What is Credit Transfer?

Definition

Credit Transfer refers to the movement of funds or credit balances from one financial account to another. It involves transferring the ownership or rights to a specific amount of money or credit from the sender (transferor) to the recipient (transferee).

Key Points

• Transfer of Funds: It involves transferring money or credit between accounts held by individuals, businesses, or financial institutions.
• Electronic Transactions: Credit transfers are often conducted electronically through banking systems, wire transfers, or online payment platforms.
• Purpose: Credit transfers can be used for various purposes, including payments, settlements, remittances, and account management.

Types of Credit Transfers

1. Bank Transfers

Bank-to-Bank: Transfer of funds between different bank accounts, facilitated by banking institutions through electronic means.

2. Wire Transfers

Domestic and International: Immediate transfer of funds between banks or financial institutions across borders using secure networks.

3. Automated Clearing House (ACH) Transfers

Electronic Payments: Batch processing of transactions for payments such as payroll deposits, bill payments, and recurring transfers.

How Credit Transfer Works

Process and Example

1. Initiation: The sender (individual or business) initiates a credit transfer request, specifying the recipient’s account details and the amount to be transferred.
2. Authorization: The sender’s financial institution verifies the transaction and authorizes the transfer of funds or credit.
3. Execution: The funds are debited from the sender’s account and credited to the recipient’s account, typically within a specified timeframe depending on the transfer method used.

Example Scenario

Scenario: Jane needs to pay rent to her landlord, Tom. She initiates a credit transfer from her bank account to Tom’s bank account using online banking. Upon verification and authorization by the banks, the funds are transferred electronically, ensuring timely payment of rent.

Importance of Credit Transfer

Efficiency and Convenience

Credit transfers offer a quick and convenient method for individuals and businesses to conduct financial transactions without the need for physical cash or checks.

Global Transactions

Facilitates seamless international transactions, enabling businesses to engage in global trade, remittances, and cross-border payments efficiently.

Payment Automation

Supports automated payments for recurring expenses such as utilities, subscriptions, and loan repayments, reducing administrative overhead and ensuring timely payments.

Benefits of Credit Transfer

Speed and Security

Electronic credit transfers ensure prompt delivery of funds with enhanced security measures to protect against fraud and unauthorized transactions.

Cost-Effectiveness

Compared to traditional methods like cashier’s checks or money orders, credit transfers often incur lower fees, making them a cost-effective choice for large or frequent transactions.

Transparency and Tracking

Provides transparency with transaction records and electronic receipts, allowing senders and recipients to track payment status and reconcile accounts easily.

Challenges in Credit Transfer

Fees and Charges

Some credit transfers may involve fees depending on the transfer method, destination country, and currency exchange rates, impacting the overall cost of transactions.

Regulatory Compliance

Cross-border credit transfers may require compliance with international regulations, anti-money laundering (AML) policies, and Know Your Customer (KYC) procedures, adding complexity to the process.

Conclusion

In conclusion, credit transfer is a fundamental mechanism in modern finance, enabling individuals and businesses to transfer funds or credit balances electronically between accounts. Whether for personal payments, business transactions, or international trade, credit transfers offer speed, security, and convenience in managing financial obligations and facilitating economic activities. By understanding the mechanics of credit transfer, leveraging efficient payment methods, and staying informed about regulatory requirements, stakeholders can optimize financial operations and harness the benefits of seamless fund transfers in today’s interconnected global economy. As digital payment systems evolve and financial technologies advance, credit transfer continues to play a pivotal role in shaping the future of financial transactions and enhancing financial inclusion worldwide

As the name suggested, authorised push payments are:

1. Authorised: the payer fully intends to send their money to a recipient
2. ‘Push’ payments: the payer initiates the payment, as opposed to a ‘pull’ payment, where funds are taken from the payer’s account by the recipient

A legitimate authorised push payment could be made for several reasons. The payer may want to transfer money to invest, pay a tradesman, or even send money to family and friends.

APP fraud is so powerful as it effectively tricks the target into willingly parting with their money. This differs from unauthorised fraud, where the fraudster takes funds from your account without permission.

Treasury Bank credit transfers are exchanged as closed looped single or grouped transactions for privacy, convenience or efficiency reasons. The processing of credit transfers may differ from country to country and system to system; using ISO 20022 Pacs.008 credit transfers that will be sent when clients request Treasury Bank to send funds transfer to an account at the acquiring bank. As following:

• Clients may call or email to request a transfer over the counter or
• Clients may request payment through the web page or mobile banking API
• Clients are a corporation, may have your own ERP system and that is integrated with the Treasury Bank system and can request the payment through a pain.001 (payments initiation) message or
• Clients can request a payment through Treasury Bank proprietary integration with their acquiring bank that involve pacs.008

The above will result in outgoing pacs.008 from Treasury Bank

Structure​

Message flow where Treasury Bank and Receiving bank are correspondents​

Message flow where Treasury Bank and Receiving bank are not direct correspondents and settled through cover payment​

Message flow where the messages are routed through data processor (serial flow)​

Message flow through HSC or ACH clearing system​

Traditional Card Payment Transaction and Settlement Flow

1. Card transactions flow between client, Treasury Bank banks (issuer), processors, recieving banks (acquirer) and , within a card association network.
2. A cardholder initiates a card payment by presenting a payment card (or providing card details, such as the number and expiration date).
3. The merchant’s payment system sends the card information to the acquirer or payment processor, which sends the information to the appropriate card network, which forwards it to the issuing bank for approval.
4. The issuer approves or declines the transaction, sending the information back through the payment chain the way it came.

Treasury Bank’s Card Payment Transaction and Settlement Flow

Card transactions flow as Bank-to-Bank (B2B) as Credit Transfers

A cardholder is a merchant and client that initiates a card payment by presenting a payment card details, such as the number and expiration date.

The merchant’s sends its payment card requests to acquirer bank’s processor to pay other merchants with a Treasury Bank’s pre-approved identification and payment at acquirer bank processor.

How To Works

Unlike most banks, Treasury Bank Clients:

• are in-house investments contractors’ members with Treasury Bank
• have the same acquirer bank and processor
• Treasury contractors can only purchase from treasury bank members
• Transactions are internal book transfer at the acquirer bank’s processor

 Closed Looped Account Transaction:

• Treasury Bank as funds originator
• SFTP Client act as Treasury Banks bank connector
• Trading Partners hold accounts with Treasury Bank and acquiring bank.
• Acquiring Banks is account holders and cardholders receiving bank and processor with the card association.

Treasury Bank begins with contracting clients, fund underwriting, deposit account opening with acquiring banks, and  establishing control agreements with both banks. Treasures will also establish agreements with verify Treasury Bank to be fund originator as “Sender” and acquiring banks to be network processor as “Receiver.”   

Clients of Treasury Bank and the Acquirer Bank are automatically pre-identified and approved for funds by both banks Ledger for cash positioning and easy reconciliation.

After Treasury Bank originates 1:1 direct credit transfer to acquiring bank all clients’ payment transfers are closed looped RTP payment date with internal card information as book transfers within acquirer core network as its internal payment processor with or without card network

Each bank Issuing responsibility:

• Treasury Bank issues payment certificate
• Acquiring Bank issues payment card

Client initiates a card payment by presenting a payment card only with other pre identified and approved client for settlement by the Issuer and Acquirer.  

The card network only process payment within one acquiring bank internally.

Outside the Loop

• Any merchant payment outside the loop will be forwards to the appropriate card network with issuing bank pre-approval.
• Treasury Bank preapproval assures that payment will never decline within the network.

Tokenization

Tokenization is used to protect sensitive information. Tokenization involves a process of replacing credit card and account information with unique symbols, which creates a token. The token is not based on any known number in the original transaction such as a bank number, account number, or any other information tied to the customer.

Tokens allow retention of essential information about the transaction without compromising its security.

The following are examples of risks avoided that are associated with Treasury Bank payment cards:

• •Banks that use third parties to administer various aspects of customer card accounts are exposed to increased risks (e.g., operational, compliance, reputation) relating to the activities performed by the third party.
• All Prepaid verified cards are cash or cash equivalent account to void money laundering BSA/AML violations
• All cardholders are clients of both the issuer and the acquirer, so transferring of funds to or from an all account are unknown to avoid any KCY or CDD and EDD violations third party.
• Third parry integration has bank level security protocols to lower financial compliance risks that may exist due to multiple rules and regulations that apply. with card association rules and Regulation E.

Low Credit Risk

All credit transfers are one-way push credit transfers, which decreased credit risk by voiding potential fraud and charge-back activity. This is because all accountholders are directly between one closed connection with a issuing and an acquiring banks.

Benefit

Be apart of

Standing Order

A standing order is a payment service by which a payment service provider, on the basis of a contract on the standing order with its payment services user, periodically on a certain or determinable day transfers a certain or determinable amount from the payment account of its payment services user to credit the payment account of the payee (e.g. payment of the annuity or installment of a loan, etc.). The contract on the standing order can be separately entered into or as a provision of another contract.

Methodology – credit transfer and standing order

Paper-based order:

Credit transfers initiated by a paper-based order cover payment orders by which a payment transaction of credit transfer is initiated, which are initiated:

• Over-the-counter at a credit institution or a person that, on the basis of a contract, is acting on behalf and for the account of a credit institution;
• By using a 2D barcode, QRC, or other forms of scanning on paper-based payment orders that are scanned exclusively over the counter at a credit institution or a person that, on the basis of a contract, is acting on behalf of and for the account of a credit institution;
• at all other places, e.g. automated payment machines or by using any other devices/means/channels on paper-based payment orders as invoice, check, money order or voucher. 

Credit transfers initiated by a paper-based order can be executed from a payment account – transaction account, payment account – another payment account, in cash and by “Other” sources of funds as securities. 

Electronically:

Credit transfers whose payment orders are submitted electronically cover payment orders that are initiated:

• over-the-counter at a credit institution (received by fax or in other ways if carried out without a manual intervention by credit institution’s employees);
• by using Internet (electronic) banking services;
• by using telebanking services;
• by using the service of payment via the mobile phone;
• through an ATM/banking kiosk,
• by using the E-bill service;
• via the SMS;
• through the Reporting entity’s internal system, and
• at all other places, e.g. automated payment machines or by using any other device/means/channel not mentioned above (e.g. through SWIFT).

Credit transfers initiated electronically can be executed from payment accounts – transaction account, a payment account – another payment account, other “accounts” (only if performed from “other” accounts of a credit institution) and other sources of funds.

DEFINITIONS AND DESCRIPTIONS

1. Consumer 

‘Consumer’ means a natural person who, in payment service contracts covered by the CFPB for purposes other than his/her trade, business or profession, as well as a natural person concluding a contract for the issue of electronic money pursuant to the Electronic Money Act outside the area of his/her business activity and freelance occupation.

2. Non-consumer 

“Non-consumer” means a legal or natural person other than the consumer.

The following are included:

• legal persons (e.g. corporate, institutions, cooperatives, associations, foundations etc.), craftsmen and other natural persons employed as freelancers or carrying out an economic activity when entering into a contract on payment services within the area of their economic activity or freelance occupation,
• entities that do not have legal personality, but that can be the holders of payment accounts (e.g. bodies of state administration, representative offices etc.)

3. Credit transfers 

“Credit transfer” means a payment transaction by which a credit institution transfers funds to a payee’s account on the basis of a payer’s order, and the payer and the payee can be the same person.

The following are also included:

• transfers of funds from one payment account to another;
• credit transfers initiated through a device that enables the execution of payment transactions (e.g. a deposit-withdrawal-transaction ATM);
• the transfer of the amount of a granted credit from the payment account and other “accounts” of the credit institution crediting the credit beneficiary’s payment account managed by another payment service provider;
• the transfer of the amount of a granted credit from the payment account and other “accounts” of the credit institution crediting the credit beneficiary’s payment account managed by the credit institution itself if the transfer is executed on the basis of a special payment order of the credit beneficiary, and not on the basis of a credit agreement;
• the transfer of the amount of a granted credit from the payment account and other “accounts” of the credit institution crediting the payment account of a payment service user other than the credit beneficiary, irrespective of whether the account is operated with the credit institution (when the transfer is carried out on the basis of a special payment order) or with another payment service provider;
• payer’s cash deposits (by a payment slip) to the payee’s payment account operated either by the credit institution or by another payment service provider;
• credit transfers used to settle credit instalments/annuities initiated through Internet (electronic) banking debiting the transaction account of a consumer or non-consumer crediting another “account” of the credit institution, etc.

4. National payment transaction 

“National payment transaction” means a payment transaction the execution of which involves a payer’s payment service provider and a payee’s payment service provider, or only one payment service provider, which operate in the Special District in accordance with Chapter 7 of the Administrative Ordiance

5. Modes of initiation of credit transfers

5. Paper-based 

The term “paper-based covers payment orders that the payer submits in paper form, or on paper-based forms.  

The following are also included:

• payment orders submitted by fax, fixed phone or other means in which the credit institution must intervene manually so that the order can be executed;
• payment transactions executed on the basis of the order by a consumer or non-consumer debiting their payment accounts in a sum total (batch payments, e.g. for employees’ salaries) and when specifications are received in paper form (every individual credit transfer is recorded), and 
• paper-based payment orders submitted at automatic payment machines.

The term “electronically” covers payment orders submitted electronically.

The following are also included:

• payment orders received by fax or in other ways if payment orders are carried out without manual intervention;
• payment transactions executed against the order by a consumer or non-consumer debiting their payment accounts in a sum total (batch payments, e.g. for employees’ salaries), and received over the counter at a financial institution on any of the media (e.g. USB, CD, disk, etc.). Every individual credit transfer is recorded for these payment transactions.

6. Payment method 

The payment method describes the device, means, place, channel etc. through which or at which credit transfer

payment transactions are initiated or executed.

The term “over-the-counter” covers data on payment orders by which a credit transfer payment transaction is initiated, which are submitted over-the-counter at a credit institution or another person that, on the basis of a contract, is acting on behalf and for the account of the credit institution.

The following are also included:

• payment transactions that are executed against the order of a consumer or non-consumer debiting his/her account in sum total, and the order is received over-the-counter at a credit institution or a person acting on behalf and for the account of the credit institution on any of the media (e.g. order for the payment of employee salaries submitted on a CD, USB, disk etc.). These payment transactions are recorded for every individual credit transfer.

The following is not included:

• payment transactions executed through a 2D barcode over-the-counter at a credit institution or another person that, on the basis of a contract, is acting on behalf and for the account of the credit institution;
• payment orders that are executed as the bill-paying service submitted for collection over-the-counter at a credit institution or a person that, on the basis of a contract, is acting on behalf and for the account of the credit institution;
• over-the-counter cash deposit to the payment account (including the use of a debit card);
• over-the-counter cash deposit through a payment instrument.

The term “2D barcode” covers j data on credit transfers initiated by using a 2D barcode or other forms of scanning on paper-based payment orders that are scanned exclusively over-the-counter at a credit institution (or through a person that, on the basis of a contract, is acting on behalf of and for the account of the credit institution).

The following are also included:

• credit transfers initiated by using a 2D barcode or other forms of scanning on paper-based payment orders scanned over-the-counters at the person that is acting on behalf and for the account of a credit institution that are executed as credit transfers, or the payment service provider (credit institution) does not have a contract with the payee.

The following is not included:

• any other form of 2D barcode usage except its scanning.

1. 3. Other 

The term “Other” covers payment transactions that are initiated/executed at all other places, e.g. automatic payment machines, or by using all other devices/means/channels other than those mentioned here.

1. 4. The Internet

The term the “Internet” covers data on credit transfers that a consumer or non-consumer has initiated by using the agreed Internet (electronic) banking debited to his/her payment account operated by a credit institution, and the payment service user has contracted the Internet (electronic) banking service with the credit institution.

The following are also included:

• credit transfers initiated at a banking kiosk through the Internet (electronic) banking service.

1. 5. Telebanking 

The term “Telebanking” covers data about payment orders initiated by using telebanking (using the user application pre-installed on the workstation or personal computer/device of the payment service user) debiting the payment account operated by a credit institution, and the payment service user has contracted the telebanking service with the credit institution.

1. 6. Mobile phone 

The term “Mobile phone” covers data on credit transfers that the payment service user has initiated by using the application installed on a mobile device to debit his/her payment account operated by a credit institution, and the service user has contracted the payment service with the credit institution via the application installed on the mobile device.

1. 7. ATM/banking kiosk 

The term “ATM/banking kiosk” covers data on credit transfer payment transactions initiated through an ATM/banking kiosk.

The following are also included:

• credit transfers initiated through an ATM/banking kiosk (e.g. deposit-withdrawal-transaction ATM) enabling the execution of payment transactions by a paper-based/electronic payment order (most often a 2D barcode) that can be paid directly from the payment account.

The following is not included:

• cash deposit at an ATM/banking kiosk through a payment instrument.
• credit transfers initiated at a banking kiosk through the Internet (electronic) banking service.

1. 8. E-bill

The term “E-bill” covers credit transfer payment orders initiated by using the E-bill service, which the payment service user has contracted with the credit institution. The E-bill includes payment orders in the electronic form that are completed in advance for the user, electronically submitted to the user for authorisation, and the user authorises them electronically.

1. 9. SMS

The term “SMS” covers data on payment transactions of a credit transfer initiated via the SMS on a mobile device. The payment account of the payment service user is debited, which is operated by a credit institution and the service user has contracted the SMS payment service with the credit institution.

1. 10. Internal system of reporting entities

The term “internal system of reporting entities” covers payment transactions that a credit institution executes through its internal system (internally developed application solution) debiting its accounts and debiting the account of the payment service user. 

The following are also included:

• the payment transactions of debiting the payment account of a credit institution through its internal system such as, for example, the payment of credit institution’s overhead costs or the payment of salaries to the employees of the credit institution. 

7. Source of funds for payment 

The sources of funds for the execution of a credit transfer payment transaction are described below. 

1. 1. Payment account – transaction account

A payment account – transaction account is a current account or a giro account regulated by the Payment System Act. For the execution of the payment transactions of credit transfer, it refers to the accounts of consumers, non-consumers and credit institutions.

1. 2. Payment account – another payment account 

A payment account – another payment account is any account operated by a credit institution on behalf of one or more users of payment services and it is used for the execution of the payment transactions of credit transfers, but it cannot be categorised under the “Payment account – transaction account” and Other “accounts”. For the execution of the payment transactions of credit transfer, it refers to the accounts of consumers, non-consumers and credit institutions.

1. 3. Other “accounts”

The term other “accounts” covers all other accounts that are not categorised under the “Payment account – transaction account” and “Payment account – another payment account”. It comprises all accounts other than payment accounts, such as time deposits, various accounts, sub-accounts etc. 

For the execution of the payment transactions of credit transfer, it refers to the accounts of credit institutions.

1. 4. Cash 

All payment transactions in which cash is the source of funds for the execution of a credit transfer are included.  For the execution of the payment transactions of credit transfer, it refers to the accounts of consumers and non-consumers.

1. 5. Other 

The term “Other” covers all payment transactions of credit transfers in which the source of funds cannot be categorised under any of the above, including payment transactions of credit transfers in which the source of funds is a payment instrument (credit, debit and similar payment card). For the execution of the payment transactions of credit transfer, it refers to the accounts of consumers and non-consumers.

DESCRIPTION OF THE BASIC FIELDS OF THE REPORT

1. “TOTAL – Number of transactions“ 

It presents the total number of executed national payment transactions of credit transfers, initiated paper-based or electronically, that credit institutions have executed in the Republic of Croatia in euro, debiting the payment accounts of their payment service users or debiting their payment accounts or other accounts.

The payment transactions of national credit transfers that credit institutions have executed in the Republic of Croatia debiting their accounts are accounted for as “non-consumers”.

2. “TOTAL – Value of transactions“ 

It presents the total value of executed national payment transactions of credit transfers, initiated paper-based or electronically, that credit institutions have executed in the Republic of Croatia in euro, debiting the payment accounts of their payment service users or debiting their payment accounts or other accounts. 

The payment transactions of national credit transfers that credit institutions have executed in the Republic of Croatia debiting their accounts are accounted for as “non-consumers”.

Table PT2 Cross-border/international credit transfers

Data presented in this report are collected on the basis of the Decision on the obligation to submit payment and electronic money statistics (Official Gazette 147/2013 and 16/2017) and the accompanying Instructions.

This report presents the cross-border/international credit transfers sent and received, debited from/credited to the account of the consumer, non-consumer and the credit institution itself as the reporting entity whose transactions are included within the non-consumer transactions.

It does not include the credit transfer payment transactions sent/received that the credit institution has executed on its own behalf and for its account, or payment transactions against a payment account of the credit institution operated by a foreign payment services provider that the credit institution does not execute for the purpose of rendering the payment service to a consumer, etc.

Data in this report refer to the total number/value of transactions during the reporting period, or month, including the first and the last day in the month. Payment transactions executed in all currencies are included, and the amounts in the table are presented converted in euro at the exchange rate of the CNB on the last day of the reporting period.

DEFINITIONS AND DESCRIPTIONS

1. Credit transfer

A credit transfer is a payment transaction by which a payment service provider transfers funds to a payee’s account against a payer’s order, and the payer and the payee can be the same person.

In the case of batch payments (file with payments, e.g. salaries, contributions, etc.) every transfer to the payee’s account is counted as a single transaction.

2. Consumer

“Consumer” means a natural person who, in payment service contracts covered by the Payment System Act (Official Gazette 66/2018 and 114/2022) is acting for purposes other than his/her trade, business or profession.

3. Non-consumer

“Non-consumer” means a legal or natural person other than the consumer.

The following are included:

• legal persons (e.g. corporates, institutions, cooperatives, associations, foundations etc.), craftsmen and other natural persons employed as freelancers or carrying out an economic activity when entering into a contract on payment services or a contract on the issuing of electronic money within the area of their economic activity or freelance occupation,
• entities that do not have legal personality, but that may be the holders of payment accounts (e.g. bodies of state administration, representative offices etc.).

4. Cross-border/international payment transactions received

Cross-border payment transactions received refer to the total number/value of payment transactions received by the reporting entity, where the payer’s payment service provider operates in the EU.

International payment transactions received refer to the total number/value of payment transactions received by the reporting entity, where the payer’s payment service provider operates in a third country.

Cross-border and international payment transactions received are defined by Article 3(1), sub-paragraphs 22 and 42 of the Payment System Act.

DESCRIPTION OF THE BASIC FIELDS OF THE REPORT

1. Cross-border/international credit transfers sent – number/value of transactions

Cross-border and international payment transactions sent are counted on the payer’s side and they refer to the total number/value of payment transactions of credit transfers which the credit institution has executed debiting the payment accounts of its payment service users or debiting its payment accounts or other “accounts”.

1. Cross-border/international credit transfers received – number/value of transactions

Cross-border and international payment transactions received are counted on the payee’s side and they refer to the total number/value of payment transactions of credit transfers which the credit institution has executed for the benefit of payment service users or for its own benefit.

Table PT3 Standing order transactions in the Republic of Croatia in euro

Data presented in this report are collected on the basis of the Decision on the obligation to submit payment and electronic money statistics (Official Gazette 147/2013 and 16/2017) and the accompanying Instructions.

This report presents national payment transactions of executed standing orders in euro by debiting the payment accounts of users (consumers and non-consumers) as well as the contractual charge to their payment cards on the basis of a standing order.

This report presents the given consents and standing order payment transactions also credited to the service user (another legal or natural person) as well as credited to the reporting entity itself (credit institution or electronic money institution).

DEFINITIONS AND DESCRIPTIONS

1. Standing order

A standing order is a payment service by which, on the basis of a contract on the standing order with its payment service user, the reporting entity (credit institution or electronic money institution), periodically on a specified or determinable day, transfers a specified or determinable amount from the payment account of its payment service user credited to the payee’s payment account (e.g. payment of the annuity or instalment of a credit, etc.). The contract on the standing order can be concluded separately or as a provision of another contract.

2. Contractual charge of a payment card with a standing order

The contractual charge of a payment card with a standing order means payment transactions for which the charge through a payment instrument (payment card) is pre-arranged and that have the elements of a standing order.

3. Consumer

“Consumer” means a natural person who, in payment service contracts covered by the Payment System Act (Official Gazette 66/2018 and 114/2022 ) is acting for purposes other than his/her trade, business or profession.

4. Non-consumer

“Non-consumer” means a legal or natural person other than the consumer.

The following are included:

• legal persons (e.g. corporates, institutions, cooperatives, associations, foundations etc.), craftsmen and other natural persons employed as freelancers or carrying out an economic activity when entering into a contract on payment services or a contract on the issuing of electronic money within the area of their economic activity or freelance occupation,
• entities that do not have legal personality, but that may be the holders of payment accounts (e.g. bodies of state administration, representative offices etc.).

5. National payment transaction

“National payment transaction” means a payment transaction the execution of which involves a payer’s payment service provider and a payee’s payment service provider, or only one payment service provider, which operate in the Republic of Croatia in accordance with Article 7 of the Payment System Act (Official Gazette 66/2018 and 114/2022)

DESCRIPTION OF THE BASIC FIELDS OF THE REPORT

1. Columns “TOTAL – Number of transactions” and “TOTAL – Value of transactions”

The columns show data about the number and value of transactions of executed standing orders, which refer to the total number/value of transactions during the reporting period, where the value of data includes the number/value of executed standing orders on the first and the last day of the reporting period.

2. Columns “Number of contracts”

The columns “Number of contracts” show data about the total number of active contracts on the standing order on the last day of the reporting period.

They also show the number of contracts on the standing order concluded between the payment service user and the reporting entity (credit institution or electronic money institution) irrespective of whether the contract is concluded directly with the reporting entity or through an intermediary (a third party that, on the basis of the contract with the reporting entity, concludes contracts on the standing order on behalf and for the account of the reporting entity).

Here’s a breakdown of what this might entail:

• What it is:A fund origination certificate is a document that verifies the origin of funds, ensuring they weren’t obtained through illegal or suspicious means. 
• Why it’s used:Financial institutions, regulatory bodies, and other entities often require this type of documentation to comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations. 
• Examples:
  • Investment Funds: When investing in a fund, the fund manager might request a certificate to verify the source of the investor’s funds. 
  • Real Estate Transactions: In real estate deals, the buyer might need to provide a certificate to show where the purchase money came from. 
  • Large Cash Transactions:Banks and other financial institutions might require this for large cash deposits or withdrawals. 
• What it might include:The certificate could include information such as:
  • The source of the funds (e.g., salary, inheritance, loan). 
  • Details about the financial transaction or investment. 
  • The identity of the person or entity providing the funds. 
  • Supporting documentation, such as bank statements or employment contracts. 
• Other related terms:
  • Source of Funds: This refers to the origin of the funds being verified. 
  • Deal Origination: In finance, this refers to the process of identifying and securing investment opportunities. 
  • Certificate of Origin: This is a document used in international trade to verify the country of origin of goods

Here’s a more detailed explanation: 

1. Cash-Based Payment System: 

• This is the most basic form of payment, involving the physical exchange of currency (coins and bills). 
• It’s a straightforward method where no financial institutions or intermediaries are involved. 
• Cash transactions are often used forsmaller purchases or situations where privacy is a concern. 

2. Paper-Based Payment System: 

• This system primarily utilizes checks as the means of payment. 
• Checks are written orders to a bank to pay a specified amount to a specified payee. 
• Although their use has declined, checks are still used for rent, utility bills, and paying suppliers. 

3. Electronic-Based Payment System: 

• This encompasses all methods of payment that occur through digital channels and networks. 
• Debit Cards: These cards are linked to a user’s bank account, allowing for direct withdrawal of funds for purchases. 
• Credit Cards: These cards provide a line of credit, allowing users to make purchases and pay later, usually with a fee or interest. 
• Mobile Wallets/Digital Wallets: These are applications that store payment information securely, allowing users to make payments via mobile devices or online. Examples include Apple Pay Apple Pay, Google Pay and PayPal. 
• Bank Transfers: These allow for direct funds movement from one bank account to another, often used for Host to Host (H2H) Bank to Bank (B2B) larger or regular payments. 
• Direct Debit/Automatic Payments: These are recurring payments, often for bills or subscriptions, that are automatically deducted from a user’s bank account. 
• Buy Now, Pay Later (BNPL): A growing trend in e-commerce that allows customers to split the cost of a purchase into smaller, staggered payments. 
• Cryptocurrency: A decentralized digital currency that allows peer-to-peer transactions, stored in digital wallets

Treasury banking responsibilities 

• Cash flow: Monitoring members digital cash flow, forecasting future cash flow, and establishing cash position 
• Liquidity: Ensuring there’s enough liquidity to meet financial obligations 
• Risk management: Managing and mitigating financial risks 
• Investments: Pooling available securities and cash for investment 
• Deposits: Administering deposit activities, including currency, coin, and remote deposits 
• Funds transfers: Transferring funds across payment networks.

Treasury banking goals 

The goal of treasury banking is to maximize profitability by ensuring sufficient liquidity and capitalizing on market opportunities. 

Treasury banking in practice 

Treasury banking involves a mix of strategic forecasting, investment analysis, and risk management techniques. Treasurers use real-time data to make decisions about where to allocate funds. 

Treasury banking is also known as digital cash management

There is a variety of structures families can choose to commit their assets to, each with its own attributes and uses. In this article, I shall focus on the specific characteristics and merits of a family investment fund for private family wealth.

What is a family fund?

Simply put, a family fund is a closed-ended or sometimes open-ended) structure set up for family members. The units or shares of the structure are only accessible to the participating members of the family or their wealth administrators.

Funds are popular among wealthy families, investment club members and other partners looking to keep wealth together and invest in a range of asset classes on a collective basis. They allow assets to be consolidated, providing a clearer view of the collective pool of wealth.

Importantly, a fund is a ‘tax neutral’ structure that limits debate around the allocation of capital gains/income by virtue of being a see-through structure that places taxability squarely on the shoulders of the investors.

A fund structure also provides an independent and professional framework to help safeguard the family’s assets and tailor individual family members’ income. Wealthy families may not have the expertise or the time to make well-founded investment decisions. They may therefore appoint an investment manager for the day-to-day investment decisions, an administrator to independently calculate net asset values and an auditor to independently verify the financial records and accounting methods – with each appointment serving to ensure industry best practice and compliance with local and international regulations.

Further, funds can be compartmentalised, making it possible to select several managers or management companies within a single fund, and thus meet the various requirements of different family members. For example, this can be used to allow certain family members to invest in fixed income instruments that are linked to debt financed underlying asset classes if their cash flow needs so dictate. Vice versa, tailored entities can be structured in between the fund and individual investors for specific planning purposes.

A fund can also be structured and operated to meet changing investment objectives in a shifting economic landscape. Shares in a fund may be held by a securities account or even a life insurance contract. They can also be held in a trust or foundation for asset protection and succession planning purposes.

When can you use a family fund?

Family fund structures suit multiple purposes and can be used in a variety of situations. A family fund is a particularly apt choice when seeking to:

• Ensure continuity of the family business
• Safeguard assets from political and economic instability, or spendthrift activity
• Achieve flexibility in reclassifying income and distributions to suit individual needs
• Aid individual planning, given that a fund is tax neutral
• Allocate participation rights with or without voting rights
• Avoid possible intra-family disagreement
• Establish charitable legacies
• Enhance investment opportunities, diversification and liquidity
• Gain easier access to liquidity and leverage.

Setting up a family fund

When it comes to setting up a family fund, there are a number of factors that must be taken into consideration, from the specific purpose met by the fund through to its operational framework. Choosing where the fund is to be domiciled is also an important decision, as every jurisdiction has its own laws and regulations.

In the consultation rounds, the items that need to be discussed in order to outline the operational framework are:

• The regulatory environment regarding the investment policy
• The jurisdiction where the fund should be domiciled
• Its management and corporate governance including directorships
• The general preference of prospective investors
• The estimated costs in establishing and administrating the fund
• Tax efficiency for the fund and the investment manager
• Fund manager incentives including fees and sharing of costs with investors.

Appointing an independent administrator to set up the fund can deliver true value, especially if they are involved in the process from the very beginning. Administrators guide the fund’s investment manager in the initial consultation rounds by connecting them with the right legal and tax advisers based on their specific requirements, thus paving the way to the best possible structure.

In funds we trust

To conclude, a fund offers great flexibility, transparency and versatility and can help to keep the family’s wealth together while satisfying the needs of individual members. When used in conjunction with other wealth planning structures, family funds provide a global wealth management solution encompassing all family members.

Family funds are on the rise for various reasons, mostly to do with their enhanced access to expertise, independent management and controls, and sound planning tools. Funds allow families to obtain the right balance between active involvement and passive investing in an objective and sustainable format. At the same time, they allow for greater scalability and access to external investors, thus potentially enhancing performance. In addition, for multi-family offices and family club transactions, a fund is an ideal vehicle for implementing and governing targeted allocations from each participating family in a ring-fenced way.

For example, at IQ-EQ we have recently assisted in setting up family funds for significant family wealth pools in Colombia and Brazil, including active and passive assets and varying levels of involvement across the different family members. At the time of contribution of the assets, independent valuations took place on the underlying operating companies, thus providing a baseline valuation to establish correct levels of ownership and pricing of instruments. Similarly, investment advisory boards were established for implementation of an investment strategy set out by the family patriarchs.

Finally, it’s important to note that the increasing interest in family funds is happening against a backdrop of greater transparency and regulation. Indeed, a significant advantage of establishing a family fund is compliance with BEPS and OECD requirements. This is not unimportant in today’s world, in which full compliance and sustainability is considered a minimum standard by regulators and investors, requiring careful planning and structuring through a recognised and fully compliant jurisdiction.

SOC 2 is an auditing procedure that ensures your service providers securely manage your data to protect the interests of your organization and the privacy of its clients. For security-conscious businesses, SOC 2 compliance is a minimal requirement when considering a SaaS provider.

What is SOC 2

Developed by the American Institute of CPAs (AICPA), SOC 2 defines criteria for managing customer data based on five “trust service principles”—security, availability, processing integrity, confidentiality and privacy.

Unlike PCI DSS, which has very rigid requirements, SOC 2 reports are unique to each organization. In line with specific business practices, each designs its own controls to comply with one or more of the trust principles.

These internal reports provide you (along with regulators, business partners, suppliers, etc.) with important information about how your service provider manages data.

There are two types of SOC reports:

• Type I describes a vendor’s systems and whether their design is suitable to meet relevant trust principles.
• Type II details the operational effectiveness of those systems.

SOC 2 certification

SOC 2 certification is issued by outside auditors. They assess the extent to which a vendor complies with one or more of the five trust principles based on the systems and processes in place.

Trust principles are broken down as follows:

1. Security

The security principle refers to protection of system resources against unauthorized access. Access controls help prevent potential system abuse, theft or unauthorized removal of data, misuse of software, and improper alteration or disclosure of information.

IT security tools such as network and web application firewalls (WAFs), two factor authentication and intrusion detection are useful in preventing security breaches that can lead to unauthorized access of systems and data.

2. Availability

The availability principle refers to the accessibility of the system, products or services as stipulated by a contract or service level agreement (SLA). As such, the minimum acceptable performance level for system availability is set by both parties.

This principle does not address system functionality and usability, but does involve security-related criteria that may affect availability. Monitoring network performance and availability, site failover and security incident handling are critical in this context.

3. Processing integrity

The processing integrity principle addresses whether or not a system achieves its purpose (i.e., delivers the right data at the right price at the right time). Accordingly, data processing must be complete, valid, accurate, timely and authorized.

However, processing integrity does not necessarily imply data integrity. If data contains errors prior to being input into the system, detecting them is not usually the responsibility of the processing entity. Monitoring of data processing, coupled with quality assurance procedures, can help ensure processing integrity.

4. Confidentiality

Data is considered confidential if its access and disclosure is restricted to a specified set of persons or organizations. Examples may include data intended only for company personnel, as well as business plans, intellectual property, internal price lists and other types of sensitive financial information.

Encryption is an important control for protecting confidentiality during transmission. Network and application firewalls, together with rigorous access controls, can be used to safeguard information being processed or stored on computer systems.

5. Privacy

The privacy principle addresses the system’s collection, use, retention, disclosure and disposal of personal information in conformity with an organization’s privacy notice, as well as with criteria set forth in the AICPA’s generally accepted privacy principles (GAPP).

Personal identifiable information (PII) refers to details that can distinguish an individual (e.g., name, address, Social Security number). Some personal data related to health, race, sexuality and religion is also considered sensitive and generally requires an extra level of protection. Controls must be put in place to protect all PII from unauthorized access.

Blog: When data privacy and protection are rights, don’t get it wrong.

See how Imperva Data Protection can help you with SOC 2 compliance.

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The importance of SOC 2 compliance

While SOC 2 compliance isn’t a requirement for SaaS and cloud computing vendors, its role in securing your data cannot be overstated.

Imperva undergoes regular audits to ensure the requirements of each of the five trust principles are met and that we remain SOC 2-compliant. Compliance extends to all services we provide, including web application security, DDoS protection, content delivery through our CDN, load balancing and Attack Analytics.

Table of Contents

Public blockchains

Blockchains like Bitcoin (BTC) were designed to be public, decentralized, and accessible to anyone for any purpose they choose. The power of this concept is extensive as individuals can now transfer funds to anyone globally, without any intermediaries. 

However, these blockchains also have some drawbacks due to their design. With BTC you oftentimes have expensive and lengthy transactions. Furthermore, all participating users, their associated wallets, and transactions are visible for anyone to see.

Of course, it is not in the best interest of every organization to have all of its operations completely transparent, and accessible to the world. Therefore a compromise was needed. How could these organizations take advantage of the potential of blockchain while also ensuring that it can meet their specific needs? Innovation brought to life other types of blockchains such as private, federated, and hybrids. 

Private blockchains

With public blockchains being the quintessential type that the crypto space is known for, the next most common type is the private blockchain. There are several significant differences between the way these two are structured, and in many ways, private blockchains are the antithesis of what cryptocurrencies like Bitcoin set out to be. 

That being said, private blockchains exist to perform functions that a public blockchain would not be adequate for. They are centralized, directly managed by a core group, and they are not open to the average person. This means that a central authority determines who is allowed to operate a node, and rights are given individually. Not all nodes can perform the same functions on the network.

Ripple (XRP) is perhaps the most recognizable example of a private blockchain. Ripple primarily works to facilitate transactions between banks, and other financial institutions by converting different currencies into XRP for quick, and efficient transactions. With this use in mind, you can see how crucial it is to employ a private blockchain, and ensure that sensitive data is not intercepted.  

The pros and cons of private blockchains

This structure brings both positives, and negatives when compared to the public version. Private blockchains tend to validate transactions much faster than public ones, because there is not a wide consensus network. For an organization that must process thousands of transactions per day, and needs them completed as fast as possible, this sort of structure may be essential. In addition to this increased efficiency, these networks are also far more scalable due to the number of nodes involved. Lower fees are standard as well. 

With these benefits, some disadvantages must be taken into account. There are not as many users dedicated to the upkeep of the network, and therefore, public blockchains are also more susceptible to fraud and attacks. For these reasons, other structures were developed such as federated, and hybrid blockchains. 

Notable details of private blockchains:

• Centralized, managed by a core group
• Permissions based (no unknown parties involved) 
• More efficient transactions
• Easier to scale
• Lower transaction fees
• Potentially more vulnerable to fraud and attacks

Federated (consortium) blockchains

Federated or consortium blockchains have many similarities to their private counterparts. While they are not open to just anyone, there are more participants involved than traditional private blockchains. Multiple different entities all interact with the network, and together they create a more decentralized system. Notably, these networks also do not have a native token. Since there is no economic incentive, generally only corporations, and businesses utilize federated blockchains. 

Proof of vote (PoV)

Bitcoin is known for its proof of work (PoW) consensus, and in recent years, we have seen the rise of proof of stake (PoS) protocols as well. However, these consensus mechanisms are unfit for the necessities of federated blockchains. Instead, they often use a proof of vote (PoV) system.

All participants on this network have equal permissions, and often work together to complete tasks. When new blocks are being created, all governing parties must vote to validate them. If even one of the validators submits a vote of denial, the block can’t be created. Each PoV structure comes with predetermined rules, such as how many votes are needed out of the total number of active nodes. This system ensures a measure of trust, and organization on the network.

But how are federated/consortium blockchains safer than public and private?

Federated blockchains expand on the capabilities of public, and private versions, and therefore they have many of the same features while also being generally safer. First, there is no single point of attack like a private blockchain, but also less of a theoretical chance for 51% attacks as in public networks. Being governed by several pre-vetted entities, federated networks split the risk among the connected nodes. 

Similarly, the risk of fraudulent, or criminal behavior is also mitigated because all nodes on the network are known to the group. Since they don’t use a PoW protocol, federated blockchains are also less dependent on excessive electricity usage, and less likely to be heavily regulated as well. For corporations, and multinational systems that have millions of dollars at stake, these benefits are greatly appreciated. 

Use cases and examples

On that note, some recognizable examples of federated/consortium blockchains include Corda, Quorum, Voltron, Batavia, Marco Polo, and many others. Some of the most essential use cases include banking, supply chain management, know your customer (KYC) processing, insurance, healthcare, and information registries.

Notable details of federated/consortium blockchains:

• Proof of vote protocol
• Resistant to fraud/attacks by design 
• Does not use excessive energy like proof of work protocols 
• All nodes on the network are known and approved
• Useful for groups of corporations, multinational companies
• No native token involved

Hybrid blockchains 

As the name implies, hybrid blockchains are designed with a combination of the features found in public and private blockchains. The concept is to take both systems’ strengths while simultaneously removing the disadvantages. Data is often private but can be made public for transparency purposes. For example, sales data can be sent to shareholders of a company, or features can be demonstrated to customers. 

Hybrid blockchains are often controlled by one individual organization, however they can also allow outside users to join the network if desired. In most scenarios, users have full access to the hybrid network but are not able to change, or add to it without the permission of the blockchain’s governing figure. 

Like federated systems, hybrids do not use a native token. There is also no way to 51% attack them because they will be operated by a sole organization. Overall, hybrid blockchains aim to merge the speed of private blockchains with the security of public structures in a system that is customizable to the organization’s specific needs.

Use cases and examples

One example of a hybrid blockchain that is currently live is the IBM Food Trust. This organization revolves around food supply management, and the network is used to track goods and products from their individual origins, through processing, and all the way to their final destination. This has been said to aid in minimizing waste, increase safety and transparency, and helping companies understand where there may be inefficiencies in their systems. Further use cases include global finance, banking, and other services. 

Notable details of hybrid blockchains:

• Combines elements of public and private blockchains
• Managed by one entity
• No native token
• Can provide permissionless access while remaining secure
• Fast and efficient transactions 

Disclaimer: For family purposes only. Not investment or financial advice outside family members. Seek professional advice. Digital assets involve risk. Do your own research.