Evolutionary Trends of Payment Systems

Evolutionary Trends of Payment Systems

DOI: 10.4018/978-1-61520-645-2.ch006
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Abstract

This chapter also reviews another line of evolutionary trends, including the “Multi-Currency Payment Systems” and “Offshore Payment Systems,” and the linkage between payment system and “Securities Settlement System” (SSS). It also gives an explanation about the adoption of “Financial EDI” capability, which is the scheme that enables the processing of remittance information with payment instructions in the payment system.
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Transision From Dtns System To Rtgs System

The first evolution was observed in the payment systems operated by central banks. The evolutionary growth was the transition from the DTNS system to the RTGS system.

DTNS System and RTGS System

In many countries, when the electronic payment systems were first introduced, they were the Designated-Time Net Settlement (DTNS) systems. DTNS system is a net settlement system, thus the settlement of funds occurs on a net basis. In concrete terms, a net position of each participating bank is calculated, which is defined as the sum of the value of all the transfers a participant has received up to a particular point in time minus the value of all transfers it has sent. DTNS system is a designated-time settlement system, in which the final settlements take place at a certain time, typically once, at the end of the day. In short, the final settlement of net positions occurs at the end of the day in DTNS system.

On the other hand, the Real-Time Gross Settlement (RTGS) systems have two features. The first feature is that the settlement of funds occurs on a gross basis, which means payment instructions are processed on a one-by-one basis without netting. The second feature is that the final settlement is made on a real-time basis during the day. Thus the settlements become final immediately.

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