Payment

Life cycle of Payment

Posted by Sagar A

1. Submission

  •   Purpose of payment
  •   Choice of payment instrument
  •   Recipients details (BIC etc)
  •   Submit

2. Bank’s internal processing

  •   Verification
  •   Availability of funds
  •   Authentication
  •   Accounting entries
  •   Prepare payment instruction for clearing

3. Life Cycle of Payment – Interbank processing (Clearing)

  •    In-house payments (on-us, book-entry transaction)
  •   Transmission
  •   Recon and sorting

 –  Sort code/BIC, account number, amount

  –  Sorting

  •   Netting
  •   Establish final positions for settlement

4. Life Cycle of Payment – Interbank processing

  • Interbank Settlement
  • the actual transfer of funds between the payer’s bank and the payee’s bank which discharges the obligation of the payer bank to the payee bank in respect of the transfer.
  •  transfer of balances on the book of central or commercial bank.

5.6. Life Cycle of Payment – Internal processing & communication

Bank’s Internal Processing

  •  The receiving bank credits the account of the recipient.

Information and Communication

  •  The receipt of payment is communicated to the beneficiary via account statements following the crediting of its account.
  •  If the payment is made in response to an invoice, the recipient (e.g. a firm) will perform a reconciliation following the receipt of funds in order to match incoming payments with invoices sent.

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