Glossary

By Bill Maurer and Scott Mainwaring

• ACH: Automated Clearing House, the US electronic network for financial transactions. ACH transfers include things like direct deposit of paychecks, direct debit for bill payments, and, with new scanning technology, for point-of-purchase check clearing.
• AML: Anti-Money Laundering.  Regulations restricting the anonymous and untraceable use of money transfers, intended to prevent criminal activity from going undetected.  Many digital money systems outside of the standard banking system have attracted concern from AML regulators, and prompted extensions to traditional AML systems.
• Contactless smart card: A smart card (qv) using RFID or NFC technology to communicate with the card reader rather than requiring direct contact. Many public transit cards are contactless smart cards.
• Correspondent banking: An arrangement whereby a merchant or financial institution sets up a relationship with a bank such that the former can deal with financial transactions on behalf of that bank. Correspondent banking in the developing world often serves as a means of extending the reach of banks into remote areas as a form of “branchless banking.”
• Digital money or digital currency: a broad term used to cover any technological channel for providing access to, or constituting in itself, a means of exchange, method of payment, store of value, or any other traditional functions of money. Digital moneys include the electronic recording of value; online or virtual currencies; card- or chip-based devices for making transactions; mobile phone based applications; internet payment systems; special-purpose value-storing devices or systems like airline miles, gift cards or transit passes; and value-storing devices or systems intended for a specific use but repurposed to function as a more generalized means of exchange or store of value (e.g., airtime minutes or transit cards repurposed to function as currency for general use).
• E-cash:  a type of digital money that seeks to emulate properties of physical cash such as anonymous exchange.  Public transit contactless smart cards such as Suica (Tokyo), Octopus (Hong Kong), and Oyster (London) can be used as e-cash, so long as anonymity is preserved by not registering the card with a central authority.
• EFT: electronic funds transfer. The electronic transfer of funds from account to account.
• ISO: The International Organization for Standardization.  Specifies several important digital money-related standards, including:  7811, covering standard payment cards the represent information via embossed characters and magnetic tracks; 7816, covering smart cards requiring physical contact for data transfer;  8583, covering electronic transaction formats, such as those used by the VISA and Mastercard networks; and 14443, covering contactless smart cards.
• Magstripe: the magnetic tape on the back of your credit card, used to store account information. Most magstripe cards are linked to a remote account and do not store value within themselves.
• Mobile banking, m-banking, m-payments: Mobile device-based applications for conducting traditional banking activities such as checking balances, making payments or transferring funds. Newer applications are being developed for sending and receiving value directly from device to device and for storing value on or in a device. Mobile devices include mobile phones, wireless point-of-sale terminals, and mobile handheld computers and smartphones.
• NFC: Near-field communication, a short-range wireless communication technology. Near-field communication devices incorporate RFID readers and tags into a single device, allowing two such devices to transfer data to one another when held near each other (usually within 10cm).
• Payment cards:  “Plastic money”, in the form of credit cards, debit cards, charge cards, or stored value cards.  May be general-purpose (such as cards leveraging the VISA or MasterCard networks), or special-purpose (such as cards issued by particular retailers, transit agencies, or other institutions).
• POS terminal: point-of-sale terminal. Wireless point-of-sale terminals can be harnessed for mobile banking applications, allowing people with no access to brick-and-mortar banks to make deposits, withdrawals, payments, etc.
• RFID: Radio frequency identification. RFID tags can be placed in objects to identify them to RFID readers within a certain range. The technology has been adopted for contactless smart-cards.
• SIM card: subscriber identity module; a secure chip for mobile devices that stores, among other data possibly, a subscriber’s unique identification in the form of a service-subscriber key (IMSI, International Mobile Subscriber Identity). It permits the subscriber to change mobile devices by switching the SIM card from an old device to a new device without losing data. Can be harnessed for m-banking applications.
• Smart card: a card in which a specialized computer has been embedded, allowing it to process transactions more elaborately and securely than directly reading or writing to electronic memory (as in magnetic-strip based cards).  Smart cards may be online (requiring network connectivity to connect to a remote account) or offline (instantiating all “account” functionality within). They can be contact (requiring swiping or docking) or contactless (using wireless data transfer via RFID/NFC).
• SMS: short message service, used to exchangetext messages between mobile phones. Can be extended to form a value-transfer mechanism, as in Safaricom’s M-PESA system in Kenya.
• Stored-value card (or prepaid card):  A payment card in which digital money has been encoded either directly (as in most smart card based systems), or as a link to an account to be debited when payment is made (as in most magnetic track-based systems).  Such systems are often regulated as a distinct form of limited financial services, separate from banks.
• Virtual currency:  A form of money used within an online virtual world, such as “Linden Dollars” within Linden Lab’s Second Life, or “gold pieces” within Blizzard Entertainment’s World of Warcraft.
• WAP: wireless application protocol, the international standard for network communications in wireless devices, permitting mobile phones and other wireless devices to access the internet.