The transfer of value and its associated information from a payer to a beneficiary (both parties being either

consumer, bank, business or government)

●According to a Payers instruction

●Using a Payment instrument

●Inter or Intra Bank

●Domestic or cross border, according to the industry agreements and in conformance to the law of the land

A Payment process involves initiating, routing, receiving, processing and managing of all payment transactions
within or across country boundaries. This includes the calculating and applying interest and fees and charges,
monitoring accounts for movements and payments, supporting netting, pooling and cash concentration and the
capability to assist customers in collecting funds and interfacing with all domestic and international payment
and clearing houses.
It also includes all supporting functions for the execution of payments such as reconciliation, settlement and
exception handling.
Issuing Bank- An issuing bank is a bank that offers card association branded payment cards directly to consumers.

Acquiring Bank - An acquiring bank (or acquirer) is the bank or financial institution that accepts credit and or debit card
payments for products or services on behalf of a merchant

Card network: Visa, MasterCard or other

networks that act as an intermediary between
an acquirer and an issuer to authorize credit
card transactions.

Bank reconciliation is the process of comparing and matching figures from the accounting records against those shown on a
bank statement. The result, any transactions in the accounting records not found on the bank statement or vice-versa are said to
be outstanding
 Payments Value Chain:

The Payments value chain spreads across multiple functions in the bank ranging from Strategy to operations
including the Channel, products and IT.

A high level view of the Payments value chain is depicted in figure 1.

Figure 1: Payment Process

 Manage Payment Agreement:
One of the initiation points for a Payment transaction to go through is the creation of Payment agreements with
various internal and external entities like the Master and Visa for Card related products; the Clearing houses
and Agent banks for transactional payments and SWIFT and Reserve Bank for International payments. The
Payment strategic team in the organization is held responsible for the creation of these agreements and re-
visiting and improving the same from time to time.
While the External Payment agreements are effected and managed by the Strategic team, there are various
internal functions that are dependent on each other in effecting a payment transaction, hence an internal
agreement (OLA – Operational level agreement) between the corresponding divisions are created.
 Initiate & Validate payment:
Payments are initiated as part of servicing existing products and services sold by the Bank and through new
products being constantly developed and innovated in the Bank.
For example, a customer can walk into a branch or an ATM to initiate a payment or alternatively, can send a
request through Internet banking, Phone banking or through Mobile. Similarly, the Banks can initiate a
payment on behalf of the customer or route payments into a customer’s account, based on certain
agreement / standing instructions (covered in ‘Payment Agreement’). All payment transactions are validated
and authenticated before actioning the same.
On confirmation of the customer information including his limit details and levels of authority the transaction is
initiated for processing.
Applying Payment rules & Enriching Payment:

On the confirmation of the customer Identity and the transaction authenticity, the Payment engine routes the
transaction internally for same bank transaction or to the Clearing House for interbank transactions.
Based on special instructions, if any, the payment engine creates a provision to effect the same during the
transaction lifecycle. For e.g. (special instructions to re-direct a transaction to an alternate account in the event
the transaction getting rejected is addressed as part of the payment enrichment)
Clearing, Settlement & Posting of Payment:

Every transaction with any associated bank (“Not on us”) is routed via the Payment engine to the centralized
clearing house for clearing and Settlement. The clearing house sends the Payment instruction to the
corresponding bank for verification and sends back a message to the Initiating bank, on the status of the
transaction. The confirmation message from the Account clearing house (ACH) triggers the movement of funds
to the beneficiary account.
After clearing, ACH triggers settlement on daily basis. It advices all the corresponding banks for the final
settlement.

In case of Forex transactions, the payment instructions are routed via SWIFT and controlled through the
Reserve bank and there will b clearing and settlement through a Cash Correspondent bank – one for each

currency for each local bank.