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Abbreviations in Financial Transfers Explained

June 26, 2022

Financial Transfers Explained

When using bank transfers, payment transactions, reading statements, or invoices, non-professional users without specialist knowledge may face a problem in understanding terminology. It is difficult for most people to grasp the specialized economic vocabulary by themselves. Abbreviations used in banking are a more significant barrier to understanding.

The best assistant in such situations will be a dictionary of banking terms and economic concepts created to improve the financial literacy of ordinary people and simplify the process of analyzing bank statements. 

We would like to help the users of Payrow to understand this terminology. You don’t have to look for additional information in directories or on third-party sites, as we have identified the most frequently encountered terminology and expect this will simplify the life of entrepreneurs as much as possible.

KYC – Know Your Customer

When creating a profile in areas related to finance, we usually face a concept of identity verification, Know Your Customer (KYC). As part of the KYC verification procedure, you need to upload your documents confirming your identity, for example, a valid identity card or passport.

If you do not complete KYC, you may have limited access to the functions of the service provider To get full access and an increased limit of deposits and withdrawals, users need to complete KYC verification.

KYC is a significant element in countering financial crime and money laundering. It does not allow transferring money between accounts of one user, which excludes the possibility of creating multiple accounts. Customer identification is the most important aspect, as it is the first step towards creating a secure and fair use of the platform. 

KYB – Know Your Business

The Know Your Business (KYB) concept is mostly similar to KYC, but more about business. The purpose of verification is to check a company, a commercial organization, or a startup for compliance with the laws. It is necessary that the business is officially registered and is not involved in criminal activity or the bankruptcy process. This is a part of prudence that should be taken before dealing with any company. 

External Transfer

Money transfers can be made within a country or sent abroad: i.e., internally or externally. A similar concept can be applied to transfers within your company and between companies and your partners. An external transfer can be considered between your own accounts in another bank, for example, interbank money transfers to an account to pay bills or pay for services.

SWIFT payments 

SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. SWIFT payments refer to transactions using the SWIFT international payment network. This is an international system for establishing financial communications between banks. To make it clear, SWIFT doesn't actually transfer funds. Banks across the globe use it, for example, to send money transfer orders to each other using SWIFT codes. The main function is to transfer money abroad quickly, accurately, and safely.

SEPA – Single Euro Payments Area

The Single Euro Payment Area is a project of the European Union to introduce a single payment system, the purpose of which is to simplify cashless bank transfers in euros and to unite the national markets of different countries into a single market.

It allows European consumers and businesses to make and receive credit transfers, direct debit payments, and card payments. SEPA allows the use of international bank transfers without the hassle and fees associated with traditional banking transactions. Additional savings are achieved by the obligation of banks to credit SEPA payments to the recipient's account without any fees. Payments are usually made no later than one working day after their processing.

As of June 2022, SEPA includes 36 member states: Austria, Belgium, Great Britain, Bulgaria, Cyprus, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, Spain and Sweden, 3 EEA countries – Norway, Liechtenstein, Iceland, as well as Switzerland and Monaco.

BACS – Bankers Automated Clearing System

BACS stands for Bankers Automated Clearing System. BACS is a UK payment system that performs paperless credit and debit transactions directly crediting money to accounts or debiting them from accounts. The system has existed for more than 50 years and is considered safe and reliable.

Direct debit is one of the most commonly used functions used by businesses. It is an order from the account holder to the bank allowing the company to withdraw various amounts of money. Direct debiting is used to ensure the possibility of regular, safe, and efficient payments. Direct credit is usually used to transfer salaries into the bank accounts of employees. 

At the moment, Bacs Direct Credit Salary Service is used by more than 90% of British employees. Until recently, BACS was also an advanced system of one-time online payments and payments made by phone, but today it’s outperformed by the Faster Payments system. 

FPS – Faster Payments Service

The Faster Payments Service (FPS) was created for sending electronic sterling payments in the UK. The project was aimed at increasing the quality of payment services, making payments more affordable for households, and reducing the time of payments between accounts of different banks to several seconds. It has been successfully put into use and is considered to be a popular service.

CHAPS – Clearing House Automated Payment System

CHAPS stands for Clearing House Automated Payment System. Just like BACS, CHAPS is a UK payment processing system. CHAPS is used for the interbank transfer of funds by enterprises in transactions with large amounts of money. Processing a CHAPS payment or transfer takes one day, and you usually need to pay a fee of $25-30. 

CHAPS payments are used when buying real estate, to transfer funds between the bank accounts of the relevant parties. To make a payment via CHAPS, it is usually necessary to visit your bank with an identity card confirming your identity. It is advisable to check the limit of fast payment transfers of your bank before making a CHAPS payment. Faster payments are usually used for transfers up to $100,000, and this happens instantly for free.

IBAN – International Bank Account Number

The International Bank Account Number (IBAN) is a unique identification number that helps banks to process payments automatically. This is an international code usually consisting of 34 characters (letters and numbers), which allows banks to process international transfers. The length of IBAN differs from country to country. Each character set of the code represents different details of the user’s bank account.

BBAN – Basic Bank Account Number

A Basic Bank Account Number represents a bank account number in regard to a specific country. The BBAN is the last bunch of characters of the IBAN when it comes to international funds transfers. Today, there is no universal BBAN standard, and its length varies depending on the country's standards.

BIC – Bank Identifier Code

The Bank Identifier Code (also known as SWIFT address or SWIFT code) is a unique code of a financial institution, most often a bank, used for financial transactions. The BIC consists of 8 or 11 characters. It is intended for the identification of transaction participants and is a mandatory element of the details of any bank. The BIC is used in payment documents across the UK.

The Payrow platform supports Faster Payments Service, SEPA, and SWIFT transfers. We provide the technological solutions for your project to develop, cover a larger territory and attract new users and customers. Make fast domestic payments in the UK, as well as payments in the Eurozone and around the world in just two clicks – use Payrow!