International Payments And Payment Schemes Flashcards
Correspondent Banking
“Defined as an arrangement under wich one bank holds fund owned by other bank and provides payment and other services to those respondent banks”
SWIFT Acronym
Society For Worldwide Interbank Financial Telecommunications
CHAPS
UK Clearing House Automated Payment System
- One of the largest large value wire transfer payment systems in the world
- Uses real time gross settlement
- Suited for high value payments
Use-Cases:
- Money market transactions
- Individuals buying a car
- Property transaction
- Corporation paying taxes
Operator: Bank of England
SWIFT Function
“SWIFT is a messaging system used between banks for same-day electronic funds transfer”
- SWIFT does not actually move funds
- Payment schemes move funds
“SWIFT specifies a set of standard messages and formats that the industry agrees on, thus minimizing translation and counterparty verification costs”
- SWIFT counts more than 11000 members in more than 200 countries
Fedwire
- Large Value Payment Scheme
- Operated by the FED
- Uses real time gross settlement
BACS
- Bankers Automated Clearing House
- Uses deferred net settlement (once per day)
Use Cases
- Supplier payment via DD
- DD utility bills
- DD gym membership, subscription
- Payroll
FedACH
- Deferred net settlement
Important Deferred Net Settlement Real-Time Payment Schemes
- FPS (UK)
- UPI (India)
- Twint (Switzerland)
Important Real Time Gross Settlement Retail Payment Schemes
“Increasingly, this settlement method is being used for retail payment systems”
-FedNow
- Pix (Brasil)
- TIPS (EU)
- RTP (US)
SEPA
Single Euro Payment Area
“Is an initiative that aims to enable payers anywhere in the EU to make fast, safe and efficient Euro Credit Transfers and Direct Debits to anywhere within the area, just like national payments”
