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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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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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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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