Infographic: A Guide to Core Payment Types Topic3

The World of Electronic Payments

From massive corporate buyouts to daily coffee runs, electronic payments power our economy. Explore the core systems that move money around the globe.

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High-Value

The express lane for money.

Primary Point: Urgent, large-value, and non-recurring payments requiring immediate and irrevocable settlement.

Core Characteristics

• Urgency & Value: For critical, high-stakes transactions.
• Irrevocable: Once settled, the payment is final and cannot be reversed.
• Settlement Model: Typically uses Real-Time Gross Settlement (RTGS) systems like Fedwire (US) or TARGET2 (EU) for instant finality.

Common Use Cases

• Corporate Finance: Mergers and acquisitions.
• Real Estate: Finalizing property purchases.
• Financial Markets: Interbank and treasury settlements.

International & FX Payments

• Cross-Border: Payments moving between countries, often called "wire transfers."
• SWIFT: Utilizes the SWIFT messaging network to securely communicate payment instructions globally.
• FX (Foreign Exchange): Involves converting one currency to another as part of the transaction.

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Low-Value

The workhorse of daily payments.

Primary Point: Repetitive, lower-value payments that are not time-sensitive and are processed efficiently in large groups (batches).

Core Characteristics

• Bulk Processing: Processed in batches, not individually.
• Lower Cost: Highly cost-effective for high volumes.
• Settlement Model: Uses Deferred Net Settlement (DNS) via an Automated Clearing House (ACH).
• Reversibility: Payments can sometimes be reversed (e.g., in cases of error in the US ACH system).

Push vs. Pull Payments

• Push (Direct Credit): Payer initiates the payment (e.g., sending a salary).
• Pull (Direct Debit): Payee initiates the collection with payer's consent (e.g., collecting a utility bill).

Global Systems Examples

• UK: Bacs processes billions of Direct Debits and Credits annually.
• USA: Nacha governs the rules for the ACH network, which moves trillions of dollars.
• Europe: SEPA (Single Euro Payments Area) harmonizes euro payments, treating them all as domestic.

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Book Transfers

The internal superhighway.

Primary Point: An internal transfer where the payer and payee hold accounts at the same financial institution.

Core Characteristics

• Internal: The funds never leave the bank's own books ("on-us" payment).
• Instant & Final: Settlement is immediate as it's a simple bookkeeping entry.
• Efficiency: The most cost-effective method, bypassing external clearing systems entirely.
• Flexibility: Can be used for any value, and some banks offer cross-border book transfers within their international network.

At a Glance: High-Value vs. Low-Value

Attribute	High-Value Payments	Low-Value Payments
Urgency	High / Time-critical	Low / Not time-sensitive
Value	Typically large, significant sums	Typically small, often with value caps
Processing	Individually, in real-time	In batches (bulk files)
Settlement	Immediate & Final (RTGS)	Delayed (DNS), sometimes reversible
Typical Cost	Higher	Lower
Example	Buying a company	Paying a monthly phone bill