The EPC recommends three messages for the customer reporting. The bank can use one or many of them, according to client’s needs, to provide account reports, account statements and debit/credit notification. It is important to understand that these reporting messages are for customers which can integrate and process them in own IT systems. They...

Banks can join a clearing system or a settlement system as direct participants (DP) or as indirect participants (IP). After reading this post, you will understand the differences between these two types of participants and why only direct participants settle in CSM. The following figure depicts direct and indirect participants and the relationship they...

The Bank of International Settlement (BIS) defines settlement as an act that discharges obligations in respect of funds or securities transfers between two or more parties. Thus settlement is the funds transfer that is carried out by one party to fulfill his obligations towards the counterparty in a financial operation. The settlement must be...

After presenting the bilateral clearing in the previous article, it is now time to move to the next level: the multilateral clearing. In a multilateral clearing, a high number of financial institutions are involved. But the principle is the same as for bilateral clearing. All the participant banks will exchange payments among each other up to...

SEPA, the Single Euro Payments Area, is the area where SEPA payment instruments like the SEPA Credit Transfer and SEPA Direct Debit can be used. SEPA countries amount to 34 member states out of which certain states belong to other areas like the Eurozone and the European Economic Area (EEA). This article should help you...

In this article, we will look at push and pull payment transactions, two key concepts in payments. At first, let’s consider the definitions of the words pushing and pulling. Pushing means exerting a force on somebody or something in order to move it away from oneself. Pulling is applying force on somebody or something...

Traditional payment systems operate essentially on two types of models: open loop models and closed loop models. In this post, we will present each of the models with their advantages and drawbacks. Understanding how these models work is crucial for the analysis of payment systems. So read the following very carefully. Open loop models in...

Many take payment systems for granted and some are not even aware of their existence. But the reality is that our world would be completely different without them. What is a payment? What are payment instruments and payment systems? To start with fundamentals, this first article provides a brief introduction to payments and payment...