GLOBAL PAYMENTS KNOWLEDGEISO 20022 / SWIFT / SEPA / MT / MX
04 / CLEARING & SETTLEMENT14 MIN

Payment market infrastructures

The named systems banks plug into to clear and settle payments — TARGET2/T2, Fedwire, CHIPS, FedNow, CHAPS — and whether each settles gross, nets, or runs instant.

NOT STARTED

L0 Explain simply

An everyday analogy: think of the big shared systems that banks plug into as a country's motorways for money. Cars — the payments — belong to individuals, but they all travel on a small number of public roads built and policed by someone else. Every country has a few of these roads. Some are express lanes for a handful of very large, urgent vehicles: the high-value systems. Others are broad motorways carrying huge volumes of everyday traffic. And newer ones never close, running every minute of every day for instant trips. The banks own the cars; the state or an industry body usually owns the roads. Learning the names of these roads — and which traffic each is built for — is most of what clearing and settlement infrastructure means in practice.

L1 Core concepts

A payment market infrastructure — often called a financial market infrastructure, or FMI — is a shared system that clears or settles payments between institutions. Two design choices sort most of them. First, gross versus net: a real-time gross settlement (RTGS) system settles each payment individually and finally, while a netting system offsets many payments and settles only the difference. Second, high-value versus instant: some carry large, urgent interbank payments, others round-the-clock retail traffic. In the euro area, T2 — the Eurosystem service that replaced TARGET2 (the Trans-European Automated Real-time Gross settlement Express Transfer system) in March 2023 — is the RTGS, with EURO1 a separate net system. In the United States, Fedwire is the Federal Reserve's RTGS and CHIPS (Clearing House Interbank Payments System) is a privately run high-value system that nets. FedNow is the US instant service. In the United Kingdom, CHAPS (Clearing House Automated Payment System) is the sterling RTGS.

L2 Practitioner view

What separates these systems in daily practice is who operates each, what it is built for, and when it is open. Central banks operate the real-time gross settlement (RTGS) systems and settle them in central bank money: the Eurosystem runs T2, the Federal Reserve runs Fedwire, and the Bank of England runs CHAPS (Clearing House Automated Payment System). Industry bodies operate others: The Clearing House runs CHIPS (Clearing House Interbank Payments System) in the United States, and EBA CLEARING runs pan-European systems including EURO1. Instant systems such as FedNow run every minute of every day, so they have no cut-off in the way a high-value system does; a bank joining one must staff and fund it around the clock. High-value systems, by contrast, have operating hours and hard cut-offs, and a large payment that misses the window waits. Most economies run several of these side by side, and a bank chooses the path by currency, value, urgency, and which system can reach the beneficiary's bank.

L3 Technical details

A closer look at the settlement models shows why the labels matter. Fedwire and CHAPS (Clearing House Automated Payment System) are true real-time gross settlement (RTGS): each payment settles one at a time, with finality, across accounts at the central bank, so there is no interbank credit exposure between participants. CHIPS (Clearing House Interbank Payments System) is different — a netting system that reaches finality continuously through the day using participants' prefunded positions, combining netting's liquidity efficiency with intraday finality. T2 is RTGS but embeds liquidity-saving mechanisms that offset queued payments, borrowing netting's efficiency without giving up gross settlement. Instant systems such as FedNow settle each retail payment individually and immediately, around the clock, typically against prefunded balances held at the central bank. The common thread is central bank money for final settlement; the differences are timing, liquidity, and whether obligations are ever allowed to accumulate.

L4 Standards & sources

Two operator sources anchor this topic, and each system's operator is the authority for its own rules. The European Central Bank's TARGET Services pages describe T2, the euro real-time gross settlement (RTGS) service that replaced TARGET2 in March 2023, and how it settles high-value euro payments in central bank money. The Federal Reserve's Fedwire Funds Service pages describe the US RTGS system for immediate, final, and irrevocable dollar transfers; the Fedwire Funds Service completed its move to ISO 20022 messaging on 14 July 2025. For the other systems named here, the operators are the sources: The Clearing House for CHIPS (Clearing House Interbank Payments System), the Bank of England for CHAPS (Clearing House Automated Payment System), and EBA CLEARING for EURO1. Two cautions: operating hours, cut-offs, and message standards are set by each operator and change over time; and participation tiers — direct versus indirect — mean "a bank uses CHIPS" can describe several different relationships. Confirm specifics against the operator whose system you are studying.

Sources & standards2
  1. Official requirement

    TARGET ServicesEuropean Central Bank · TARGET Services; T2 RTGS in central bank money

    Describes the Eurosystem's TARGET Services, including the T2 RTGS system and central liquidity management used to settle euro payments in central bank money. · Checked 2026-07-12

    T2 replaced TARGET2 in March 2023. Detailed user functional specifications are published separately in the ECB's professional-use documents section.

  2. Official requirement

    Fedwire Funds ServiceFederal Reserve Financial Services · Fedwire Funds Service; real-time gross settlement of US dollar transfers

    Describes the Fedwire Funds Service, the US real-time gross settlement system for immediate, final, and irrevocable US dollar funds transfers. · Checked 2026-07-12

    The Fedwire Funds Service completed its ISO 20022 implementation on 14 July 2025.

SEE THE PAYMENT MOVE

A TARGET2 (T2) settlement (euro RTGS) — swimlane diagramA high-value euro payment settles one-for-one across the banks' accounts in central-bank money, in real time and with finality — each accepted instruction settles on its own, without any prior netting. The full step-by-step description follows this diagram as text.
MESSAGECLEARING OBLIGATIONSETTLEMENTPOSTING
A TARGET2 (T2) settlement (euro RTGS). One payment settling gross. Real RTGS operation depends on intraday liquidity management across CLM and RTGS accounts, queue optimisation, and settlement windows across the whole business day. PLAY IT STEP BY STEP →
Read the steps as text
  1. 01Message
    Bank Alfa submits the payment to T2Bank Alfa (sending bank) → TARGET2 (T2) · pacs.009

    Bank Alfa's payments desk sends a high-value interbank payment (a pacs.009) to TARGET2, which processes it the instant it arrives rather than batching it for a later cycle. Nothing has moved yet — it is an instruction.

  2. 02Processing
    T2 checks Bank Alfa's available liquidityTARGET2 (T2)

    TARGET2 checks whether Bank Alfa's RTGS account holds enough available liquidity — drawing on the Central Liquidity Management (CLM) component — to cover the full amount before it settles anything.

  3. 03Settlement
    T2 settles the payment in central-bank moneyBank Alfa (sending bank) → Nordbank (receiving bank)

    With liquidity confirmed, T2 debits Bank Alfa's account and credits Nordbank's account at the central bank, one payment at a time. RTGS settles each accepted instruction individually, without any prior netting, and the transfer is final the instant it settles.

    • DR Bank Alfa's RTGS account at the central bankEUR 2,000,000.00
    • CR Nordbank's RTGS account at the central bankEUR 2,000,000.00
  4. 04Message
    Nordbank is confirmed of the settled paymentTARGET2 (T2) → Nordbank (receiving bank)

    TARGET2 tells the receiving bank that the funds are on its account at the central bank and are final, with the details of the payment it needs to apply.

  5. 05Posting
    Nordbank books the incoming fundsNordbank (receiving bank)

    Because the interbank leg already settled with finality, Nordbank records the credit on its own ledger without waiting for anything else. The payment is complete end to end.

    • CR Incoming settlement account at NordbankEUR 2,000,000.00
A CHAPS payment (UK sterling RTGS) — swimlane diagramA high-value sterling payment settles one-for-one across the banks' accounts at the Bank of England, in real time and with immediate finality — each payment settles on its own in central-bank money, with no netting and no waiting for a cycle. The full step-by-step description follows this diagram as text.
MESSAGECLEARING OBLIGATIONSETTLEMENTPOSTING
A CHAPS payment (UK sterling RTGS). One sterling payment settling gross. Real CHAPS operation depends on intraday liquidity management, the Bank of England's intraday liquidity facility, central-queue optimisation, and settlement windows across the whole business day. PLAY IT STEP BY STEP →
Read the steps as text
  1. 01Message
    Bank Alfa submits the CHAPS paymentBank Alfa (sending bank) → CHAPS · pacs.008

    Bank Alfa must pay a high-value sterling obligation — the completion monies on a property purchase — to Nordbank, so it sends an interbank payment (a pacs.008) into CHAPS. Since the ISO 20022 migration on 19 June 2023 the message carries richer structured data, including the Purpose Code and Legal Entity Identifier (LEI). Nothing has moved yet — it is an instruction.

  2. 02Processing
    CHAPS checks Bank Alfa's available liquidityCHAPS → Bank of England (RTGS)

    Before it settles anything, CHAPS checks whether Bank Alfa's settlement account in the Bank of England's RTGS infrastructure holds enough available liquidity to cover the full GBP 850,000.00 amount.

  3. 03Settlement
    The Bank of England settles the payment in central-bank moneyBank Alfa (sending bank) → Nordbank (receiving bank)

    With liquidity confirmed, the Bank of England debits Bank Alfa's settlement account and credits Nordbank's, one payment at a time. CHAPS settles each payment individually in central-bank money, without any prior netting, and the transfer is final the instant it settles.

    • DR Bank Alfa's settlement account at the Bank of EnglandGBP 850,000.00
    • CR Nordbank's settlement account at the Bank of EnglandGBP 850,000.00
  4. 04Message
    Nordbank is confirmed of the settled paymentCHAPS → Nordbank (receiving bank)

    CHAPS tells the receiving bank that the funds are on its settlement account at the Bank of England and are final, with the payment details — including the Purpose Code and LEI — it needs to apply.

  5. 05Posting
    Nordbank books the incoming fundsNordbank (receiving bank)

    Because the interbank leg already settled with immediate finality, Nordbank records the credit on its own ledger without waiting for anything else. The property completion is paid, end to end.

    • CR Incoming settlement account at NordbankGBP 850,000.00
Sources for this topic7
  1. Official requirement

    TARGET ServicesEuropean Central Bank · TARGET Services; T2 RTGS

    Describes the Eurosystem's TARGET Services, including the T2 RTGS system and central liquidity management used to settle euro payments in central bank money. · Checked 2026-07-12

    T2 replaced TARGET2 in March 2023. Detailed user functional specifications are published separately in the ECB's professional-use documents section.

  2. Official requirement

    Fedwire Funds ServiceFederal Reserve Financial Services · Fedwire Funds Service

    Describes the Fedwire Funds Service, the US real-time gross settlement system for immediate, final, and irrevocable US dollar funds transfers. · Checked 2026-07-12

    The Fedwire Funds Service completed its ISO 20022 implementation on 14 July 2025.

  3. Official requirement

    CHIPSThe Clearing House · CHIPS high-value US dollar clearing and settlement

    Describes CHIPS, the private-sector US dollar high-value clearing and settlement system operated by The Clearing House. · Checked 2026-07-12

    CHIPS migrated to ISO 20022 messaging in April 2024; participant rules are not fully public.

  4. Official requirement

    CHAPSBank of England · CHAPS sterling RTGS

    Describes CHAPS, the UK's sterling high-value payment system, settled payment by payment in the Bank of England's RTGS infrastructure. · Checked 2026-07-12

    The Bank of England has operated CHAPS directly since November 2017; participant-facing reference documents are published separately.

  5. Market practice

    Fast payments - enhancing the speed and availability of retail paymentsCPMI, Bank for International Settlements · Characteristics of fast (instant) payment services

    Defines the key characteristics of fast (instant) payment services and analyses their benefits, risks, and implications for central banks. · Checked 2026-07-12

    Predates several major instant payment launches; this site uses it for concepts, not current statistics.

  6. Official requirement

    EBA CLEARING payment systems (STEP2-T and RT1)EBA CLEARING · EURO1 high-value net system

    Describes the pan-European payment systems operated by EBA CLEARING, including STEP2-T for SEPA batch clearing and RT1 for SCT Inst instant payments. · Checked 2026-07-12

    Participant rulebooks and full technical documentation for STEP2 and RT1 are not public; content here relies on the operator's public pages.

  7. Simplified educational illustration

    Payments Signal editorial teaching modelsPayments Signal

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

    What this simplifies: The motorway analogy compresses each system's rules to a road, and the named systems are described at a conceptual level; operating hours, participation tiers, settlement models, and message standards are operator-specific and change over time.

    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.

Deepest material on this page: L4 Standards & sources. Where a topic stops short of implementation depth, that is a deliberate coverage decision, not an oversight — see coverage.