Everyday millions of people trade globally sending money in different forms across the world in exchange for goods and services. This exchange is called a payment.
Payments happen to clear obligations between buyers and sellers resulting in a settlement.
Payment systems are mechanisms established to facilitate the clearing and settlement of monetary and other financial transactions.
Happening at rapid rates, often at efficient clicks of a button, a tap of a card or swing of a device, payment systems have become so effective that people hardly stop to think about how they work.
In part because they have always been considered a background activity - comparable to plumbing, when was the last time one ever stopped to think about the pipes carrying waste out of our houses? Yet it would be hard to imagine a functional town without plumbing and sewer systems.
Other reasons include the idea that payment systems were reserved and supported by legacy financial institutions and their professionals. This has changed dramatically over the years with the banking and financial services industry seeing new market entries into their space.
This new found attention on the sector and consequently on payment systems is caused by a number of supporting factors which include changes in technology, volumes of payments, globalization and recently as we have seen between Russia and Ukraine as a matter of national security - changes in politics.
This piece serves as an introduction into the world of payments and will form a series where I walk the reader through foundational topics such as
Basic knowledge of payment systems.
Different aspects of a settlement and relevant actors in a payment system.
Roles played by central and other banks in payment systems.
The economic nature of payment systems.
Until the next one!
Signed - Gcinisizwe
Fantastic piece, well done
Looking forward to the next one!