payment system

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Payment System

Any system enabling the transfer of funds between parties. For example, when a bank processes a check, it uses a payment system to collect funds from the bank on which the check was drawn and then transfers the funds to the payee's account. Likewise, a clearing house uses a payment system for the settlement of security transactions. Most payment systems are electronic, and many involve the Federal Reserve in some way.

payment system

see PAY.
References in periodicals archive ?
For more information about CHIPS, see Bank for International Settlements, Payment Systems in the Group of Ten Countries (December 1993), pp.
Patrick Parkinson and Jeff Stehm-Staff, Board of Governors Adam Gilbert, Emily Gollob, Lauren Hargraves, Richard Mead, and Mary Ann Taylor-Staff, Federal Reserve Bank of New York Prepared as a staff study in fall 1991 Interest in clearance and settlement arrangements in securities markets by the Federal Reserve and other central banks reflects an increasing awareness that disturbances in settlement processes in those markets can adversely affect the stability of payment systems and the integrity of the financial system generally.
Moreover, from an international standpoint, the efficiency and soundness of national payment systems are becoming increasingly interlinked because of the need to make and settle the growing number and variety of off-shore, cross-border, and multicurrency payments.
Thus, over the years we have been committed to higher capital standards, to the reduction of risk in the payment system, to finality criteria for clearing-houses and payment systems, and to improved international cooperation in the areas of payment systems and banking supervision.
Although the role of central banks in the payment system varies from country to country, they have several common areas of concern regarding their countries' payment systems as broadly defined, including both clearing and settlement.