Payment SystemsSimplistic definition

the way we make and receive payments using different payment instruments.

RBI Vision : To proactively encourage electronic payment systems for ushering in a less-cash society in India and to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards.

Evolution of Payment Systems

Natural

Money

( Premature Time )

Precious

Metal Money (650

BC)

Paper mone

y ( 1700 AD )

Symbolic

Money

( Present )

Digital

Money

(Future)

Electronic Payment SystemsNational Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) allow individuals, companies and firms to transfer funds from one bank to another.

How are the two different?

NEFT operates on a deferred net settlement (DNS) basis and settles transactions in batches. The settlement takes place with all transactions received till a particular cut-off time. It operates in hourly batches — there are 11 settlements from 9 am to 7 pm on weekdays and five between 9 am and 1 pm on Saturdays. Any transaction initiated after the designated time would have to wait till the next settlement time.

In RTGS, transactions are processed continuously, all through the business hours. RBI’s settlement time is 9 am to 4:30 pm on weekdays and 9 am to 1:30 pm on Saturdays. Banks can function within this time frame or change it. Here, transfers made are quick and can be helpful in emergencies.

S.W.I.F.T - Society for Worldwide Interbank Financial Telecommunication

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.

SWIFT does not facilitate funds transfer; rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with one (or more) so as to enjoy those particular business features.

SWIFTNET : During 2007 and 2008, the entire SWIFT Network migrated its infrastructure to a new protocol called SWIFTNet Phase 2. The main difference between Phase 2 and the former arrangement is that Phase 2 requires banks connecting to the network to use a Relationship Management Application (RMA) instead of the former Bilateral key exchange (BKE) system.

Pictorial RepresentationBenefits for Corporate :

1) Cash Visibility2) Enhanced Security3) Greater Reliability4) Lower cost of

financial transactions5) Compliance

Some facts and figures• Cheque constitutes 52 % in volume and 9 % in value terms of all non cash transactions.• The number of non-cash transactions per citizen is very low in India (6 transactions per inhabitant)

Plan of Action

SWIFT •Secondary Research•Understanding in detail the various aspects

Corporate •Getting in touch with relevant person•Analyzing the benefits to corporate using the services

Bank•Feasibility study for implementing SWIFT•Benefits of offering the service•Recommendations