Global Transactions: What are the Predominant Payment Schemes? 

Are efficiency and reliability of payment systems are crucial for businesses and individuals alike? 

I think so, from facilitating everyday transactions to enabling cross-border trade, various payment schemes play an important role in the financial services ecosystem. 

Locally

Locally within the UAE, the Central Bank of the UAE oversees two main types of payment systems:

Large-Value payment systems (LVPS) 

Includes the UAE Funds Transfer System (UAEFTS), facilitating significant fund transfers among participating entities.

Retail payment systems (RPS)

Manages a high volume of lower-value transactions, such as cheques, credit transfers, and card payments. Examples include the Image Cheque Clearing System (ICCS), UAE Wages Protection System (UAEWPS), UAE Switching System (UAESWITCH), UAE Direct Debit System (UAEDDS), and UAE Payment Gateway System (UAEPGS).

Cross border

And two prominent cross-border payment systems that facilitates transactions between financial institutions in different jurisdictions (primarily UAE & KSA), governed by agreed rules and standards, are AFAQ (GCC RTGS) and BUNA (Arab Regional Payment System).

 

Central Banking Digital Currencies

There's the "Aber" project, a joint effort by Central Bank of UAE and Saudi Central Bank (SAMA), aimed to assess a dual-issued digital currency (CBDC) for domestic and cross-border settlements experimenting with CBDC issuance, and benchmarking against other central banks.

Globally

Globally, a few predominant payment schemes operating globally, exploring their features, benefits, and regional applications.

ACH (Automated Clearing House)

A network for electronic bank transfers in the US, the Automated Clearing House (ACH) facilitates the movement of funds between accounts. Known for its low-cost nature and efficiency, ACH is particularly suited for bulk payments. Its widespread adoption makes it a cornerstone of the North American payment ecosystem.

Regions: Primarily utilized in North America.

Examples: NACHA (The Electronic Payments Association), Zelle.

SEPA (Single Euro Payments Area)

SEPA represents a standardized payments scheme for Europe, aimed at harmonizing electronic payments across the Eurozone. SEPA streamlines cross-border transactions within the Eurozone, offering a single rulebook for participating countries.

Regions: European Union member states.

Examples: TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System), SEPA Instant Payments.

Faster Payments Service (FPS)

FPS is a real-time payments scheme in the UK, enabling instant settlements with round-the-clock availability. With its instantaneous transaction processing, FPS ensures swift and seamless fund transfers, enhancing efficiency in the UK payment ecosystem.

Regions: United Kingdom.

Examples: Faster Payments Scheme.

The Clearing House Real-Time Payments (RTP)

RTP is a network for instant payments in the US, providing real-time settlements with push-to-pull capabilities. Offering broader reach and real-time settlements, RTP complements ACH, catering to the evolving needs of the North American financial landscape.

Regions: Primarily utilized in North America.

Examples: The Clearing House RTP.

SWIFT (Society for Worldwide Interbank Financial Telecommunication)

SWIFT serves as a messaging network for cross-border payments, facilitating secure communication between financial institutions worldwide. Renowned for its global reach and robust security measures, SWIFT supports various financial transactions, including international fund transfers and trade finance.

Regions: Operates worldwide.

Examples: SWIFT gpi (Global Payment Innovation) for faster payments.

CHIPS (Clearing House Interbank Payments System)

CHIPS is a real-time gross settlement system for high-value payments in the US, ensuring immediate fund availability. Renowned for its security and high transaction volume capacity, CHIPS facilitates large-value transactions with efficiency and reliability.

Regions: Primarily utilized in North America.

Examples: CHIPS same-day settlement.

RTGS (Real-Time Gross Settlement)

RTGS represents a system for immediate settlement of high-value transactions, ensuring final and irreversible settlements. Minimizing counterparty risk, RTGS provides a secure and efficient platform for processing high-value payments in various countries.

Regions: Utilized in various countries, including India, Australia, and Singapore.

Examples: India: NEFT (National Electronic Funds Transfer), RTGS; Australia: CHESS (Clearing House Electronic Subregister System); Singapore: FAST (Fast And Secure Transfers).

CBDCs (Central Bank Digital Currencies)

CBDCs are digital versions of central bank currencies, offering the potential for faster, cheaper, and more inclusive payments with programmable features. With ongoing developments in various countries, CBDCs hold promise for revolutionizing the payment landscape, offering enhanced accessibility and efficiency.

Regions: Under development in various countries globally.

Examples: China: e-CNY (Electronic Chinese Yuan); Bahamas: Sand Dollar; Nigeria: eNaira.

As the global economy continues to evolve in this rapid startup and AI technology growth, the role of secure payment schemes becomes increasingly paramount. 

Understanding the features & functionalities of these diverse payment systems gives businesses + individuals understanding of complex modern financial industry. Whether it's speed of real-time payments, security of cross-border transactions, or just convenience, each scheme contributes uniquely to global finance.