GLOBAL PAYMENTS KNOWLEDGEISO 20022 / SWIFT / SEPA / MT / MX
PAYMENTSSIGNAL

The interactive academy for the standards, messages, and rails that move money.

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A simple domestic transfer

One person pays another at a different bank in the same country. The simplest complete journey: instruct, check, move the message, move the money, credit.

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Contributor Shubham Mathure

STEP 1 / 8MESSAGE

The payer asks their bank to pay

Payer → Bank Alfa (payer's bank)

Using an app or a branch, the payer gives their bank an instruction: pay this person, at that bank, this amount. Nothing has moved yet — it is only a request.

Step 1 of 8: The payer asks their bank to pay

  1. 01Message
    The payer asks their bank to payPayer → Bank Alfa (payer's bank)
  2. 02Processing
    Bank Alfa checks the instructionBank Alfa (payer's bank)
  3. 03Posting
    The payer's balance goes downBank Alfa (payer's bank)
  4. 04Message
    The instruction travels to the clearing systemBank Alfa (payer's bank) → Clearing system
  5. 05Clearing obligation
    The clearing system adds everything upClearing system
  6. 06Settlement
    The banks settle upBank Alfa (payer's bank) → Nordbank (payee's bank)
  7. 07Message
    Nordbank receives the detailsClearing system → Nordbank (payee's bank)
  8. 08Posting
    The payee's balance goes upNordbank (payee's bank)
MESSAGECLEARING OBLIGATIONSETTLEMENTPOSTING
Full step-by-step text (works without JavaScript)
  1. 01Message
    The payer asks their bank to payPayer → Bank Alfa (payer's bank)

    Using an app or a branch, the payer gives their bank an instruction: pay this person, at that bank, this amount. Nothing has moved yet — it is only a request.

  2. 02Processing
    Bank Alfa checks the instructionBank Alfa (payer's bank)

    Is the account number valid? Is there enough money? Is anything suspicious? Banks check before they promise.

  3. 03Posting
    The payer's balance goes downBank Alfa (payer's bank)

    Bank Alfa reduces the payer's balance. Important: the payee does not have the money yet — it has only left the payer.

    • DR Payer's account at Bank Alfa — EUR 200.00
  4. 04Message
    The instruction travels to the clearing systemBank Alfa (payer's bank) → Clearing system

    Banks do not call each other one by one. They send payment messages to a shared clearing system that connects them all.

  5. 05Clearing obligation
    The clearing system adds everything upClearing system

    Thousands of payments flow both ways between the banks. The clearing system works out who owes whom overall — a tally, not yet a movement of money.

    Clearing decides who owes what. Settlement — the next step — actually moves the money.

  6. 06Settlement
    The banks settle upBank Alfa (payer's bank) → Nordbank (payee's bank)

    Bank Alfa's account at the central bank goes down; Nordbank's goes up. Now — and only now — has money truly moved between the banks.

    • DR Bank Alfa's account at the central bank — EUR 200.00
    • CR Nordbank's account at the central bank — EUR 200.00
  7. 07Message
    Nordbank receives the detailsClearing system → Nordbank (payee's bank)

    The message tells Nordbank exactly whose account to credit and with how much.

  8. 08Posting
    The payee's balance goes upNordbank (payee's bank)

    Nordbank credits the payee. The journey is complete: payer down, banks settled, payee up.

    • CR Payee's account at Nordbank — EUR 200.00

What this simplifies: A deliberately generic domestic scheme. Real systems (instant rails, batch ACH, RTGS) differ in timing and mechanics — later topics cover those differences.

LEARN THE CONCEPTS BEHIND THIS FLOW

Sources for this flow2
  1. Market practiceMarch 2003 edition

    A glossary of terms used in payments and settlement systems ↗ — CPSS (now CPMI), Bank for International Settlements

    Standard definitions for payment, clearing, and settlement terminology used across BIS committee reports and referenced by glossary entries on this site. · Checked 2026-07-12

    Terminology has evolved since this edition; newer CPMI publications refine some definitions.

  2. Simplified educational illustration

    Payments Signal editorial teaching models — Payments Signal

    This site's own simplified teaching models. · Checked 2026-07-12

    What this simplifies: A generic clearing system with one netting cycle; real domestic schemes differ in timing, messages, and settlement model.

    Used wherever diagrams, scenarios, figures, or example values are didactic constructions rather than sourced facts; every such use carries a simplifications disclosure. All people, companies, banks, and list entries in examples are fictional.