Accredited ACH Professional (AAP) Practice Exam

Who is referred to as the Payee in a transaction?

1. The entity that initiates the transaction

2. The entity that receives funds from a transaction

3. The individual who holds the card

4. The financial institution clearing the transaction

The correct answer is: The entity that receives funds from a transaction

In the context of a financial transaction, the payee is defined as the entity that receives funds as a result of that transaction. This role is crucial in the flow of payments, as the payee is essentially the recipient of money owed by the payer, who is the entity that initiates the payment. When considering the purpose and function of a transaction, the payee is primarily focused on receiving the payment, which may be for goods, services, or debts owed. Understanding this role helps clarify the dynamics of transactions in the payments ecosystem, including how funds move between parties. The other roles mentioned serve different functions: the entity that initiates the transaction, for instance, is responsible for originating the payment request, while the individual who holds the card is typically involved in consumer transactions but does not define the payee role. Lastly, the financial institution clearing the transaction acts as an intermediary that processes the payment but does not receive the funds directly; thus, it does not fit the definition of payee.