iGaming Bank Terminology

Understanding the unique terminology of iGaming banks is essential for navigating its complex landscape. At Xace, we acknowledge the challenges posed by this specialist vocabulary, and as such we have developed a glossary of terms - designed to clarify some of what others might label as mere jargon. 

DISCLAIMER: This is for information purposes only. It is not intended to serve as financial, investment, legal, or any other advice. The information present here is accurate at the time of publishing.

Merchant account

A merchant account is a type of business bank account that allows businesses to accept and process electronic payments, such as debit and credit card transactions. The account acts as an intermediary between a customer’s bank account and the business, enabling the business to receive the funds for transactions immediately. 

Merchant accounts are provided by merchant acquirers, which partner with businesses to facilitate electronic payments. They are essential for businesses that want to accept credit and debit card payments, and provide customers with payment options that are secure, quick, and user-friendly.

Businesses must undergo an application process to open a merchant account. The merchant acquiring bank will assess the business by looking at the credit history and duration of the business’ operations. Businesses using a merchant account can expect to pay various fees for setup, monthly maintenance, transactions, and other service costs.

Multi-licensed accounts

A bank may be described as “multi-licensed” when it offers solutions or systems that consolidate and manage several bank accounts from various banks into a single interface. This provides a business with a centralised point of access to account-specific data. It also enables the business to streamline its financial operations, making it much easier to operate even if the business has quite complex banking needs.

The term “multi-licensed” comes from the notion that if a financial institution offers their banking services and products across multiple different jurisdictions or performs multiple different types of financial activities, they will need to obtain the necessary licences and authorizations from various

regulators in the jurisdictions in which they plan to operate.

B2C (Business 2 Consumer) operators

A B2C operator is either an entity or a system that facilitates Business 2 Consumer (B2C) payments. These operators enable consumers to make payments to businesses through various channels and payment methods.

B2C payments are a fundamental element of great customer experiences in many areas of financial transactions. B2C operators include payment processors, financial institutions, and billing companies. These organisations play vital roles in processing and facilitating these types of payments. 

Examples of B2C payments include online and in-store electronic retail purchases and online bill payments. Additionally, B2C operators play a critical role in enabling player payouts in the iGaming and e-Betting industry.

B2C player payouts

B2C player payouts are a specific type of B2C transaction. They typically refer to the disbursement of funds to players using products and services from iGaming businesses. This can include fund transfers connected to winnings, refunds, or other forms of monetary distribution that occur during gaming and betting activities. iGaming organisations heavily rely on player payouts to offer efficient payment solutions as part of a seamless, reliable, and easy fund transfer experience for their customers.

On-rails and Off-Rails in Banking

• on-rails banking: transactions that occur within the traditional banking system.
• off-rails banking: transactions that occur outside of the traditional system, often using alternative or emerging payment methods.

On-rails banking

In banking, payment rails are the infrastructure that enables the transfer of money. Rails connect a payer and a payee, like financial institutions, and money is moved from one account to another. There are lots of different types of payment rails, such as SWIFT, SEPA, ACH, debit card networks, credit card networks, and wire transfer networks. A good way of visualising it is by imagining a map of a railroad network. Each rail line is a different payment route, and any financial institution or bank at either end of a line can move money between them, regardless of the payment method, currency or location.

When bank A initiates payment, they send information via the payment rails to the recipient. The information will include customer account details and any instructions for the receiving bank or financial institution. 

Every payment rail will work differently: they settle payments at different speeds, charge different fees, and use various technologies to support the process. By understanding the different payment rails, business owners can better understand their different payment modes and options.

Payment rail types include:

• Account-to-account
• Debit and credit card networks
• CHAPS
• Faster Payments
• SEPA
• SWIFT

Off-rails banking

Off-rails banking refers to payment systems that exist outside the remit of the traditional banking ecosystem. The most notable example is blockchain technology, which provides the underlying infrastructure for cryptocurrencies.

Modernised payment infrastructure

In recent years, modernised payment infrastructure has emerged in the traditional banking ecosystem. This payment infrastructure is characterised as agile and flexible. It interconnects different banking and financial ecosystems and is also distributed at the edge. This means that data processing and analysis has been shifted from centralised data centres to the periphery of the banking network. Financial institutions can now operate using local servers or edge devices. This helps them improve data privacy, process data in real-time, and achieve lower latency. Using modernised payment infrastructures, customers can enjoy a seamless and speedy experience and banks are able to handle large volumes of data and transactions securely.

Open banking and BaaS

• open banking: a system that allows third-party financial service providers to access financial information from banks through apis.
• BaaS (Banking as a Service): a model that allows third parties to offer banking services without obtaining a banking licence.

Open banking

Open banking, also known as open bank data, is a banking practice that grants third-party services providers access to financial data (e.g., transactions and customer preferences) held by financial institutions, including banks. This access is facilitated through the use of application programming interface (API) technology.

The core idea behind open banking is to create a network of interconnected accounts and data across institutions, empowering consumers, financial institutions, and third-party service providers to utilise this shared information. Open banking has the potential to revolutionise both the competitive landscape and the consumer experience within the banking industry.

BaaS (Banking as a Service)

As banks embrace technology, Banking as a Service (BaaS) has emerged as a financial technology solution. This allows non-bank businesses, like platforms and marketplaces, to offer services that were traditionally restricted to licensed banks. BaaS providers can banking services into their business offering and existing interface. Essentially, non-bank businesses can now bring the bank to their customers when providing their core services to their users.

Through BaaS, platforms can provide their customers with bank accounts, payment cards, and working capital. They can offer a consolidated view of the customer’s sales activities, transactions, accounts, and business loans on a single platform. BaaS can be used in multiple ways, from foreign exchange services to pure payments or lending.

Payment systems and methods

• Payment systems: the infrastructure enabling fund transfers.
• Payment methods: specific instruments or channels used to initiate a payment.
• Payment gateways: services that securely transmit payment information between parties.
• Account-to-account: direct transfer of funds between bank accounts.
• Instant FX: real-time foreign exchange transactions.
• Batch pay: processing multiple payments together as a batch.

Payment systems

A payment system provides the infrastructure and processes that allow funds to transfer between different parties, such as institutions and individuals. Payment systems will have various mechanisms such as networks for credit and debit cards, wire transfers, ACH, and real-time payment systems. 

Payment methods

A payment method is a specific instrument or channel used to initiate a payment. These methods could be physical, such as a credit card, a debit card, or cash. They can also be digital, such as payment via a digital wallet, an online bank transfer or a mobile payment. The payment method is supported by underlying payment systems. 

Payment gateways

A payment gateway facilitates the secure transmission of payment information between parties involved in a transaction. They are a technology or service that acts as a bridge so that information can be transmitted between the customer, the business, and the payment processor. Many payment gateways are easily integrated by way of plugins or APIs. Their purpose is purely transmission-focused, and they don’t often cover chargeback management or fraud detection features.

A2A (account-to-account)

A2A payments are also referred to as account-based, online banking, or direct account payments. They are direct money transfers that take place from one account to another, without using an intermediary. 

Traditionally, A2A payments were associated with actions such as setting up regular bill payments via a direct debit. However, with the growth of open banking, A2A transactions are being used to enable quicker settlements at reduced transaction costs that deliver a much better user experience. A2A payments can be used to reduce customer journeys by shortening online checkout flows. It uses enhanced security measures, often a couple of steps of verification that must be taken by the customer to verify their identity, reduce payment fraud risks, and complete the payment quickly and easily.

Instant FX (foreign exchange)

Foreign exchange services are an increasingly important feature of many banks. Now, instant FX enables financial institutions to perform foreign exchange (FX) transactions in real time. Currency conversions can be automatically executed by setting up pre-agreed FX margins and delivering instant confirmation. Businesses no longer need to hold additional currency accounts and can use instant FX services to experience swift, secure, and efficient foreign exchange transactions. Instant FX services can streamline currency conversion processes, offer competitive rates and provide risk management tools to help businesses easily manage cross-border transactions.

Batch pay

In the context of banking, “batch pay” or “batch payment” refers to the process of sending numerous payments to different recipients together in one transaction, instead of as separate transactions. Batch payments are beneficial for businesses that deal with recurring invoices, large transaction volumes or international payrolls. It helps simplify their payment processes by performing these transactions in bulk. This action can be described as bulk payments, mass payments, or mass payouts. A single payment from the account can then be sent to multiple recipients simultaneously, instead of making individual payments and processing each transaction one by one. 

Businesses might do this by uploading a spreadsheet of transaction and recipient information into a software that then processes all the payments. Batch payments are especially useful when paying multiple recipients in different currencies. They can help greatly reduce errors, alleviate time spent by human resources performing payments individually, and often can be cost-effective too.

Cross-border payment systems

• Offshore payments: financial transactions involving the transfer of funds between entities in different countries.
• RTGS (Real-Time Gross Settlement): immediate transfer of funds between banks.
• FPS (Fast Payment Systems): enable instantaneous digital payments.
• SEPA (Single Euro Payments Area): harmonises euro payments across Europe.
• SEPA Instant: SEPA scheme for instant euro credit transfers.
• Target2 / T2: Eurosystem's real-time gross settlement (RTGS) system.
• IBAN (International Bank Account Number): a standard international numbering system for individual bank accounts.
• SWIFT (Society for Worldwide Interbank Financial Telecommunication): a global network that processes payments between different countries. 
• BIC (Bank Identifier Code): a unique code assigned to all banks and financial institutions.

Offshore payments

Offshore payments and cross-border payments are two terms that are sometimes used interchangeably. They refer to different types of payments.

The term “offshore” signifies that the payment is occurring outside the domestic jurisdictions of all the parties involved in the payment.

Cross-border payments refer to a transfer of funds between parties located in different countries–the critical difference is that the money is being sent to and from locations where the sending and receiving parties are based.

Both offshore or cross-border payments are subject to various international banking regulations, and may also be subject to other laws, such as foreign exchange regulations.

RTGS (real-time gross settlement)

Real-time gross settlement (RTGS) is a funds transfer system that enables the instant transfer of money and/or securities. Unlike other payment systems that may process transactions in batches or by netting financial obligations between parties at the end of the day, RTGS systems settle each transaction one by one. This takes place in real-time, meaning that once a payment is initiated through RTGS, it is immediately processed and settled, making it final and irrevocable.

RTGS systems are typically managed and operated by central banks, serving as a critical infrastructure for the smooth functioning of financial markets. They ensure the secure and efficient transfer of large-value interbank fund transfers, contributing to the stability and integrity of the financial system.

FPS (Faster Payment Systems)

Faster Payment Systems are often referred to as:

• instant payments
• real-time payments
• immediate payments

An FPS enables users to transfer money 24/7, 365 days a year. They do this by providing real-time clearing and settlement, allowing funds to flow seamlessly between different accounts held by banks and financial institutions.

As funds can be transferred in as little as 30 seconds, FPS expand real-time capabilities for use in contexts where transactions may be high-volume and low-value, such as in the retail sector. FPS is viewed as a great solution for cross-border transactions that are quick, cheap, accessible, transparent and secure.

SEPA (Single Euro Payments Area)

SEPA stands for Single Euro Payments Area and is a payment system designed for quick and cost-effective bank-to-bank transfers mostly within the European region. There are several non-EU countries that are members, including the recently departed UK. SEPA treats payments between members of its network as domestic transactions, ensuring uniform speed and cost regardless of the sender's or recipient's location. Standard SEPA payments typically take a day to be processed, and this uniformity benefits both businesses and individuals.

SEPA Instant

SEPA Instant is a new payment network that allows payments to occur within seconds, at any time of the day or week. However, both the sender's and recipient's banks must be part of the SEPA Instant network for these rapid payments to be feasible. Not all European financial institutions have fully adopted the SEPA Instant network yet.

TARGET2

TARGET2 is an abbreviation of Trans-European Automated Real-time Gross Settlement Express Transfer and the system supported safe and efficient settlement of European payments. It performed as the Eurosystem’s real-time gross settlement (RTGS) system for over a decade, handling transactions in euros. It enabled payments to take place worldwide, and was primarily used for high volume and high value transactions between banking institutions.

T2

In March 2023, the Eurosystem launched the T2 wholesale payment system, replacing TARGET2. The updated RTGS system contains a central liquidity management tool that allows participants to manage and monitor liquidity across all TARGET services and optimise their liquidity use. The new system also offers improved cyber resilience and can facilitate payments in different currencies.

IBAN (International Bank Account Number)

The International Bank Account Number (IBAN) is a globally standardised system designed to ensure the accurate transfer of international payments to the intended recipient's bank account. An IBAN not only identifies a bank account but also includes information that helps locate the country, bank, branch, and specific account number. An IBAN can have up to 34 alphanumeric characters.

This system is crucial in facilitating seamless international transactions, as it helps prevent errors and delays that might arise from incorrect or incomplete account information. By using a standardised format for bank account identification, IBAN helps streamline the process of cross-border payments and contributes to the overall efficiency and reliability of the global financial system.

SWIFT (Society for Worldwide Interbank Financial Telecommunications)

SWIFT (Society for Worldwide Interbank Financial Telecommunications) is the most widely used payment network globally. SWIFT is a messaging network that serves as a payment execution channel for banks. SWIFT's international reach makes it the preferred choice for cross-border payments in multiple currencies, catering to both business and individual needs. However, SWIFT can be expensive to use, and processing can take up to seven days for payments to reach the recipient, as they pass through several intermediary banks in the process.

BIC (Bank Identifier Code)

SWIFT codes are sometimes referred to as BIC codes. BIC stands for Bank Identifier Code and it essentially performs the same function as a SWIFT code.  BIC/SWIFT codes are arranged in the following format:

AAAABBCCDDD

• AAAA is the bank code
• BB is the country code
• CC is the location code
• DDD is the branch code. This part is optional.

Some banks will use a BIC8, which is an 8-character BIC, while others use a BIC11, which is an 11-character BIC.

UK payment systems

• BACS (Bankers' Automated Clearing Services): electronic bank-to-bank payment system.
• CHAPS (Clearing House Automated Payment System): real-time settlement system for high-value transactions.
• Faster Payments (UKFP): enables near-instantaneous money transfers 24/7.

BACS (Bankers' Automated Clearing Services)

Introduced in the UK in the late sixties as an alternative to cheques, this new type of Bankers Automated Clearing Service offered faster bank-to-bank transfers. Abbreviated and now commonly referred to as “BACS” or “Bacs”, this payment method is well-established and used by banks and building societies across the UK. 

Bacs is divided into two primary services: Direct Debit and Direct Credit. Direct Debit is commonly employed for recurring payments, such as utility bills and subscription services, where the funds are automatically debited from the bank account on specified dates. In contrast, Direct Credit is typically used for outgoing payments, including salary disbursements, insurance settlements, and pension payments.

Despite the emergence of faster payment methods, Bacs continues to hold a significant place in the UK banking system, offering a reliable and affordable option for financial transactions.

CHAPS (Clearing House Automated Payment System)

CHAPS is a payment method primarily used for high-value transactions in the United Kingdom. It was initially established to facilitate swift, high-value payments in pounds sterling for businesses and a minimum transaction limit of £10,000 used to apply (this rule is no longer in effect).

The CHAPS system is commonly employed for urgent, one-off payments, for example payments made to solicitors during house purchases or payments required during time-sensitive business deals. The key advantage of using CHAPS is the immediate review and same-day transfer of funds to the recipient's account. This super speedy service comes at a cost: CHAPS is one of the most–if not the most—most expensive domestic payment methods available in the UK.

UK Faster Payments (UKFP)

Faster Payments is a modern payment system introduced in the UK in 2008. Many UK banks and building societies now offer their customers this system, as payments sent via Faster Payments are typically processed within two hours, if not within seconds. Faster Payments offers a maximum transaction limit of £1,000,000, however banks and building societies can set their own limits.

US payment systems

• ACH (Automated Clearing House): an electronic network for financial transactions in the United States.
• Fedwire: a real-time gross settlement funds transfer system operated by the U.S. federal reserve banks.
• RTP (Real-Time Payments): a payment network providing instant payments.

ACH (Automated Clearing House)

ACH is an electronic network for financial transactions in the United States. It processes credit and debit transactions, such as direct deposits, payroll payments, consumer bills, and tax payments. The ACH typically processed transactions in batches and is often used for low-value, less urgent payments. Payments take between one and three business days to settle. 

Fedwire

Fedwire is a real-time gross settlement (RTGS) system operated by the U.S. Federal Reserve. It is designed to process high-value, time-critical transactions that require immediate settlement. Using Fedwire, financial institutions can electronically send and receive high-value, time-sensitive payments in U.S. dollars, with the knowledge that each transaction will be processed individually and settled immediately upon receipt, making them final and irrevocable.

RTP (Real-Time Payments)

In November 2017, the U.S. Clearing House launched a payment processing network called Real-Time Payments (RTP). This network is used to transfer money electronically and instantaneously between banks in the United States, and is used for payroll payments, loan disbursements, retail purchases and gig economy payments. The RTP rail is open 24/7, and can be used by any U.S. depository institution that is federally-insured, meaning that the RTP is accessible to the majority of bank accounts in the United States.

Security and compliance

• AML (Anti-Money Laundering): rules to prevent money laundering.
• CDD (Customer Due Diligence): process of verifying clients' identity.
• KYC (Know Your Customer): verifying the identity of customers to prevent fraud.
• dual approval of payments: a “maker and checker” control mechanism that requires two individuals to authorise a transaction.
• dual sign-off: a “two sets of eyes” control mechanism that requires two individuals to authorise a transaction.

What’s the difference between AML, CDD, and KYC?

Anti-money laundering typically refers to national and international laws in place to combat the practice of money laundering. Customer due diligence describes the processes that financial institutions undergo to identify and report AML suspicions or violations. Know your client checks work hand-in-hand with CDD checks, by providing a necessary first step of client identification and risk assessment before clients are onboarded. 

Anti-money laundering (AML)

Anti-money laundering (AML) refers to regulations and business practices introduced to prevent money laundering. Laws typically govern financial institutions’ practices of identifying, reporting and proactively preventing suspicious financial behaviour, including transactions that may be linked to money laundering activities.

Financial institutions must perform various AML checks in line with regulations. These checks aim to uncover illicit funds and transactions that are being disguised as having come from legitimate sources. Money laundering can include all kinds of financial transactions or funds that are associated with criminal activity. This could be in relation to fraudulent activity, corruption, tax evasion, terrorism financing, or trafficking operations.

Customer due diligence (CDD)

Financial institutions are required to conduct customer due diligence (CDD) to identify, verify, and assess customers' risk profiles to prevent money laundering. This requirement is ongoing, and financial institutions are expected (and legally obligated) to maintain up-to-date records of both customer information and customer transactions. 

In the United States, the U.S Treasury's Financial Crimes Enforcement Network (FinCEN), sets out four core steps that are required for effective CDD checks.

1. Identifying and verifying the customer's personally identifiable information (PII).
2. Verifying the identity of beneficial owners with a significant stake (25% or more) in the company that is opening an account.
3. Understanding both the nature and the purpose of customer relationships and compiling risk profiles of each relationship.
4. Monitoring suspicious activity, such as suspicious transactions, and periodically updating customer information.

Financial institutions use CDD processes to identify any illegal activity, like money laundering or corruption schemes, and comply with KYC regulations and AML rules.

Know Your Customer (KYC) 

KYC stands for “know your customer” or “know your client”.

KYC checks are a crucial measure in combating financial crime and money laundering. In the context of banking, a KYC check is a mandatory procedure performed when opening an account and periodically thereafter. 

With KYC checks, emphasis is placed on verifying the customer’s identity before onboarding the client. This information is checked using document, biometric, face, and ID card verifications. 

Dual approval of payments

A security tactic that adds an additional layer of scrutiny to payment transactions is the dual approval process. Two separate individuals are required to authorise a transaction before it can be executed. Dual approval helps reduce payments made in error or fraudulently. Dual approval is a popular tool for transactions that are high in value or sensitive, such as wire transfers.

Typically a “maker” must initiate the transaction and a “checker” must provide approval. They must be two separate individuals; one person can not hold both roles. This helps prevent an individual from holding unilateral authority over transaction authorisations. 

Dual sign-off

Similar to dual approval is the process of a dual sign-off, also referred to as dual authorization. Instead of a “maker and checker” approach, the dual sign-off uses a “two sets of eyes” approach. Ultimately, it requires that at least two separate people have independently reviewed and approved a planned or proposed transaction. Dual sign-off is often adopted when making payroll payments. Like dual sign-off, dual approval helps mitigate the risk of fraud and human error.