humanitarian financial Assistance Glossary of Terms

These definitions have been collated from various sources, including the Cash Learning Partnership (CaLP) and Cash Essentials. They were selected for their potential relevance to the management of humanitarian Cash & Voucher Assistance.

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Acquiring Bank

The acquiring bank is the financial institution that maintains the merchant’s bank account. The contract with the acquirer enables merchants to process credit and debit card transactions.

Aggregator

An entity that consolidates financial transactions for processing, such as providing a single platform to execute payments via multiple financial service providers (FSPs)

Authentication

The process applied by a financial service provider (FSP) to ensure that the person authorising a transaction is who they say they are. This typically involves multiple factors including knowledge of a unique personal identification number (PIN) or password and/or at least one biometric.

Automated Teller Machine (ATM)

A semi-automated machine that dispenses cash or performs other banking services without the aid of a bank teller (cashier) when an account holder inserts a bank card.

Bank

A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes. There are several different kinds of banks including retail banks, commercial or corporate banks, and investment banks. In most countries, banks are regulated by the national government or central bank.

Banking

Bank deposits are liabilities. When you pay money into a bank, you don’t really have a deposit. There isn’t a pot of money sitting somewhere with your name on it. Instead, you have lent that money to the bank. They owe it to you.  It becomes one of their liabilities. That’s why we say our accounts are in credit: we have extended credit to the bank.  Similarly, if you are overdrawn and owe money to the bank, that becomes your liability and their asset.

Banknote

A banknote (or ‘bill’ as it is often referred to in the US) is a type of negotiable promissory note, issued by a bank or other licensed authority, payable to the bearer on demand.

Bank Information Number (BIN)

The first six digits on a debit card that represent the issuing bank. The issuing bank is responsible for the cards they release based on their banking license requirements and therefore interprets KYC requirements.

Bid-Offer (Spread)

The bid-offer spread (also known as the bid-ask) is the difference between the price quoted for an immediate sale (ask) and an immediate purchase (bid) for currency pairs. The size of the spread is a measure of the liquidity of the market and determines the transaction cost. Other determinants include the counterpart FSP pass-through charge (there may be more than one counterparty), perceived country risk, currency type and volume of transactions (frequency and size).

Biometric

Physical and behavioural characteristics used to authenticate that the subject is who they say they are. Biometric identifiers include finger print / vein, palm print / vein, voice, facial features, iris patterns, ways of walking and ways of interacting with the authentication device.

Blockchain

An unchangeable digital record of payments where transactions are processed and verified by a swarm of independent computers rather than by a single referee or central bank. This decentralised structure of ‘distributed ledgers’ supposedly enhances security as there is no single entity to be hacked. It also protects personal identity and guarantees that governments can’t block transactions or otherwise manipulate the payments space.

Breakage

The term used to describe the balance of unredeemed prepaid transfers that are never claimed.

Bulk Payment

A simultaneous transfer of funds from an entity to many recipients. This term is often used to describe the mobile money services used for humanitarian programs (as opposed to person-to-business or person-to-person payments).

Cash

Physical currency in the form of banknotes and coins.

Cash Assistance

The term cash assistance refers to direct cash transfers to individuals, families and communities in need of humanitarian support in lieu of in-kind commodities or direct service delivery. The term can be used interchangeably with ‘cash-based interventions’ (CBI), ‘cash transfer programming’ (CTP), ‘cash and voucher assistance’ (CVA), and ‘cash-based programming (CBP)’. It does not include fund transfers from donors, payment of incentives to the staff of local authorities, payment of salaries to national staff and those of implementing partners, or social protection payments in support of government. It also excludes remittances and aspects of financial inclusion such as insurances, loans or micro-finance.

Cash Centre

Cash Centres are private companies authorised to sort and distribute banknotes and coins, transport them to professional cash handlers, register and analyse counterfeits, and conduct quality control on behalf of Central Banks.

Cash-in-Transit

Cash-in-transit is industry jargon that describes the physical transfer of banknotes, coins, credit cards and items of value from one location to another. The locations include cash centres, bank branches, ATMs, large retailers and other premises holding large amounts of cash. Many cash-in-transit companies are private security companies.

Cash Industry

The collective term for commercial entities involved in the production, handling, distribution and management of physical currency (see Payments Industry).

Cash Management

Cash management refers to a broad area of finance involving the production, distribution and usage of cash. It is not the same thing as Treasury Management which is about managing the efficiency of cash flow within a given organisation (see Treasury Management).

Cash-out

Conversion of a digital or physical cheque, money order, bond, voucher or token into cash; may involve using an ATM or agent (e.g. mobile money agent, shopkeeper).

Cash Cassette

A plastic container used for storing banknotes when in transit or for replenishing ATMs. The size of two shoe-boxes, ‘smart’ versions act as sophisticated mobile vaults, with geo-location transmitters, remote electronic access keys, PIN-pads and intelligent banknote destruction systems.

Central Bank

Central Banks – or Reserve Banks as they are sometimes called – are obliged by law to exercise overarching responsibility for maintaining a stable and well-functioning monetary system. They do this by A) enacting monetary policy aimed at reducing market volatility and controlling inflationary effects; B) maintaining efficient and effective national and international payment, clearing and settlement systems; and C) ensuring liquidity by maintaining the money supply.

Central Bank Digital Currency

A central bank digital currency (CBDC) is the digital form of fiat money. It is not a ‘cryptocurrency’ as it is issued by the state and therefore has legal tender status.

Cheque

A cheque – or ‘check’as it is called in the US – is a document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name the cheque has been issued. The person writing the cheque, known as the drawer, has a transaction banking account where their money is held. The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay that person or company the amount of money stated.

Chip & PIN

Chip and PIN is the generic name adopted by the banking industry for the EMV smart card payment system for credit, debit, and ATM cards. ‘Chip’ refers to a computer chip embedded in the smartcard, and ‘PIN’ refers to a personal identification number that the customer must supply. EMV is a payment method based upon a technical standard for smart payment cards and for payment terminals and automated teller machines which can accept them. EMV originally stood for ‘Europay, Mastercard, and Visa’, the three companies which created the standard.

Closed Loop

A system in which the institution that issues the payment card is always the same institution that provides the acquiring infrastructure. The card or password can only be used on the acquiring infrastructure of that one institution

Coin

A coin is a small, flat, round piece of metal alloy (or combination of metals) used primarily as legal tender. Issued by government, they are standardised in weight and composition and are produced at ‘mints’.

Counterfeit

Banknotes contain 35 or more anti-counterfeit devices, most of them machine-readable, designed to prevent their illegal replication. These devices include watermarks, kinegrams, holograms, metallic strips, security threads and micropores as well as the use of special inks, substrates, design features and printing techniques in their manufacture. Each banknote also has a unique identification number.

Cryptocurrency

A cryptocurrency is a standard virtual currency used for making or receiving payments on the blockchain. Crypto-tokens are a subset of cryptocurrency. They are special kinds of virtual currency tokens that reside on their own blockchains and represent a distinct asset or utility. In essence, cryptocurrencies are specific virtual currencies that have their own dedicated blockchains and are primarily used as a medium for digital payments. On the other hand, crypto-tokens operate on top of a blockchain that acts as a medium for the creation and execution of decentralised apps and smart contracts, with the tokens being used to facilitate the transactions.

Currency

Fiat currency can only be issued by official order. Its value is based on the issuing authority’s guarantee to pay the stated face value on demand. A fiat currency’s value is underpinned by the strength of the government that issues it, not its worth in physical commodities such as gold or silver. All national currencies in circulation are issued and managed by their respective central banks and are therefore fiat currencies.

Debit Card

A debit card (also known as a ATM card) is a plastic payment card that can be used instead of cash when making purchases or when cashing out. There are three main types of debit card, each looking much the same but which in fact work very differently: There are those which are linked to individual bank accounts; pre-paid versions which don’t require bank accounts (and which therefore have upload limits); and corporate expense versions which are directly linked to the aid organisation’s account. Aid organisations tend to use the pre-paid version.

Deflation

In economics, deflation is the opposite of inflation and describes a sustained decrease in the general price level of goods and services.

Denomination

Denomination is the proper description of a currency value on a banknote or coin. UK banknotes have four denominations: £5, £10, £20 and £100.

Digital Payments (E-Transfers)

A digital / electronic transfer of money from the implementing agency to a recipient. E-transfers provide access to cash, goods and/or services through mobile devices, electronic vouchers, or cards. E-transfers may also be referred to as digital payments; these are umbrella terms for e-cash and e-vouchers.

Due Diligence

Due diligence helps an enterprise strengthen its risk management capacity by mitigating criminal, contractual or reputational risks. In the aid sector, it comprises a set of policies and measures designed to mitigate the possibility of diversion of aid and ensure that cash assistance reaches affected populations.

Fiat Currency

Pieces of paper without utility value as a physical commodity but whose value derives from being declared by a government to be legal tender.

Fiduciary

That which relates to a duty of acting in good faith with regard to the interests of another (person or organisation).

Fiduciary Risk

Fiduciary risk is the possibility that an agent will not act in the principal’s best interest. For donors, this translates to the likelihood that funds entrusted to aid organisations to deliver is not used for its intended purposes, does not realise its full value-for-money, or cannot be properly accounted for.

Financial Inclusion

Financial inclusion refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. While it is recognised that not all individuals need or want financial services, the goal of financial inclusion is to remove all barriers, both supply side and demand side. Supply side barriers stem from financial institutions themselves. They often indicate poor financial infrastructure, and include lack of nearby financial institutions, high costs to opening accounts, or documentation requirements. Demand side barriers refer to aspects of the individual seeking financial services and include poor financial literacy, lack of financial capability, or cultural or religious beliefs that impact their financial decisions. There is growing scepticism from some experts about its effectiveness.

Financial Service Provider (FSP)

A financial service provider (FSP) is any commercial entity that provides cash transfer services. This may include e-transfer services, e-voucher companies and financial institutions such as banks and microfinance institutions as well as mobile network operators (MNOs) and hawala agents

Finger-Vein Scanning

Finger vein recognition is a method of biometric authentication that uses pattern-recognition techniques based on images of human finger vein patterns beneath the skin’s surface. Because veins are inside the body and invisible from the outside, finger vein patterns are extremely hard to steal and do not change with age or activity. Finger-vein scanners also check for proof-of-life using pulse detection.

Fintech

The term fintech is shorthand for ‘financial technology’ and refers here to commercial companies seeking to improve the delivery and use of digital financial services rather than any specific technology per se.

Fiscal

Fiscal is used to describe something that relates to government money or monetary policy.

Foreign Exchange

Foreign exchange, or forex, is the conversion of one country’s currency into another. In a free economy, a country’s currency is valued according to the laws of supply and demand. In other words, a currency’s value can be pegged to another country’s currency, such as the US dollar, or even to a basket of currencies. A country’s currency value may also be set by the country’s government. However, many countries float their currencies freely against those of other countries, which means their value is constantly changing. The value of any particular currency is determined by market forces based on trade, investment, tourism, and geo-political risk.

Fractional Reserve Banking

Fractional reserve banking is a system in which only a fraction of bank deposits are backed by actual cash on hand and available for withdrawal. This is done to theoretically expand the economy by freeing capital for lending.

Gateway

A payment gateway is a specialist service that authorises e-payments by the transfer of information between a payment portal (such as a website or smartphone app) and the front-end processor of an acquiring bank.

General Data Protection Regulation (GDPR)

The GDPR’s primary aim is to give control to individuals over their personal data and to simplify the regulatory environment for international business. Although a directive of the European Commission, its effects are global.

Gross National Income (GNI)

Formerly known as Gross Domestic Product (GDP), GNI is the total amount of money earned by a nation’s people and businesses at home and abroad. It is used to measure and track a nation’s wealth from year to year and is the market value of all the domestic products and services produced in one year by labour and property supplied by the citizens of a country.

Hawala

The word ‘hawala’ is a generic term for ‘bank’ or ‘banking’ in Arabic and refers to a money transfer network or agent. They deliver cash by drawing on the available liquidity of third parties, usually local merchants.

Hyper-Inflation

Hyperinflation is an extremely rapid period of inflation where soaring prices cause people to hoard, creating a rapid rise in demand chasing too few goods. The hoarding may create shortages, aggravating the rate of inflation exacerbated by a rapid increase in the money supply caused by unrestrained printing of fiat currency.

Inflation

In economics, inflation is a general rise in price level relative to available goods resulting in a substantial and continuing drop in purchasing power in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index, usually the consumer price index, (See Hyper-inflation)

Intelligent Banknote Neutralisation Systems (IBNS)

An intelligent banknote neutralisation system is a security system which protects banknotes against unauthorised access to its contents by rendering it unusable. It does this by marking the cash with an indelible dye, gluing bundles together or burning them. Such systems can be found in mobile vaults and cash cassettes.

Interbank Rate

The interbank lending market is a market in which banks lend short-term funds to one another in different currencies, usually overnight. Such loans are made at the interbank rate and it is this rate which determines the bid and offer (ask) price (See Bid-Ask).

Interest

The charge levied by financial institutions to cover the costs of borrowing or lending money, typically expressed as an annual percentage rate.

Iris scanning

Iris recognition is an automated method of biometric identification that uses mathematical pattern-recognition techniques on video images of one or both of the irises of an individual’s eyes, whose complex patterns are unique, stable, and can be seen from some distance. No two irises are the same, even in an individual. They are also constantly changing shape which means they offer proof-of-life.

Issuing Bank

A financial institution that offers branded payment cards directly to customers.

Know Your Customer (KYC)

This usually refers to the information that the local regulator requires financial service providers (FSPs) to collect about any potential new customer in order to discourage financial products being used for money laundering or other crimes. Some countries allow FSPs greater flexibility than others as to the source of this information.

Legal Tender

Money that is legally valid for the payment of debts and that must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt.

Liquidity

Liquidity refers to the ease with which an asset or security can be converted into cash without affecting its market value. It is a measure of the extent to which a person or organisation has cash to meet immediate short-term obligations, or assets that can be quickly converted to do this.

Load Volume

For prepaid cards or mobile money, the total amount to be loaded onto cards or mobile wallets. Payment volume may also refer to the amount spent by card/wallet holders over a given period of time.

Magnetic Stripe Card

A plastic card with a magnetic stripe capable of storing data and secured by a PIN or visual signature match. Ancient technology, they are highly insecure and have been superceded by Chip and PIN cards (see Chip & PIN Card).

Microcredit

A sub-segment of microfinance that focuses on giving small loans to low-income people for the purpose of allowing them to earn additional income by investing in the establishment or expansion of microenterprises.

Microenterprise

A market-oriented economic activity with – in most definitions – 10 or fewer employees (including the owner and unpaid family members).

Microfinance

The provision of financial services adapted to the needs of micro-entrepreneurs, low-income persons, or persons otherwise systematically excluded from formal financial services, especially small loans, small savings deposits, insurance, remittances, and payments services.

Mobile Money

Mobile money uses mobile phones to access financial services such as payments, transfers, insurance, savings, and credit. It is a paperless version of a national currency that can be used to provide humanitarian e-cash payments.

Mobile Network Operator (MNO)

A mobile network operator (MNO) is a wireless service provider or mobile network carrier that provides mobile wireless communications services that controls all the elements necessary to sell and deliver services – including financial services – to an end user.

Modality

Modality refers to the form of assistance – e.g. cash transfer, vouchers, in-kind, service delivery, or a combination (modalities). This can include both direct transfers to household level, and assistance provided at a more general or community level e.g. health services, WASH infrastructure.

Monetary

An adjective relating to money, cash or currency. Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives.

Monetisation

The conversion of an idea or physical asset into cash.

Money

Money is any item or verifiable record that is generally accepted as legal tender for payment of goods and services and all debts, public and private, in a particular country or socio-economic context. The main functions of money are as a medium of exchange, a unit of account, or as a store of value. Any item – such as a mole of salt or cowrie shell – or verifiable record that fulfils these functions can be considered as money. Nearly all contemporary money systems are based on fiat money i.e pieces of paper without use value as a physical commodity but whose value derives from it being declared by a government to be legal tender.

M1 Money

M1, M2, M3 and M4 represent different measures of money supply. Not all of them are widely used and the exact classifications depends on the country. M1 – also called narrow money – describes coins and notes in circulation and other savings equivalents that are easily convertible into cash. M2 includes M1 plus short-term time deposits in banks and 24-hour money market funds. M3 includes M2 plus longer-term time deposits and money market funds with more than 24-hour maturity. M4 – also called ‘broad money’ – includes M3 plus other deposits.

Multiplier Effect

Indirect effects of cash assistance whereby increased expenditure by recipients contributes to income growth for non-recipients, expansion of markets for local goods, or increased demand for services. The ‘economic multiplier’ is the estimated number by which a change in some other component of aggregate demand is multiplied to give the total amount by which income is increased as a result of direct and indirect benefits from that change in demand.

Onboarding

Jargon for the process of signing up a new customer.

Optically Variable Device (OVD)

An optically variable device is a security feature that changes how it appears to the viewer. The banknote or feature itself does not change, but how it interacts with light and viewing conditions makes it seem to vary to an observer. Many different security features can be considered OVDs, from colour-shifting inks to holograms.

Payment

A payment is the voluntary tender of money (or its equivalent) by one party to another in exchange for goods or services provided by them, or to fulfill a legal obligation. The party making a payment is commonly called the payer, while the payee is the party receiving the payment. Payment is not the same as settlement unless using cash when change is received. A payment also refers to transfer of cash at point-of-sale between final beneficiary/recipient and the merchant.

Payments Industry

The collective term for commercial entities involved in payments and settlements using physical and/or electronic money.

Personal Account Number (PAN)

The full 16-digit number on a credit, debit, or prepaid card.

Personal Identification Number (PIN)

A numerical code used in many electronic financial transactions. PINs are usually issued in association with payment cards and may be required to complete a transaction.

Point-of-Sale (POS) Device

Card and smartphone-reading devices that facilitate e-transfer transactions at point-of-sale.

Polymer

See Substrate

Price Elasticity

A measure of the variability of supply or demand in response to a change in price. Price elasticity of demand is calculated as the ratio of the percentage change in quantity demanded to the percentage change in price. Price elasticity of supply is the ratio of the percentage change in quantity supplied to the percentage change in price.

Private Sector

The private sector includes any actors which generate income / profit through their business operations. In finance, the ‘private sector’ comprises banks, financial service providers, card schemes, and the cash management industry (including cash-in-transit companies)

Processing (Sorting)

Banknotes can be sorted mechanically in the field by type and denomination. Modern counting machines can count the number of notes as well as their combined value. They can also detect counterfeits and keep electronic records of the number of each note being sorted. Such machines are cheap and portable. They should be used before any cash transfer using physical currency is made.

QR-Code

A QR code (abbreviated from Quick Response code) is a type of matrix barcode (or two-dimensional barcode) first designed in 1994 for the automotive industry in Japan. A barcode is a machine-readable optical label that contains information about the item to which it is attached. In practice, QR codes often contain data for a locator, identifier, or tracker that points to a website or application. A QR code uses four standardized encoding modes to store data efficiently; extensions may also be used. It consists of black squares arranged in a square grid on a white background, which can be read by an imaging device. The required data is then extracted from patterns that are present in both horizontal and vertical components of the image.

Remittances

Money sent home from emigrants working abroad.

Remittance Company

Commercial companies whose only, or primary, service is wiring or transferring money electronically between locations, often from abroad. These companies provide a Cash Collection service, whereby the recipient pays a fee to collect money in addition to the sender paying a commission to have money transferred.

Seigniorage

Seigniorage refers to the difference between the value of a currency and the cost of producing it. It is essentially the profit earned by the government from printing and minting money.

Scrip

Scrip is any informal substitute for legal tender. It is often in the form of a written credit note or IOU.

Settlement

The process in which a buyer, having made a payment in exchange for an agreed-upon good or service, actually transfers funds to the seller’s account. In e-transfers, the underlying security often changes hands several days after the actual trade is made whereas cash settlements are instantaneous and irreversible.

Smart Card

A smart card is a device that includes an embedded integrated circuit that can be either a secure microcontroller or equivalent intelligence with internal memory or memory chip alone. The card connects to a reader with direct physical contact or with a remote contactless radio frequency interface. With an embedded microcontroller, smart cards have the unique ability to store large amounts of data, carry out their own on-card functions (e.g. encryption and mutual authentication) and interact intelligently with a smart card reader.

Substrate

Banknotes are not made of paper; they are made of cotton-linen mixes, polymer, or both. Several central banks have said they moved to polymer because it is cleaner, greener, more durable and more secure than the ‘paper’ versions.

Supply Elasticity

The responsiveness of the quantity of a good supplied by traders and others relative to the change in its price (price elasticity of supply) or other factors (e.g. income of the supplier).

Society for Worldwide Interbank Financial Telecommunications (SWIFT)

A commercial network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardised and reliable environment.

Token

Tokens are a subset of cryptocurrency. They are a special kind of virtual currency that reside on their own blockchains and represent a distinct asset or utility. In essence, cryptocurrencies are specific virtual currencies that have their own dedicated blockchains and are primarily used as a medium for digital payments. Tokens, on the other hand, operate on top of a blockchain that acts as a medium for the creation and execution of decentralised apps and smart contracts, with the tokens being used to facilitate the transactions. (See also Crypto-Currency)

Transfers

Cash transfers refer to the movement of cash from donor to final recipient. The final ‘transfer’ from recipient to merchant is not a ‘transfer’ but a payment.

Treasury Management

The process of administering to the financial assets of a business. The purpose is to optimise liquidity, make sound financial investments for the future with any excess cash, and hedge financial risks.

Velocity-of-Money

The velocity of money is a measure of the number of times that an average unit of currency is used to purchase goods and services within a given time period. Think of it as the rate at which people spend cash and how hard each dollar works to increase economic output. The concept is less about how frequently banknotes change hands and more about the size of economic activity to a given money supply. Higher velocity means the same quantity of money is used for a greater number of transactions and is related to the demand for money.

Voucher

A paper, token or e-voucher that can be exchanged for a set quantity or value of goods or services, denominated either as a cash value (e.g. $15) or predetermined commodities (e.g. 5 kg maize) or specific services (e.g. milling of 5 kg of maize), or a combination of value and commodities. Vouchers are restricted by default, although the degree of restriction will vary. The terms vouchers, stamps, or coupons might be used interchangeably.