Part IV: Payment systems 253
253 Part IV: Payment systems 13 Payment systems This chapter describes essentials of payment systems. Gross and net settlement systems and payment systems in the United States, the Eurozone, Japan and the United Kingdom are explained. 13.1 Essentials of payment systems Payment means the transfer of money or liquidity. The payment is carried out by means of a currency or by transfer of a bank deposit (the so-called bank pay- ment). Currency is used usually to realize small retail payments. The large retail payments and all wholesale payments take the form of deposit transfer. In this chapter we will concentrate solely on bank payments. Payment system or funds transfer system (FTS) is the system of transfers of deposits or liquidity between current accounts. It can operate either on the basis of settlement of individual (gross) payments while checking balances on the cur- rent accounts (gross payment system), on the basis of settlement the net payment calculated as a difference between mutual claims and obligations (net payment systems), or on the basis of combination of both systems. 13.1.1 Interbank payment systems The interbank payment system or the interbank funds transfer system (IFTS) is the system of transfers of liquidity whose participants are mostly or exclusively banks. This system operates usually on the basis of correspondent banking through mutual nostro and vostro accounts. Within individual coun- tries, the system of nostro and vostro accounts gets simplified so that there is at least one bank or some special entity (usually owned by banks)...
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