with settlement entities.” – Marqeta
“They verify transaction details, ensure funds are available, and perform certain anti-fraud measures” – Plaid

Clearing and Settlement

Clearing

“The process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and establishment of final positions for settlement.” – ECB

Clearing House

“A common entity (or a common processing mechanism) through which participants agree to exchange transfer instructions for funds, securities or other instruments. In some cases, a clearing house may act as a central counterparty for those participants, thereby taking on significant financial risks”. – ECB

Clearing system

“A set of rules and procedures whereby financial institutions present and exchange data and/or documents relating to transfers of funds or securities to other financial institutions at a single location (e.g a clearing house). These procedures often include a mechanism for calculating participants’ mutual positions, potentially on a net basis, with a view to facilitating the settlement of their obligations in a settlement system.” – ECB

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