Payment system
A payment system is any system used to settle
mechanisms, which are essentially a different aspect of payment.Payment systems are used in lieu of tendering
Modern payment systems use cash-substitutes as compared to traditional payment systems. This includes
Payment systems may be physical or electronic and each has its own procedures and protocols. Standardization has allowed some of these systems and networks to grow to a global scale, but there are still many country-specific and product-specific systems. Examples of payment systems that have become globally available are credit card and
Domestic
An efficient national payment system reduces the cost of exchanging goods, services, and assets. It is indispensable to the functioning of the interbank, money, and capital markets. A weak payment system may severely drag on the stability and developmental capacity of a national economy. Such failures can result in inefficient use of financial resources, inequitable risk-sharing among agents, actual losses for participants, and loss of confidence in the financial system and in the very use of money.[4] The technical efficiency of the payment system is important for the development of the economy.
An automated clearing house (ACH) system processes transactions in batches, storing, and transmitting them in groups. An ACH is considered a net settlement system, which means settlement may be delayed. This poses what is known as settlement risk.
Real-time gross settlement systems (RTGS) are funds transfer systems where the transfer of money or securities takes place from one bank to another on a "real-time" and on "gross" basis. Settlement in "real time" means that payment transaction does not require any waiting period. The transactions are settled as soon as they are processed. "Gross settlement" means the transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments are final and irrevocable.
Comparatively, ACHs are typically used for low-value, non-urgent transactions while RTGS systems are typically used for high-value, urgent transactions.[5]
Countries and regions have also implemented real-time or instant (or faster) payment systems which typically operate 24x7x365 and perform the transaction from debit of ordering customer's account to credit of beneficiary customer's account within a timeframe of 10–15 seconds.[6]
International
Globalization is driving corporations to transact more frequently across borders. Consumers are also transacting more on a global basis—buying from foreign eCommerce sites as well as traveling, living, and working abroad. For the payments industry, the result is higher volumes of payments—in terms of both currency value and number of transactions. This is also leading to a consequent shift downwards in the average value of these payments.
The ways these payments are made can be cumbersome, error prone, and expensive. Payments systems set up decades ago continue to be used sometimes
As of 2014, STEP2 is the only Pan-European automated clearing house (or PE-ACH system) in operation. This type of system is thought to become less relevant as banks will settle their transactions via multiple clearing houses[7] rather than using one central clearing house.
TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) is a
For users of these systems, on both the paying and receiving sides, it can be difficult and time-consuming to learn how to use
The challenges for global payments are not simply those resulting from volume increases. A number of economic, political, and technical factors are changing the types of cross-border transactions conducted. Such factors include:
- Corporations are making more cross-border purchases of services (as opposed to goods), as well as more purchases of complex fabricated parts rather than simple, raw materials.
- Enterprises are purchasing from more countries, in more regions.
- Increased outsourcing is leading to new in-country and new cross-border intracompany transactions.
- More enterprises are participating in complex, automated supply chains, which in some cases drive automatic ordering and fulfillment. Online purchasing continues to grow, both by large enterprises as part of an automated procurement systems and by smaller enterprises purchasing directly.
- There is continued growth in the use of Commuter worker.
- Individuals are increasingly taking their investments abroad.
See also
- Aadhaar Enabled Payment System
- ATM Industry Association (ATMIA)
- Automated clearing house
- BankAxept
- Bharat Bill Payment System
- BHIM
- Cheque Truncation System
- Clearing
- Clearing house
- Credit card
- Debit card
- Direct Deposit
- Digital currency
- E-commerce credit card payment system
- E-commerce payment system
- Electronic bill payment
- Digital Wallet
- Electronic commerce
- Electronic funds transfer
- Giro
- Immediate Payment Service
- EFT / EFTPOS)
- List of on-line payment service providers
- National Automated Clearing House
- National Common Mobility Card
- National Electronic Funds Transfer
- NUUP Services
- Online banking
- Payment card
- Payment service provider
- Payments as a Service
- Real Time Gross Settlement
- RuPay
- Society for Worldwide Interbank Financial Telecommunication
- Structured Financial Messaging System
- Systemically Important Payment Systems
- Unified Payments Interface
- Wire transfer
- Automated Teller Machine
References
- ^ "What is a Payment System?" (PDF). Federal Reserve Bank of New York. October 13, 2000. Archived from the original (PDF) on 21 October 2012. Retrieved 23 July 2015.
- ^ Biago Bossone and Massimo Cirasino, "The Oversight of the Payment Systems: A Framework for the Development and Governance of Payment Systems in Emerging Economies"The World Bank, July 2001, p.7
- ^ "Payment Systems: Design, Governance and Oversight", edited by Bruce J. Summers, Central Banking Publications Ltd, London, 2012, p.3
- ^ Biagio Bossone and Massimo Cirasino, Op.Cit, p.7
- ^ Michael Tompkins, Payments Canada Research Unit, and Ariel Olivares, Bank of Canada. "Clearing and Settlement Systems from Around the World: A Qualitative Analysis" (PDF). www.payments.ca. Archived (PDF) from the original on 20 November 2018. Retrieved 19 November 2018.
{{cite web}}
: CS1 maint: multiple names: authors list (link) - ^ "Instant payments definition". www.ecb.europa.eu. European Central Bank. 2017. Archived from the original on September 9, 2018. Retrieved September 8, 2018.
- ^ Syrbe, Benjamin. "European Trend Survey 'Banks & Future'". Equens whitepaper. Equens. Archived from the original on 11 November 2013. Retrieved 15 October 2013. [verification needed]
External links
- A Guide to Replacing Legacy Payment Systems Archived 2013-11-06 at the Wayback Machine
- Inside National Payment Systems
- The end of a monopoly - New consumer payment systems.
- The Future of Money-Like Things - Past, present, and future overview of consumer payment systems.