Embedded Finance Glossary

Embedded finance terms — defined by operators, not analysts.

BaaS, sponsor bank, interchange, FBO, PayFac, RTP, FedNow, and 20+ more terms. Every definition written from the perspective of someone who has run these programs at scale — not a marketing summary.

Program Models
Program Model The structural choice that determines economics, compliance, and flexibility BaaS (Banking as a Service) Middleware model for non-bank banking access PayFac (Payment Facilitator) Master merchant aggregation model Money Transmitter License (MTL) State-level licensing for money transmission
Payment Rails
ACH Payments Primary US electronic payment network RTP (Real-Time Payments) The Clearing House instant payment network FedNow Federal Reserve instant payment service Virtual Card Single-use card numbers for B2B payments Push-to-Card Visa Direct / Mastercard Send instant disbursements Payment Waterfall Rail sequencing and fallback logic
Payment Economics
Interchange The fee structure behind card payment revenue Interchange-Plus Pricing Transparent pricing vs. flat-rate processors Float Economics Yield on customer balances held in program accounts Level 2 & Level 3 Data Enhanced data that reduces B2B interchange cost Monetized ACH Fee-based ACH programs for B2B payment revenue
Compliance & Structure
Sponsor Bank The regulated entity behind an embedded finance program FBO Account For Benefit Of account structure for customer funds BSA/AML Bank Secrecy Act anti-money laundering compliance KYB (Know Your Business) Business customer identity verification BIN Sponsorship Card network BIN access for card issuing programs
Infrastructure
Ledgering Sub-ledger management for pooled FBO accounts Payment Orchestration Dynamic rail routing and processor selection Settlement The movement of funds between banks to complete transactions
AP & B2B
AP Automation Digitizing accounts payable workflows and payment execution Straight-Through Processing (STP) Automatic VCard processing without manual intervention
Card Infrastructure
Acquiring BankProcesses card payments for merchants Issuing BankIssues cards and receives interchange ChargebackTransaction reversal initiated by cardholder Sub-MerchantBusiness under a PayFac master merchant
Fintech Products
Earned Wage Access (EWA)Access earned wages before payday BNPL (Buy Now Pay Later)Installment financing at point of sale Co-OriginationFintech-bank joint loan origination model Wire TransferSame-day irrevocable bank-to-bank transfer
Additional Compliance
Regulation EConsumer electronic fund transfer protections OFAC ScreeningSanctions list checking for all programs
Questions about how these terms apply to your program? Understanding the terminology is the start. Understanding how it applies to your specific program model, volume, and product requirements is where architecture decisions get made.
Talk with us →