According to the Bank for International Settlements (BIS), a payment system consists of a set of instruments, banking procedures and, typically, interbank funds transfer systems that ensure the circulation of money. More simply, it is a system to handle the transfer of money in non-cash negotiable instruments–including checks, credit transfers, direct debits, credit and debit cards, e-money, and documentary credits (letters of credit, and so on).
Data is from the Bank for International Settlements’ Statistics on payment, clearing and settlement systems in the CPSS countries. Report published January 2013 with figures for 2011.
Use of Payment Instruments by Non-Banks (Total Value of Transactions Per Payment Instrument in USD Billions, 2011)
Use of Payment Instruments by Non-Banks (Relative Importance of Payment Instruments in % of Total Value of Transactions, 2011)
The nature of the global payments landscape has changed rapidly in recent years, as traditional payment instruments–such as cash and checks– decline in importance and the use of electronic payments rises.
According to data from the Bank for International Settlements (BIS), the total number of payment transactions by non-banks in those countries that are members of the BIS Committee on Payment and Settlement Systems (CPSS) rose each year between 2007 and 2011. In 2011, Singapore experienced the biggest jump in total payments made by non-banks — an impressive 27.7% increase over 2009 levels. China had the second largest growth (24.6%) followed by Saudi Arabia (18.3%). Overall, the United States continues to dominate with nearly half of the total. Brazil, which saw an astounding 38.3% increase in 2009 over 2008, came second.
The picture in 2011 was also relatively solid when considering growth figures for the total value of transactions. China ranked first in terms of the largest volume increase (+13.7%), followed by Mexico (+12.2%) and France (+10.7%). The biggest decline, for the second year in a row, was registered in Saudi Arabia (-6.2%). Overall, in 2011 for the first time, China passed the United Kingdom to take the top spot for the highest value of payment transactions by non-banks, with approximately a fifth of the total.
In terms of individual payment instruments, in 2011 card payments (excluding e-money) were the most popular by number of transaction (55.2% across the CPSS reporting countries). The use of e-money however grew the most over 2010 (21.4%). On the other hand, checks once again topped the ranking by value (60.6%,) although that represented a 1% drop from the previous year. Credit transfers, in the meantime, dominated overall payment value in European countries such as Belgium (96%,) the Netherlands (94.3%,) Switzerland (90.4%) and France (87.5%.)
Global Payments Infrastructure and Risk Management
The global payments and settlement infrastructure involves a complex network of domestic and cross-border payment systems with various regulating and governing bodies overseeing the smooth function of their respective networks.
Because of the complex nature of interrelationships between different elements of the global payments architecture, efficient operation of the cross-border payments infrastructure depends on the smooth functioning of all the global system involved, and policy coordination among the various stakeholders and regulatory bodies that oversee those systems.
According to the BIS Committee on Payments and Settlement Systems (CPSS) Report on the interdependencies of payment and settlement systems : “The safety of the global payment and settlement infrastructure requires that system operators, financial institutions, and service providers have a robust understanding of payment and settlement risks, and that they manage those risks effectively.”
As interdependencies among systems have grown, it has altered the risks that exist within the global payments infrastructure, and has generated new challenges for managing risk. As the report noted: “Tighter interdependencies have contributed to strengthen the global infrastructure by reducing several sources of settlement costs and risks. At the same time, interdependencies have increased the potential for disruptions to spread quickly and widely across multiple systems.”
Interbank Payments: RTGS
Real time gross settlement systems (RTGS) are funds transfer systems where transfer of money or securities takes place from one bank to another in “real-time” and on a “gross” basis. “Gross settlement” means the transaction is settled on a one-to-one basis without bunching or netting with any other transaction. The implementation of RTGS systems by Central Banks throughout the world is driven by the goal to minimize risk in high-value electronic payment settlement systems.
Fedwire is a RTGS operated by the US Federal Reserve banks. In conjunction with the privately held Clearing House Interbank Payments System (CHIPS) , Fedwire is the primary United States network for large-value or time-critical domestic and international payments.
In the UK, the Clearing House Automated Payment System (CHAPS) is one of the largest real-time gross settlement (RTGS) systems in the world. In China the RTGS is China National Advanced Payment System (CNAPS) , also called the Super Online Banking System . China’s central bank, the People’s Bank of China, launched the second generation of the system in the autumn of 2010.
TARGET2 is the Real Time Gross Settlement system for the Euro currency, and is offered by the European Central Bank and the National Central Banks of those countries that have adopted the Euro currency.
In contrast to RTGS systems , net settlement systems , such as BACS , settle transactions at the end of the day, and all inter-institution transactions during the day are accumulated for a single total settlement amount.
Data is from the Bank for International Settlements’ Statistics on payment, clearing and settlement systems in the CPSS countries. Report published January 2013 with figures for 2011.
Payment Transactions by Non-Banks (Total Number of Transactions, 2011)
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* Sum or average excluding those countries for which data are not available. For credit transfers, data for France (prior to 2005) and the United Kingdom include interbank transactions; however, the total number is relatively small.
Payment Transactions by Non-Banks (Total Value of Transactions, 2011)
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* Converted at yearly average exchange rates, except as noted. ** Total value of transactions in domestic currency deflated by yearly average CPI inflation. For the CPSS area, in US dollar terms.
*** Sum or average excluding those countries for which data are not available. Data for France (prior to 2005) and the United Kingdom include interbank transactions in credit transfers. Since the value of these transactions is relatively large, cross-country comparison and the CPSS figures should be treated with caution.
Use of Payment Instruments by Non-Banks (Total Value of Transactions Per Payment Instrument in USD Millions, 2011)*
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* Converted at yearly average exchange rates, except as noted.
** For credit transfers and e-money payment transactions, total transactions during the fiscal year ending March of the following year, converted at average fiscal year exchange rates.
*** Sum or average excluding those countries for which data are not available. For credit transfers, data for France (prior to 2005) and the United Kingdom include interbank transactions. Since the value of these transactions is relatively large, cross-country comparison should be treated with caution; consequently, CPSS figures related to credit transfers have not been calculated.
Use of Payment Instruments by Non-Banks (Relative Importance of Payment Instruments in % of Total Number of Transactions, 2011)
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* Sum or average excluding those countries for which data are not available. For credit transfers, data for France (prior to 2005) and the United Kingdom include interbank transactions; however, the total number is relatively small.
