Settlements System
 
 

  The Landscape of Payment Systems 
Financial institutions must now adopt a global perspective to its payment business: 
   
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Technology continues to shrink the globe, increasing domestic and cross-border payment volumes, bringing payment systems together.

     
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Financial institutions are competing to provide interbank clearing systems for high-value payments, banking industry consolidation is leading to shared network consolidation.

     
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Institutions behind the world’s real-time gross settlement systems, are investing heavily to reduce risk by settling transactions as quickly as possible.

     
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Users of fund transfer systems want information about payments to accompany the payments themselves in realtime via electronic data interchange as businesses are moving towards electronic settlement.

     
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The Internet poses disintermediation threats as well as opportunities.

     
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Payment systems have traditionally emphasized monetary value transfer.

     
•   There were systems which handled high volumes of low dollar transactions and those handled relatively low volumes of high dollar transactions.
     
•   The risks involved in such payment systems are the credit and liquidity risk that arise out of settlement lags, nonsynchronous settlement or default by the issuer of the settlement medium. Moreover, a lag between a trade and the corresponding settlement creates the risk that the transaction may not take place at the time agreed owing to the failure of one of the parties to perform.
     
•   Therefore, there is a need for financial institutions to have an integrated payment system with comprehensive front-office and bank-office transaction processing and automated support that lower such risks in addition to improving the efficiency of processing, clearing, settlement and finality.
     

The Landscape of Payments have transformed dramatically:

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Payment volume are continually increasing as a wave of new delivery channels and payment technologies are creating more payment choices and options.

     
•   Payments are becoming increasingly complex due to the variety of financial instruments and multicurrency settlements across multiple time zones. 
 
The Need for Integration
 
The integration of payment systems addresses a wide range of objectives which are crucial to the banking payment market. By offering integrated transaction origination, transmission, authorization and risk management, transaction processing and reporting, banks can be more responsive to their customers’ needs, thereby increasing revenues. At the same time, banks can lower their cost of operations by reducing the labor intensive functions required to process and service customer requests. As a result, services are processed more efficiently from the bank’s viewpoint and more responsively from the customer’s viewpoint.
 
With an integrated payment system, financial institutions are able to attain the basic value elements critical for a payment system to operate efficiently such as reliability, accuracy, security, accessibility, liquidity and finality.