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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. |
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There
were systems which handled high volumes of low
dollar transactions and those handled relatively
low volumes of high dollar
transactions. |
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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. |
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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. |
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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. |
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Payments are becoming increasingly complex
due to the variety of financial instruments and
multicurrency settlements across multiple time
zones. |
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| The Need for
Integration |
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| 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. |
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| 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. |
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