APRP Handbook - Ch 1: Payment Systems (16%)

APRP Handbook - Ch 1: Payment Systems (16%) Industry Background - NACHA: Formed in 1974 to govern the ACH Network. Payment Processes and Technologies - Memo Post: Temporary posting to an account that may affect the balance until verification is completed. - Proximity Payments: POS transactions made with mobile devices (e.g., cellphones, smart cards) using M-payments. - Decoupled Debit Cards: Cards issued by financial institutions that operate via the ACH network for settlement, regardless of transaction account location (e.g., Target Red Card). - Contactless Cards or Key Fobs: Use RFID technology and an embedded chip for transactions. Security Standards - PCI DSS: Payment Card Industry Data Security Standards aimed at securing credit card information across organizations. Payment Networks - Open Loop Network: A network connecting Issuing and Acquiring Financial Institutions (FIs) to manage value flow (e.g., Visa and MasterCard). - Closed Loop Network: Direct payment services between merchants and cardholders without involving FIs (e.g., American Express and Discover). Check Processing - Check Clearing: The path a check follows in the collection process. - Check Collection: Ensuring funds are correctly debited from and credited to appropriate accounts. - RDC Benefits: Decreased processing costs, support for new and existing banking products, improved customer access to deposits. Regulatory and Compliance - Authorized Signature on RCC: Warranted by the Bank of First Deposit. - Reg J: Federal Reserve Bank Operating Circular governing the check collection process involving a Federal Reserve Bank. Financial Services - Fedwire Funds and Securities Services: Instantaneous, final, and irrevocable processing completed by Federal Reserve Banks. - Fedwire Securities Service: Manages securities issuance, transfer, and safekeeping for various U.S. government entities, in electronic form. - National Settlement Service (NSS): A multilateral service allowing same-day settlement of net obligations using reserves at the Federal Reserve Bank. Emerging Technologies - Blockchain: Distributed ledger technology for aggregating transactions in blocks linked by cryptographic signatures. - APIs: Application Program Interface enabling programs to exchange information based on specifications and standards. - Interoperability: The capability to process payment instructions across different systems using common standards and compatibility. Alternative Payment Systems - Hawala: An alternative remittance system operating outside traditional banking channels, relying on network-based communications for transfers. Payment Processing Infrastructure - Gateway Provider for RTP: Licenses an application for financial institutions to connect to the RTP network, with connectivity terminating at their data centers.