- Purpose of payment
- Choice of payment instrument
- Recipients details (BIC etc)
2. Bank’s internal processing
- Availability of funds
- Accounting entries
- Prepare payment instruction for clearing
3. Life Cycle of Payment – Interbank processing (Clearing)
- In-house payments (on-us, book-entry transaction)
- Recon and sorting
– Sort code/BIC, account number, amount
- 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.