The PAYTECH Book

1Payments Explained

Executive Summary

From banknotes and coins, to plastic cards and mobile devices, payments have evolved over the centuries to include a number of instruments and means that help financial transactions to take place in the real economy. By nature, payment transactions are increasing as economic activity grows; the demand for payments is expected to rise globally as developing countries build their infrastructures and become more financially inclusive, and as the emergence of the digital economy allows for more “on-demand” products and services driven by consumer demand. But what exactly is in a payment and how are these cleared and settled in a modern financial system? What are the different technologies and infrastructures involved, and which elements are necessary in order to facilitate a payment?

This part looks at the broader question of what’s in a payment? and provides explanations and descriptions of the various stages and elements of payment systems, as well as how automated clearing houses and real-time settlement systems work. It looks at these from historical as well as technological, procedural, socio-political and regulatory perspectives. It goes on to put this in the context of modern and emerging economies around the world. Special focus is put on the evolution of money and payments that look at the material representations of money, the establishment ...