A:

CHIPS UID stands for Clearing House Interbank Payments System Universal Identifier. This is just a fancy name for an electronic clearinghouse database system, which facilitates the transfer of funds from both individual consumers and institutions. It is the back end of the automated clearing house (ACH) network, which is run by the National Automated Clearing House Association, and it provides the platform that allows exchanges to take place quickly and accurately.

Developed in the 1970s, the key to the CHIPS UID system is that its database contains all the necessary information to identify specific participants, such as name, address, routing number, account number, etc. However, all of this information is kept confidential within the system and each participant's information is linked to a six-digit code, which is referred to as the CHIPS UID.

Because the CHIPS UID number can be used by the clearing system to look up the needed banking information of a payment's recipient (e.g. routing number and account number), payment orders can be entered into the system simply with the CHIPS UID number. This simplicity reduces the occurrence of errors in transaction entry and speeds up the process for all parties.

As well, because the CHIPS UID number is linked to (but does not reveal) banking information such as an account number, the structure of this clearing system prevents a biller from knowing a payer's banking information, which increases the security and confidentiality of the system. The CHIPS UID system processes both domestic and international transactions and has long been the foremost method of moving U.S. dollars among the world's banks.

To learn more about electronic transaction technologies, check out our Electronic Trading Tutorial and Introduction To Level II Quotes..

RELATED FAQS
  1. What are the main types of chips produced by semiconductor companies?

    Learn about two ways in which chips in semiconductors industry are categorized: by functionality and by type of integrated ... Read Answer >>
  2. What is the average price-to-earnings ratio in the insurance sector?

    Discover the role the chip cycle plays in the electronics sector. The electronics sector is highly sensitive to shifts in ... Read Answer >>
  3. What does "System on a Chip" refer to in the electronics sector?

    Find out what a system on a chip (SoC) is and how it impacts the electronics sector. Also learn the applications of this ... Read Answer >>
  4. What consumer products drive most of the demand for chips produced by semiconductor ...

    Learn how the demand for consumer products, such as smartphones and cloud-based services, is increasing the market for semiconductor ... Read Answer >>
Related Articles
  1. Insights

    Inside National Payment Systems

    Investopedia explains: The global interconnection of U.S. payment systems makes commerical and financial transfers possible.
  2. Investing

    Apple Undercuts Intel Processor's Role In Next MacBook

    Apple is developing a new chip that will shift the low-power mode functionality from Intel's chips onto its own.
  3. Investing

    What does "Blue Chip" Mean?

    Describing a business as “blue chip” comes from the game of poker, where blue chips are the most valuable.
  4. Personal Finance

    Bank Lingo: Routing Number Vs. Account Number

    Each consumer bank account has its own personal ID. And so does the bank. How do these numbers function and how do they protect the account holder?
  5. Investing

    Challenges Faced When Analyzing Green Chip Stocks

    The fact that a green chip is not yet a blue chip should not alarm investors, but they need to be aware of the differences and challenges that can arise from assuming these are durable companies ...
  6. Personal Finance

    A Day In The Life Of A System Trader

    Systems traders divide their time between trading, developing, backtesting, optimizing and forward testing, to create viable and high-probability trading systems.
  7. Trading

    The Pros And Cons Of Automated Trading Systems

    Automated trading systems minimize emotions, allow for faster order entry, lead to greater consistency and resolve pilot-error problems.
  8. Trading

    Basics Of The Mechanics Behind Electronic Trading

    What was once associated with shouting traders and wild hand gestures has now become more closely associated with statisticians and computer programmers.
  9. Insurance

    Medicaid vs. CHIP: Understanding the Differences

    Medicaid and CHIP are both designed to provide low-income children with health care coverage. Find out about the differences between the two programs.
  10. Tech

    The Credit Card Chip: What Travelers Must Know

    Credit cards in the U.S are just getting ENV technology, which embeds a smart chip in your credit card. Here's how to avoid problems when traveling.
RELATED TERMS
  1. Clearing House Interbank Payments System - CHIPS

    The primary clearing house in the U.S. for large banking transactions. ...
  2. Blue Chip

    A nationally recognized, well-established and financially sound ...
  3. Corporate Trade Exchange - CTX

    A monetary transfer system used by corporations and governmental ...
  4. Bilateral Credit Limit

    Intraday credit limits set by two institutions for use with one ...
  5. Accounting Information System - AIS

    The collection, storage and processing of financial and accounting ...
  6. Green Book

    A comprehensive guide for financial institutions processing federal ...
Hot Definitions
  1. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  2. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  3. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  4. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
Trading Center