Payment Systems


What is Swift?

  • SWIFT stands for Society for Worldwide InterBank Financial Telecommunications.
  • An automated payment system used to transfer funds between different countries.
  • SWIFT is
    • A cooperative organization created and owned by banks which operates a network to facilitate the exchange of payment and other financial messages between financial institutions throughout the world.
    • A messaging network. Note that SWIFT does NOT move any money.
    • The most widely used Financial Network on the planet
  • Two different message standards:
    • MT (Text Format)
    • MX (XML Format)


SWIFT MT- Message Structure:

  • SWIFT MT messages are denoted by MTnnn where MT is the prefix.
  • First digit (n) denotes the category of the message.
  • Second digit (n) denotes the group of related parts in a transaction life cycle.
  • Third digit (n) denotes the specific message.
  • E.g. MT103 – Single Customer Credit Transfer message.
  • Each MT message consists of five blocks of data including three headers, message content, and a trailer.

Sample SWIFT MT Message:

SWIFT MT- Message Structure

Payment, Clearing and Settlement Systems:

An essential part of the worldwide financial system, payment, clearing and settlement systems, also known as Financial Market Utilities (“FMUs”), provide payment and securities services to financial institutions. Membership in FMUs allow financial institutions to serve customers and clients around the globe. 

Clearing House Automated Payment System:

The Clearing House Automated Payment System (“CHAPS”) is the U.K.’s interbank payment system for large value sterling payments. CHAPS are operated by CHAPS Clearing Company Limited (“CHAPS Co”). For its normal operation, CHAPS depends on the real-time gross settlement (“RTGS”) IT infrastructure of the Bank of England (“BoE”). 

Clearing House Interbank Payments System:

Clearing House Interbank Payments System (“CHIPS”), a US payments system, is a service of The Clearing House Payments Company L.L.C. (“The Clearing House”), which in turn, is owned by the world’s largest commercial banks. CHIPS is a large value wire transfer payment system with real-time final settlement of payments. Payments become final on completion of settlement, which occurs throughout the day. CHIPS process a large proportion of US dollar cross-border payments and an increasing volume of US domestic payments.

Electronic Payment Network:

Electronic Payments Network (“EPN”) is an electronic payment system providing automated clearing house (“ACH”) services that is owned and operated by The Clearing House. The ACH system facilitates exchanges of batched debit and credit payments among business, consumer and government accounts. The system processes preauthorized recurring payments such as payroll, Social Security, mortgage and utility payments and non-recurring payments such as telephone-initiated payments and the conversion of checks into ACH payments at lockboxes and points of sale. It also processes inbound and outbound cross-border ACH payments through foreign gateway operators.


The Society for Worldwide Interbank Financial Telecommunication, Societe Cooperative a Responsabilite Limitee (limited co-operative society) (“SWIFT”) is a member-owned co-operative. SWIFT provides a telecommunication platform for the exchange of standardized financial messages between financial institutions and corporations. SWIFT is neither a payment system nor a settlement system though the SWIFT messaging standard is used in many payment and settlement systems. SWIFT’s customers include banks, market infrastructures, broker-dealers, corporates, custodians, and investment managers. SWIFT is subject to oversight by the central banks of the Group of Ten countries.


The Trans-European Automated Real-time Gross settlement Express Transfer system (“TARGET2″) is the settlement system for cross-border payments in Euro. Participating commercial banks access the TARGET2 system via the national central banks of eurozone Member States. TARGET2 has to be used for all payments involving the eurosystem, as well as for the settlement of operations of all large-value net settlement systems and securities settlement systems handling the euro (e.g., Euro1 ). Payment.

Wire Transfer:

A wire transfer is a process of transferring money from one institution or person to another. A wire transfer is commonly practiced in cases of transferring money from one bank account to other bank account. It can also be done by depositing money in cash at a cash office which then transfer the money at the requested bank account using wire transfer. This transfer is operated completely by the bank. Since it is a wire transfer, the transfer of funds is not seen by the person sending or receiving the money. The earlier form of wire transfer was used by the telegraph companies that carried the wire transfer of money order from one office to another. With advent of new technologies and software, it has become possible to wire the money between banks conveniently.



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