3. Development of Payment Types Flashcards
(36 cards)
What are the main electronic payment types most commonly used globally today?
High-value and low-value payments.
What are some reasons for the development of high-value and low-value payment types?
To give consumers greater choice, leverage technological advances in automation, and provide payment connectivity for international commerce.
What is ‘funds transfer’?
The process of moving money from one party to another electronically, typically between bank accounts.
When is the term ‘remittance’ often used?
When financial institutions or other payment service providers send money.
What are some of the common names for high-value payment systems?
Real-time gross settlement (RTGS), large-value payment, CHAPS, Fedwire.
What are some of the common names for low-value payments?
ACH, direct debits, direct credits, BACS, SEPA, and International ACH (iACH) payments.
What is a ‘High-value payment’?
A generic term for a payment that is often urgent, non-recurring, and of significant value.
What are characteristics of high-value payments?
Usually significant value, often urgent, required to be irrevocable, often settling in real time.
What is a ‘clearing cycle’?
The time it takes to process a payment through a given clearing system; generally a published, agreed-on time period.
Are all HVPSs RTGS payment systems?
No, some HVPSs settle at the end of the clearing cycle on a deferred net settlement (DNS) basis through a central bank-owned RTGS system.
What are ‘International payments’?
Payments moving beyond national borders and currency zones, meaning the end remitter and end beneficiary are in different countries and the payment crosses a border.
What are the two main types of international payments?
Customer credit transfers (commercial payments) and wholesale financial institution transfers (payments between banks, often treasury payments).
Why are international payments often considered irrevocable, regardless of size?
Because they are generally settled in part through a national RTGS payment system (in the origination or destination country or both).
Why are international payments sometimes referred to as ‘SWIFT payments’?
Because they are largely made utilizing the SWIFT messaging system.
Why are payments within the eurozone not referred to as cross-border payments?
Due to the regulatory environment governing payments within the eurozone and the single currency involved.
What does ‘SWIFT payment’ refer to?
International payment instructions that use SWIFT as the primary messaging methodology, with specific formatting requirements for commercial and treasury payments.
What is a ‘remitter’?
Generic term for the party initiating a payment, also known as a payer.
What is a ‘beneficiary’?
Generic name for the party that receives a payment, also known as a payee.
When do ‘Foreign exchange (FX) payments’ occur?
When the parties to a payment maintain accounts in different currencies.
What is a ‘spot trade’ in foreign exchange?
The immediate purchase of foreign exchange, with the foreign currency delivered in two business days (with some exceptions).
What is a ‘forward trade’ in foreign exchange?
The purchase of foreign exchange with a settlement date in the future, using a foreign exchange rate agreed on today.
What is a ‘telegraphic transfer’ or ‘telex transfer (TT)’?
Older terms still used interchangeably with ‘wire transfer’ to denote a high-value payment, originating from the telex machine, an early electronic messaging technology for banks.
What is a ‘low-value payment’?
Generic term for a payment that is not urgent, is often repetitive, and has a lower value.
What is an ‘Automated Clearing House’?
A network that coordinates electronic payments and automated money transfers between financial institutions without using paper cheques, wire transfers, credit card networks, or cash.
