Evolution of Money and Payments, from commodity to digital – Jean Michel Godeffroy

Acceptance network: group of merchants accepting the same type of payment card. 

Acceptance: this term has two meanings; in the field of transfer systems, it refers to the inclusion of a transfer order for funds or securities in a system’s operations for further processing; in the field of cards, it refers to the process whereby a particular card brand is accepted by a terminal, a merchant or other entity. 

Acceptor: a merchant or other entity that accepts a payment instrument presented by a client in order to transfer funds to that merchant or other entity. 

ACH: see Automated clearing house. 

Acquirer: the entity to which the acceptor (usually a merchant) transmits the information necessary to process the card payment. 

Agent: a party which acts on behalf of another party. 

Algorithmic stablecoins: crypto-assets whose value is monitored by computer algorithms which “mint” (create) additional stablecoins when their price exceeds the value of the peg and “burn” (destroy) some of them when the value of the stablecoin falls below the value of the peg.  

Asset-backed stablecoin: stablecoin whose value is guaranteed by appropriately defined assets in the balance sheet of the issuer.   

ATM: see Automated teller machine.  

Authentication: the method used to verify the origin of a message and to confirm that the message has not been modified in transit. 

Authorisation: The consent given by a payer (or a third party on his behalf) in order to transfer funds; in card schemes, authorisation is given by the card issuer. 

Automated clearing house (ACH): an electronic clearing system in which payment orders are exchanged among financial institutions, and handled by a data processing centre.  

Automated teller machine (ATM): an electromechanical device that allows authorised users, typically using machine-readable plastic cards, to withdraw banknotes and/or access other services, such as balance enquiries, transfer of funds or acceptance of deposits; also called cash dispenser. 

Bank liquidity: the sum of the bank reserves in a central bank. 

Bank money: see commercial bank money. 

Bank reserve: balance on a bank account at the central bank. 

Bank: a financial institution which makes loans and accepts deposits from the public; sometimes used as a generic term for all forms of deposit-taking institutions. 

Batch settlement: a group of payment orders to be processed together. 

Bilateral netting: an arrangement between two parties to net their bilateral obligations. 

Bill of exchange: a written order from one party (the drawer) to another (the drawee) to pay a specified sum on demand or on a specified date to the drawer or to a third party specified by the drawer.  

Blockchain: a form of distributed ledger technology. 

Book money: deposits of non-bank customers on accounts held by deposit-taking institutions such as banks. 

Branchless banking: provision of basic banking services through agents, generally using telecommunication services provided by mobile network operators. 

Brand: A particular payment product (especially a card) that has been licensed by its owner for use in a given territory. 

Business continuity: Arrangements aimed at ensuring that a funds transfer system continues operating even if one or more components of the system have failed or if it is affected by an abnormal event. 

Card issuer: the financial institution that makes payment cards available to cardholders, authorises transactions at POS terminals or ATMs and guarantees payment to the acquirer for transactions that are in conformity with the rules of the relevant scheme. 

Card payment: a payment initiated by an acceptor (generally a merchant) authorized by its customer to withdraw the amount of a purchase from the customer's bank account.  

Card Scheme: financial company that sets the operating rules that issuers and acquirers must adhere to in order to allow their customers to make card payments. 

Cash: this term generally designates banknotes and coins; in some cases, it means money (as opposed to securities for example).  

CBDC: an abbreviation for Central Bank Digital Currency; see retail CBDC and wholesale CBDC. 

Central bank deposit facility: a deposit facility offered by some central banks that can be used by banks which have excess reserves at the end of the day.  

Central bank lending facility: a credit facility offered by central banks that can be drawn upon by certain designated account holders (e.g. banks) at the central bank; also called credit facility or liquidity facility.  

Central bank money: liabilities in central banks' balance sheets that are monetary by nature, including banknotes and bank reserves. 

Central securities depository (CSD): an entity that 1) enables securities transactions to be processed and settled and 2) plays an active role in ensuring the integrity of securities issues (i.e. making sure that the number of securities in circulation is equal to the number of securities issued). 

Charge card: a card enabling cardholders to have their purchases charged to an account with the card issuer, up to an authorised limit; the balance on this account is then settled in full at the end of a predefined period; also called delayed debit card. 

Cheque: a written order from one party (the drawer) to another (the drawee, normally a bank) requiring the drawee to pay a specified sum on demand to the drawer or to a third party specified by the drawer.  

Chip card: a card with an embedded microprocessor (chip) loaded with the necessary information to enable payment transactions. 

Clearing house: a central location or central processing mechanism through which payments clearing takes place. 

Clearing: all activities performed by a payment system from the time a payment order enters into the system until it is ready for settlement; this may include netting and the establishment of final positions for settlement. 

Co-badged card: card payment which bears two card scheme logos, indicating that they can be used under any of the two schemes (e.g. one for domestic payments and one for cross-border payments). 

Collateral: assets (e.g. securities) or third-party commitments that are used by a collateral provider to secure an obligation vis-à-vis a collateral taker. 

Commercial bank money: a liability of a commercial bank, in the form of deposits held at the commercial bank, which can be used for settlement purposes. 

Commodity money: money whose value comes from a commodity of which it is made.  

Contactless payment: Face-to-face card payment that does not require physical contact between the card and the POS terminal.  

Correspondent banking: provision of banking services by one bank (the correspondent bank) to another one, generally located in a different country (the client bank).  

Counterparty risk: the risk that between the time of the agreement on a transaction and the time of actual settlement the counterparty to the transaction fails to fulfil its obligations. 

Cover: see provision. 

Credit card: a card that enables cardholders to make purchases and/or withdraw banknotes up to a prearranged ceiling. The credit granted may be settled in full by the end of a specified period or may be settled in part, with the balance taken as extended credit on which interest is usually charged. 

Credit instrument: payment instrument with which payments are made at the initiative of the payer; also called "push instruments". 

Credit line: a commitment, made in advance by a given entity, to grant credit on demand to another entity.  

Credit risk: the risk that a counterparty will be unable to meet fully its financial obligations when due, or at any time in the future. 

Credit transfer: a payment instrument allowing the payer to instruct its account-keeping institution to transfer funds to the beneficiary; also known as direct credit, direct deposit or wire transfer in North America or "giro" in Northern European countries.  

Creditor: in the payments context, the beneficiary in a direct debit. 

Cross-border payment: a payment where the payer's and the beneficiary's banks are located in different countries. 

Cross-currency settlement risk: see foreign exchange settlement risk.  

Crypto-asset: a digital representation of value that can be transferred and stored electronically using distributed ledger technology or similar technology.  

Cryptocurrency: crypto-asset that performs the three functions of money, i.e. being a means of payment, a store of value and a unit of account.   

Cryptography: protocols, algorithms and methodologies to securely and consistently prevent unauthorized access to sensitive information and enable verifiability of the information.  

CSD: See Central securities depository.  

Currency: the money that is used in a particular country at a particular time; sometimes used to designate banknotes and coins. 

Custodian: an entity, often a bank, which provides custody services to its customers. 

Custody: The safekeeping and administration of securities or other financial instruments (e.g. CBDC) on behalf of clients.  

CVV code (for card validation value): series of figures printed on a payment card, to be used in addition to the card number and the expiration date to limit fraud possibilities. 

Daylight credit: see intraday credit. 

Debasement (of a coin): reduction of the intrinsic value of a coin (e.g. replacing almost pure gold or silver by an alloy containing a part of a non-precious metal such as iron or copper). 

Debit card: a card enabling cardholders to have their purchases directly and immediately charged on their account at a deposit-taking institution. 

Debit instruments: payment instruments with which payments are initiated by the beneficiary, with the payer's prior authorization to withdraw funds from the payer's account; also called "pull instruments". 

Debtor: in the payment context, the payer in a direct debit. 

Deferred net settlement system: a payment system which settles on a net basis at the end of a predefined settlement cycle (at the end of the day or several times during the day).  

Deflation: an economic situation that combines falling prices and low, or even negative, growth.  

Delayed debit card: see charge card. 

Delivery versus payment (DvP): a mechanism which links a securities transfer and a funds transfer in such a way as to ensure that securities are delivered only if payment occurs and that payment is made only if securities are delivered. 

Deposit-taking institutions: banks, electronic money issuers and other institutions (e.g. post offices) which are allowed by law to collect deposits from the public.  

Digital money: money represented by numbers, recorded in computer databases of banks or other deposit-taking institutions.  

Direct debit: payment instrument for which the beneficiary (creditor) has received a mandate (authorisation) from the payer (debtor) to withdraw funds from the payer's bank account.  

Distributed Ledger Technology (DLT): a digital system for recording transactions and their details in multiple places at the same time, without any need for intermediaries acting as a trusted third party. 

Domestic settlement: a settlement that takes place in the country (or monetary area) in which the payer and the beneficiary are located. 

Drawee: the payer's bank in the case of cheques. 

Drawer: the payer who writes a cheque. 

DvP: see Delivery versus payment. 

Electronic money: electronically stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions and which is accepted by a natural or legal person other than the electronic money issuer.  

E-money on a distributed ledger: asset-backed stablecoin which aims to maintain a stable value relative to a fiat currency. 

EMV standards: specifications developed by Europay, Mastercard and Visa to promote global standardisation of electronic financial transactions and in particular the global interoperability of chip cards. 

Eurosystem: monetary authority of the euro area composed of the European Central Bank and the national central banks of the countries which have adopted the euro as their currency. 

Face value (of a coin or a banknote): value of the coin or banknote indicated on the coin or the banknote.  

Face-to-face payment: a payment carried out between the payer and the beneficiary in the same physical location, usually at a point of sale. 

Fiat money: money which is not backed by any commodity and which is composed of money issued by central banks and by money unconditionally exchangeable at par with central bank money. 

Fiduciary money: banknotes and coins made of non-precious metals which, until the beginning of the 20th century, could be redeemed against gold or silver coins. 

Final settlement: the irrevocable and unconditional transfer of an asset or financial instrument.  

Financial inclusion: a policy aimed at facilitating access to financial services, in particular to digital financial services, for the most excluded populations. 

Financial market infrastructure: a multilateral system among participating institutions, including the operator of the system, used for the purposes of clearing, settling or recording payments, securities, derivatives or other financial transactions. 

Financial stability: a situation in which the financial system – which comprises financial intermediaries, markets and financial market infrastructures – is capable of withstanding shocks and coping with financial imbalances. 

Foreign exchange settlement risk: The risk that one party to a foreign exchange transaction will pay the currency it sold but not receive the currency it bought; this is a form of principal risk, which is also called cross-currency settlement risk. 

Four-party scheme (or four-corner schemes): card scheme where the stakeholders involved are 1) the issuers, 2) the acquirers, 3) the cardholders and 4) the card acceptors (usually merchants); this compares to three-party schemes where issuers are also acquirers.  

Free banking: a school of thought which believes that the issuance of banknotes should be left to market forces.  

Funds transfer system (FTS): A formal arrangement based on law or private contract, with multiple membership, common rules and standardised arrangements, for the transmission, clearing, netting and/or settlement of monetary obligations arising between the members.  

Giro: see credit transfer.  

Gold exchange standard: international monetary system in which only a few reserve currencies are directly exchangeable against gold, while the other currencies aim at maintaining a fixed parity with the reserve currencies; from 1944 until 1971, the US dollar had been the only reserve currency. 

Gold Standard: international monetary system in which currencies are defined by a quantity of gold, freely exchangeable one against the other at exchange rates resulting from the comparison between the gold weight of each of them.  

Governance: procedures through which the objectives of a legal entity are set, the means of achieving them are identified and the performance of the entity is measured. This refers, in particular, to the set of relationships between the entity's owners, board of directors, management, users, regulators and other stakeholders that influence these outcomes. 

Gresham's Law: principle according to which, when two forms of money of unequal quality circulate in a territory, money users prefer to hoard the best one and use the other for day-to-day exchanges; summarised by the sentence "bad money drives out good". 

Gridlock: A situation that can arise in a funds or securities transfer system in which the failure to execute one or more transfer orders prevents the execution of a substantial number of orders from other participants. 

Gross settlement: settlement of transfer orders one by one. 

Herstatt risk: see foreign exchange settlement risk. 

Hyperinflation: very high and typically accelerating inflation.  

Identification: in a payments context, a method used to allow the beneficiary of a payment to know the identity of the payer. 

Inflation: an increase in the general price level in the economy. 

Instant payment system: a funds transfer system which processes instant payments. 

Instant payment: a payment where funds are delivered almost immediately between accounts in deposit-taking institutions; also called real-time payment or faster payment. 

Integrity: in the context of data, the quality of being protected against accidental or fraudulent alteration in transmission or in storage.  

Interbank Funds Transfer Systems (IFTS): a funds transfer system where all (or almost all) participants are banks; IFTS are often called "payment systems".  

Interbank market: the segment of the money market in which banks lend and borrow bank reserves from each other, at terms ranging from one day to one year. 

Interchange fee: the fee acquirers pay to issuers of payment cards in four-party schemes, according to the rules of the scheme. 

International card scheme: card scheme that allows their customers to benefit from an acceptance network which covers a large number of countries. 

Interoperability: the set of arrangements/procedures that allows participants in different systems to exchange and settle payments or securities transactions. 

Intraday credit: credit extended and reimbursed within a single business day; also called "daylight credit". 

Intraday liquidity: funds which are available or can be borrowed during the business day in order to enable financial institutions to effect payments/settlements.  

Intrinsic value: in the context of commodity money, market value of the precious metal contained in a gold or silver coin; in the fiat money context, calculation of the value of a form of money based on the market value of the assets of the issuer.   

Large-value payment system: a funds transfer system that typically handles large-value and high-priority payments. 

Large-value payments: payments which are generally for very large amounts, are exchanged mainly between banks or between participants in the financial markets, and usually require urgent and timely settlement. 

Lead overseer: the authority that acts as convenor of the joint meetings of the authorities involved in the oversight of a specific market infrastructure.  

Leaks: in the context of money creation, money that flows out of the balance sheet of the bank which created the money, to buy banknotes or to pay beneficiaries with accounts in other deposit-taking institutions.  

Legal tender: a form of currency (e.g. banknotes) that cannot be refused to settle debts and/or purchases; the extent of this legal concept differs from country to country. 

Lender of last resort: a central bank activity which consists of lending to banks that cannot find a counterparty on the interbank market, particularly in times of crisis; in principle, central banks only lend to solvent banks that offer sufficient collateral.  

Limited-purpose prepaid card: a prepaid card which can be used only at specific locations; value stored in limited-purpose prepaid cards is not considered as money but as advanced payments. 

Liquidity risk: the risk that a counterparty (or participant in a settlement system) will not settle an obligation for full value when due (although it may be able to do so in the future). 

Loro account: term used in correspondent banking to describe an account held by one bank on behalf of another bank (the "customer bank"); the customer bank regards this account as its "nostro account".  

Loss-sharing agreement: an agreement among participants in a clearing or settlement system regarding the allocation of any losses arising from the default of a participant in the system or of the system itself. 

Maintenance period: period over which compliance with reserve requirements is checked. 

Mandate: in the context of direct debits, the authorisation given by the debtor (payer) to the creditor (beneficiary) and/or to its own account holding institution to debit his/her account. 

Market failure: refers to an economic situation where market forces lead to a misallocation of resources; this expression is generally used to justify public intervention in the economy. 

Market risk: the risk of losses arising from movements in market prices.  

Merchant service charge: a fee paid by the acceptor/merchant to the acquirer.  

Mobile money: electronic money issued by a subsidiary of a mobile network operator.  

Mobile network operator: a telecommunication service provider that sells, delivers and maintains mobile telephony services for end users. 

Monetary aggregate: a way to calculate statistically the amount of money in circulation in the economy (i.e. the money supply).  

Monetary base: monetary aggregate representing the total amount of central bank money in circulation, often denoted M0. 

Monetary Policy: decisions taken by central banks to influence the cost and availability of money in the economy. 

Money creation: money issuance which triggers an increase in the money supply. 

Money demand: quantity of money which is necessary for an economy to avoid inflation and deflation. 

Money illusion: a cognitive bias where money is thought of in nominal terms, rather than real terms, i.e. without taking into account changes in prices; as a result, money illusion increases the perception of the purchasing power of money in times of inflation, and lowers it in times of deflation. 

Money issuance: provision of a form of money to the public.  

Money market: market where short-term funds are raised, invested and traded, not only by banks, but also by corporations and governments, using credit instruments which generally have an original maturity of up to one year. 

Money supply: quantity of money available in the economy. 

Money: an asset that serves as a medium of exchange, as store of value and as a unit of account. 

Moral hazard: any situation in which one person makes the decision about how much risk to take, while someone else bears the consequences if things go badly. 

Moral suasion: use of persuasion, including implicit threats, in order to get a person, or a group of people, to change their behaviour.  

Multilateral netting: an arrangement among three or more parties to net their obligations and agree on the way to settle the single net position of each of them.  

Multi-purpose prepaid card: A prepaid card which can be used for an unlimited range of purposes on which electronic money is loaded.  

Natural monopoly: a market which can be served by a single firm at a lower cost than any combination of two or more firms. 

Near field communication (NFC): technology which allows electronic devices in close proximity to be connected, in order to make secure transactions or exchange digital content. 

Net credit (or debit) position: a participant's net credit or net debit position in a netting system is the sum of the value of all the transfers it has received up to a particular point in time less the value of all transfers it has sent. If the difference is positive, the participant is in a net credit position; if the difference is negative, the participant is in a net debit position.  

Net settlement system: a funds or securities transfer system which settles net settlement positions during one or more discrete periods, usually at pre-specified times during the business day. 

Netting: an agreed offsetting of mutual obligations by participants in a system; the process involves the calculation of net settlement positions and their reduction to a (bilateral or multilateral) net amount. 

Network externality: a situation which occurs when the value of a product or service to a user increases as the number of other users increases. 

NFC: see near field communication.  

Nominal value (of a coin or a banknote): see face value. 

Nostro account: term used in correspondent banking to describe an account held by a customer bank on the books of another bank acting as service provider; that other bank regards this account as a "loro account". 

Offline card transaction: a card transaction which is authorised without contacting the issuer.  

Offline: disconnected; often used to mean "disconnected from the Internet". 

Online card payment: a card transaction which is authorised after explicit approval from the issuer.  

Online: connected; often used to mean "connected to the Internet".   

On-us payment: payment for which the payer and the beneficiary use an account in the same deposit-taking institution. 

Open banking: a set of rules, legislative or not, which allow depositors to authorize clearly identified financial service providers to access data concerning their payment activity by means of secure online channels. 

Open market operations: direct interventions by central banks in the interbank market. 

Operational risk: the risk that deficiencies in information systems or internal controls, human error or management failures will result in unexpected losses. 

Operator: the party providing the technical facilities used by a funds transfer system. 

Originator: the payer in a credit transfer. 

Oversight: in a payments context, a central bank function, principally intended to promote the smooth functioning of payment systems, and of payment instruments, in order to protect the financial system from systemic risks, facilitate the implementation of monetary policy and maintain public confidence in the currency. 

Payment card: a card which facilitates card payments; there are three types of payment cards: debit cards, credit cards and charge cards (or delayed-debit cards). 

Payment instrument: a tool or a set of procedures enabling the transfer of funds from the payer to the beneficiary.  

Payment lag: the time lag between the initiation of a payment order and its final settlement. 

Payment system: this expression has two meanings; in most cases it is used as a synonym of (interbank) funds transfer system; in other cases, it refers to the set of instruments, banking procedures and funds transfer systems which facilitate the circulation of money in a country or in a currency area; in the latter case, it is recommended to use the word "ecosystem" or the expression "national payment system" in order to avoid confusion. 

Payment versus payment (PvP): a settlement mechanism, used to settle foreign exchange transactions, that ensures that the final transfer in one currency occurs if and only if the final transfer in the other currency takes place. 

Payment: an exchange of goods, services or financial assets for other goods, services or financial assets (including money), in amounts which have been agreed in advance by the two parties involved. 

Personal identification number (PIN): a personal and confidential numerical code which the user of a payment instrument may need to use to prove its identity; in electronic transactions, it can be seen as the equivalent of a signature. 

Point of sale (POS) terminal: electronic device which captures payment information by electronic means and transmits such information either online or offline. 

Prefunding: the requirement that funds be available in accounts at the settlement institution before the settlement institution uses these accounts to extinguish settlement obligations of the participants. 

Prepaid card: a card on which value is stored that enables its holder to use funds loaded in advance; see multipurpose prepaid cards and limited-purpose prepaid cards.  

Principal risk: The risk that a party involved in a transaction loses the full value involved in a transaction.  

Principal: a party to a transaction that acts on its own behalf.  

Privacy: in the payment context, the fact that no information may be collected or released without the consent of the individual to whom it relates. 

Processing : in a payment system context, the performance of all actions required in accordance with the rules of a system for handling a payment order from the point of entry into the system to the point of discharge from the system.  

Promissory note: a signed document containing a written promise to pay a stated sum to a specified person or to the bearer at a specified date or on demand. 

Provision: money available on an account which is sufficient to make a payment; in principle, this term covers not only positive balances on a bank account, but also unused credit lines or available collateral.  

PvP: see payment versus payment. 

Quantitative easing: unconventional monetary policy tool where central banks intervene massively in the market, and over a long period, by purchasing assets (particularly bonds) from commercial banks, in order to lower medium and long term interest rates.  

Quantitative theory of money: economic hypothesis which states that the general price level of goods and services is proportional to the amount of money in circulation (the money supply). 

Queuing: a risk management arrangement whereby credit transfer orders are held pending until sufficient cover is available in the payer's account. 

Real-time gross settlement (RTGS): a processing and settlement method in which processing and settlement takes place on a transaction-by-transaction basis in real time.  

Refunds: in the context of direct debits, claims by the debtor for reimbursement of debits on his or her account. 

Remittances: non-commercial transfers of money between individuals; the word is very often used to designate transfers from foreign workers to members of their family abroad. 

Remote payment: payment made from a distance, without the payer and payee being present at the same physical location. 

Replacement cost risk: see market risk. 

Request to pay (RTP): payment instrument consisting of a request addressed by a creditor inviting a debtor to approve a pre-formatted credit transfer to the creditor's benefit; equivalent to a one-off direct debit. 

Required reserves: minimum amount of reserves that a bank is required to hold with its central bank.  

Reserve requirements: see required reserves. 

Reserve: see bank reserve. 

Retail CBDC: central bank liability in digital form offered to the general public for retail payments. 

Retail funds transfer system: funds transfer system which processes a large volume of payments of relatively low value.  

Retail payment: payment of relatively low value, typically made outside of the financial markets, initiated by individuals or non-financial institutions. 

RTGS system: an interbank funds transfer system run by a central bank which functions according to the RTGS mode; while privately owned systems may use RTGS, only systems run by central banks are called RTGS systems. 

Securities settlement system (SSS): a system which facilitates the transfer of securities, usually against payment, in a DvP mode.  

Seigniorage: the financial advantage that results, for the issuer, from the issuance of a currency. 

Settlement agent (or institution): The institution across whose accounts transfers between participants in a funds transfer system take place in order to achieve settlement of payments processed through the system.  

Settlement asset: assets or claims on assets that are accepted by the beneficiary to discharge a payment obligation. 

Settlement failure: the inability of a participant to meet its settlement obligations when due.  

Settlement risk: general term used to designate the risk that settlement in a transfer system will not take place as expected.  

Settlement: an act that discharges financial obligations between two or more parties.  

Single Euro Payments Area (SEPA): a process initiated by European banks supported by European authorities, in order to harmonize retail payment instruments and systems, in view of transforming the euro area into a domestic payments market. 

Single-purpose prepaid card: a prepaid card for which the card issuer and merchant (card acceptor) are identical, thus representing a prepayment for specific goods and services delivered by the issuer.  

Smart card: see chip card. 

Stablecoin: crypto-asset that aims to maintain a stable value relative to a specified asset, or a pool of assets (see algorithmic stablecoins and asset-backed stablecoins).  

Stakeholder: in a payment system, a party whose interests are affected by the operation of the system. 

Standing order: an instruction from a customer to its bank to make regular credit transfers of a fixed amount to a named beneficiary. 

Supervision (of financial institutions): the assessment and enforcement of compliance by financial institutions with laws, regulations or other rules intended to ensure that they operate in a safe and sound manner and that they hold enough capital to support the risks that arise in their business. 

Systemic risk: in a payment system context, the risk that the inability of one or more participants in a transfer system (or in financial systems generally) to meet its required obligations as expected will cause other participants to be unable to meet their obligations when due. 

Systemically important payment system: a payment system which has the potential to trigger systemic risks, in the event of it being insufficiently protected against the risks to which it is potentially exposed. 

Three-party card scheme (or three-corner card scheme): card scheme which acts also as issuer and acquirer in card payments made according to the scheme rules.  

Token: in a DLT context, digital representation of an asset which can be transferred through distributed ledgers. 

Traceability: in a payments context, the ability to discover information about the origination, the intermediaries involved and the destination of a payment. 

Transfer order: an order or message requesting the transfer of funds or securities from the payer to the beneficiary. 

Transfer system: a set of legal, technical and procedural arrangements which facilitates the transfer of assets such as money or securities. 

Truncation: a procedure in which a paper-based transfer order or other financial instrument is replaced, in whole or in part, by an electronic record of the content of that instrument for further processing and transmission. 

Two-sided market: a market which includes one provider and two (or more) categories of users with different and sometimes conflicting strategies.  

Unbacked crypto-asset (or crypto-assets of the first generation): crypto-asset which is not backed by any asset and whose value depends exclusively on supply and demand.  

Unconventional monetary policies: exceptional monetary policies used between 2008 and 2022 when traditional monetary policies were no longer efficient because short-term interest rates were too low. 

Unwind: a process which occurs when a participant in a net settlement system fails to settle while transfers between participants are provisional until all participants with a net debit position have finally discharged their settlement obligations; in such a situation, all provisional transfers involving the defaulting participant are deleted from the system and the settlement obligations of the remaining participants are recalculated. 

Value date: day on which a payment is due and the associated funds need to be available to the beneficiary. 

Velocity: the average number of times a measure of money (as captured, for instance, by a monetary aggregate) turns over within a specified period of time.  

Vostro account: see loro account. 

Wholesale CBDC: bank reserves issued and/or exchanged through some form of distributed ledger technology or similar technology. 

Zero lower bound: a macroeconomic problem that occurs when short-term nominal interest rates are close to zero; in such a situation, central banks can no longer encourage spending by lowering interest rates, because lenders would prefer to hold banknotes rather than lending at negative interest rates.