Correspondent banking

The traditional way cross-border payments work: banks hold accounts with each other, and a payment hops through a chain of these relationships to reach its destination. Each hop adds time, cost and a place it can stall.

For example: Paying a supplier in Brazil from Hong Kong might route through a US bank, then a regional bank, then the supplier's bank — three hops, three sets of fees, and three places where a compliance check can hold it for days.

RTGSReal-Time Gross Settlement

Central-bank systems that settle large payments one at a time, immediately and irreversibly, using central-bank money. 'Gross' means each payment settles individually rather than being bundled and netted off.

For example: CHAPS in the United Kingdom is how the money moves when you buy a house — a single large payment settled on its own, same day, and impossible to reverse once done.

Netting

Adding up everything two parties owe each other and moving only the difference, instead of settling every transaction separately.

For example: Over a day, Bank A owes Bank B US$100m across many trades, and Bank B owes Bank A US$97m. Rather than moving US$197m in total, they move US$3m once. Far less cash is needed.

ISO 20022

The modern international standard for the messages banks send each other about payments. It carries far more structured detail than the older format it replaces — including what a payment is actually for.

For example: The old format might carry a cramped free-text line like 'INV 4471 PYMT'. The new one carries separate, properly labelled fields for invoice number, purpose code and full party addresses — so a computer can read it rather than a human guessing.

Cut-off time

The daily deadline after which a payment will not be processed until the next business day.

For example: A treasurer realises at 6pm Hong Kong time that the Singapore office needs cash. The payment window closed at 5pm, so the money cannot arrive until Monday — leaving Singapore short all weekend while the cash sits unused in Hong Kong.

Nostro account

An account one bank holds at another bank, usually abroad and in that country's currency, so it can make payments there. Latin for 'ours' — our money, held at your bank.

For example: For HSBC to pay someone in Brazilian reais, it keeps a pot of reais in an account at a Brazilian bank. That cash sits there earning little, purely so payments can be made — money that is parked rather than working.

Settlement

The moment value actually changes hands and the deal is genuinely done — not just agreed, promised, or sitting as pending. Before settlement, someone is still owed something.

For example: You tap your card at 9am and the shop says 'approved'. That is authorisation, not settlement. The money may only actually leave your account two days later — that later moment is settlement.