From instantaneous fund transfers to large-scale batch payments, the payments landscape offers an array of methods tailored to different needs and scenarios. This page delves into various payment types, including Instant Payments, Credit Transfers, Direct Debits, Direct Credits, RTGS, Remittances, Bulk/Batch Payments, and the often-overlooked Book-to-Book (or On-Us) Payments. Each payment type serves a unique purpose, whether catering to individual consumers, businesses, or specialised financial scenarios. Factors such as processing speed, settlement time, transaction value, volume, cost, customer types, and cross-border capabilities play pivotal roles in distinguishing these payment methods. As we navigate through this guide, readers will gain a comprehensive understanding of each system's nuances, advantages, and limitations.
As PagoNxt Payments Hub supports all aforementioned payments types, this resource offers valuable insights into the complex world of payments in general and payment types in particular.
Payment type taxonomy
Payment types encompass the various methods employed to transfer funds between entities. Each type signifies a distinct mode of transaction, defined to meet specific customer and financial requirements. Though payment types can be classified using various overlapping criteria, within PagoNxt Payments Hub the following taxonomy is applied:
Instant Payments: These are electronic payment solutions that allow the immediate or near-real-time transfer of funds between two bank accounts. Upon initiating the payment, the transaction is processed within seconds, making the funds available to the recipient almost instantly.
Credit Transfers: This is a method by which a payer instructs their bank to send, or "transfer", money directly to a payee's bank account. The payer initiates the transfer, typically through online banking, mobile banking, or at a branch.
Direct Debits: These are pre-authorised debits from the payer's bank account. The payer gives permission to a business or organisation (the payee) to collect payments directly from their bank account on agreed-upon dates via mandates, typically for recurring bills or subscriptions.
Direct Credits: This refers to the deposit of funds directly into a bank account, usually by an employer or a business. Common examples include salary payments, pensions, or government benefits. The recipient doesn't need to do anything to claim the funds.
RTGS (Real-Time Gross Settlement): RTGS systems are specialised transfer systems where the transfer of funds is conducted between banks on a "real-time" and on a "gross" basis. This means that transactions are settled immediately without batching, and the settlement is done individually on an order-by-order basis. RTGS systems are typically used for large-value transactions that require immediate clearing.
Book-to-Book (On-Us) Payments: Book-to-book or on-us payments refer to transactions where both the payer's and the payee's accounts are held at the same financial institution. Since these transactions occur within the same banking system, they often bypass the usual interbank processes and networks, leading to faster and sometimes more cost-effective transactions.
Remittances or Bulk/Batch Payments: This is a method of processing multiple payments at once in a single batch or file. Businesses often use this for payroll, supplier payments, or any situation where they need to make multiple payments simultaneously. Instead of processing each payment individually, they're grouped together and processed at the same time, often leading to efficiencies in terms of time and costs.
Payment type characteristics and comparison
Navigating the financial landscape, we encounter a plethora of payment types, each tailored to specific needs and scenarios. This section delves into these diverse payment types, offering insights into their unique characteristics, and applications in today's dynamic economic environment. Please note this section does not provide the advantages or disadvantages of the different payment types, as the suitability and usage is determined by the customer requirement or use case.
Processing speed | Settlement time | Per transaction value | Cross-Boarder capability | |
Instant payments | Real-time or near-real-time | Instantaneous or within a few seconds | Varies, but typically has a higher ceiling than traditional (cash) payment methods | Depends on the platform |
Credit transfers | Ranges from instant to a few hours or days | Same day to a few days | Generally no upper limit | Yes |
Direct debits | Typically takes a few hours to a couple of days | One to three days | Generally no upper limit | Limited, more common in country |
Direct credits | A few hours to a couple of days | Typically one to three days | Generally no upper limit | Limited, more common in country |
RTGS | Real-time | Instantaneous | Typically used for large-value transactions | Depends on the platform |
Book-to-book (On-us) payments | Typically very fast, often instantaneous | Immediate or near-real-time | Generally no upper limit | No |
Remittances | Generally not real-time since it processes in batches | Varies, could be a few hours to a couple of days | No specific limit | Depends on the platform |
PagoNxt Payments Hub supports the following schemes
Note: some of the below schemes are in development
Instant payments
SEPA Instant
Faster Payments
Bizum
SPEI
RTP
PIX
SPID
CODI
FedNow
Credit Transfers
SEPA Credit Transfer
TEF
BACS
ACH
Direct Debits
SEPA DD Core
SEPA DD B2B
BACS
Large value & International payments
TARGET2
EBA Euro1
EBA Step1
Correspondent
CHAPS
CHATS
Fedwire