Payment Scheme Types

1. Real time gross settlement (RTGS) payment schemes Specialist fund transfer systems where the transfer of money takes place from one bank to another. These are typically used for high value transactions that require and receive immediate settlement. Settlement for each payment made through the scheme occurs at the time the payment is affected on a transaction by transaction basis. No payment can be made without the accompanying money. This method entirely removes any settlement risk associated with the banks instructing the payments. Payments are final and irrevocable. 2. Netting Schemes Banks using netting schemes exchange payments throughout the schemes working day. Settlement for these payments is made on a netted basis - payments received are tallied against payments made. The bank settles only the net amount. The final netted payment is usually made at close of scheme day, but to avoid end of day settlement risk where one party may fail during the course of the scheme day one or more designated settlement times during the day may be agreed. 3. Automated Clearing House (ACH) Schemes An ACH scheme is usually a batch based scheme used for making large volumes of payments such as standing orders, direct debits and payroll on a batched basis. ACH systems are not normally same day settlement schemes and are therefore most commonly used for low value, non-urgent payments or payments that can be initiated ahead of time to take place on a specific date. Settlement is normally on a netting basis.