Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Electronic Fund Transfer System

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-1

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM
Pak U mempunyai tabungan di Bank X

Sistem Kliring Elektronik

CEK Bank A
Penyerahan warkat kliring (Session I)

CEK Bank A

2 BI
BANK X
CEK Bank A Barang

Penerimaan/Penolakan Warkat (Session II)

CEK Bank A
Penerimaan Warkat (Pertemuan I/pagi)

BANK A

Pak E mempunyai giro di Bank A

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-2

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Sistem Kliring Elektronik

Warkat Kliring
Cek Bilyet Giro Wesel Bank Untuk Transfer Surat Bukti Penerimaan Transfer Nota Debet Nota Kredit

Sistem Kliring
Manual Semi Otomasi Otomasi Elektronik

Penyelesaian Akhir (Settlement) Pemindahbukuan rekening giro masing-masing Bank di BANK Indonesia

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-3

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Sistem Kliring Elektronik

MAKER (DRAWER) PAYEE

DATE

CHEQUE NUMBER

The paper cheque is just a carrier of information. Electronic transmission is better. We dematerialize the cheque (remove the paper).

AMOUNT
CURRENCY AUTHORIZED SIGNATURE OF MAKERS AGENT

DRAWEE BANK DRAWEE BANK NUMBER

DRAWER ACCOUNT NUMBER

06130018184310143700000000010000USD065200356425020010130
DRAWEE BANK NUMBER DRAWER ACCOUNT NUMBER CHEQUE NUMBER AMOUNT CURRENCY PAYEE BANK NUMBER PAYEE ACCOUNT NUMBER DATE

Only the information is sent to the clearing house

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-4

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Sistem Kliring Elektronik

Diagram Sistem Kliring Elektronik

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-5

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Sistem Kliring Elektronik

Mekanisme

1. Pemisahan warkat per jenis transaksi (debet atau kredit), stempel kliring, dan pencantuman MICR 2. Bank pengirim merekam data ke sistem dengan menggunakan reader encoder atau data entry 3. Mengelompokkan warkat dalam batch 4. Mengirimkan batch DKE secara elektronik melalui jaringan komunikasi data ke penyelenggara, Fisik warkat dikirim juga untuk dipilah berdasarkan bank tertuju dengan menggunakan mesin baca berteknologi image 5. Peserta dapat melihat status DKE (sukses atau gagal) 6. SPKE memproses DKE setelah waktu transmit DKE berakhir 7. SPKE mem-broadcast informasi hasil kliring sehingga peserta bisa melihat secara on line posisinya
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-6

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Sistem Kliring Elektronik

ACH Credit Transaction

1. BUYER SENDS AN ORDER TO BUYERS BANK TO CREDIT $X TO SELLERS ACCOUNT IN SELLERS BANK

BUYER
2. BUYERS BANK SENDS TRANSACTION TO AUTOMATED CLEARINGHOUSE

SELLER
6. SELLERS BANK CREDITS SELLERS ACCOUNT WITH $X

BUYERS BANK
4. BUYERS BANK PAYS $Y TO SETTLEMENT BANK

SELLERS BANK

SETTLEMENT BANK
5. SETTLEMENT BANK PAYS $YTO SELLERS BANK

CLEARINGHOUSE
3. CLEARINGHOUSE DETERMINES THAT BUYERS BANK OWES SELLERS BANK $Y (ALL TRANSACTIONS ARE NETTED)
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-7

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Sistem Kliring Elektronik

1. BUYER AUTHORIZES SELLER TO DRAW $X FROM BUYERS ACCOUNT IN BUYERS BANK 8. BUYERS BANK ADVISES BUYER OF PAYMENT

ACH Debit Transaction

2. SELLER ASKS HIS BANK TO SEND TRANSACTION TO AUTOMATED SELLER CLEARINGHOUSE 7. SELLERS BANK CREDITS SELLERS ACCOUNT WITH $X

BUYER

BUYERS BANK

SELLERS BANK
3. SELLERS BANK SENDS TRANSACTION TO AUTOMATED CLEARINGHOUSE

5. BUYERS BANK PAYS $X TO SETTLEMENT BANK

SETTLEMENT BANK
6. SETTLEMENT BANK PAYS $X TO SELLERS BANK

CLEARINGHOUSE
4. CLEARINGHOUSE DETERMINES THAT BUYERS BANK OWES SELLERS BANK $X (ALL TRANSACTIONS ARE NETTED)

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-8

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement

Tujuan

1. Memberikan pelayanan sistem transfer dana antar peserta, antar nasabah peserta dan pihak lainnya secara cepat, aman, dan efisien 2. Memberikan kepastian pembayaran 3. Memperlancar aliran pembayaran (payment flows) 4. Mengurangi resiko settlement baik bagi peserta maupun nasabah peserta (systemic risk) 5. Meningkatkan efektifitas pengelolaan dana (management fund) bagi peserta melalui sentralisasi rekening giro 6. Memberikan informasi yang mendukung kebijakan moneter dan early warning system bagi pengawasan bank 7. Meningkatkan efisiensi pasar uang
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-9

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement NET SETTLEMENT Internet Bank Gross Payment Before Netting
Sender Bank Receiving Bank

Net VS Gross

A 70 0

B 90 50

C 40 0 -

D 80 0 20

Ammount of Liability

A B C

210 70 70

D
Total Claim

10
80

30
170

60
100

100

100
450

Net Claims (+) or Liabilities (-) of Each Bank

Bank Total A -130 B 100 C 30 D 0 Net 0

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-10

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement GROSS SETTLEMENT BANK A

(40)
(80) (90) (70) (10) (50) (60)

Net VS Gross

BANK C

(20)

BANK B

(30)

BANK D

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-11

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement

Karakteristik

1. 2. 3. 4. 5. 6. 7. 8. 9.

V Shaped Structure Transfer mechanism Window Time No Money No Game Capping Queue Management and Gridlock Resolution Intraday Liquidity Facility Bye-Laws Information Technology Security and Disaster Recovery Plan 10.Future Plan
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-12

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement

V Shaped Structure
Receiving Bank

Sender Bank

1. Full Payment Message

3. Full Payment Message

2. Settlement
RCC BI-RTGS
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-13

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement

1. 2.

Transfer Mechanism

3.

Sender Bank enters credit transfer input into RTGS Terminal which will be further transmitted to RCC at Bank Indonesia RCC will process the credit transfer with the following mechanism: To verify whether the checking account balance of the sender bank is higher or equal to the nominal ammount of credit transfer When the sender banks checking account is adequate, a posting in the sender bank and receiving bank checking accounts will be executed simultaneously When the sender bank checking account is not adequate, the credit transfer will be placed in queue within the RTGS machine Settled credit transfer information will be transmitted automatically to RCC to RTGS terminal to receiving bank
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-14

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement

Window Time

06.30 a.m. to 5.00 pm Prolong time for certain cases Only credit other participant account Not Allowed to Debit other participant account To minimize vairous payment system risk In the beginning, Rp 1 Billiun

No Money No Game

Capping

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-15

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement

1. 2.

Queue Management and Gridlock Resolution

The queue in BI-RTGS system based on priority level and first in

first out (FIFO)

The queue modul in BI-RTGS system shall be completed with bypass FIFO facility which automatically operates when the queue reaches a certain ammount, for the purpose of reducing the number of queues The priority level in queue module in BI-RTGS system is as follows: First priority Coverage of clearing result Second priority Bank transaction with BI/the government Third priority Credit transfer originating from BI-RTGS participant banks When BI-RTGS detects gridlock, gridlock resolution facility will be operated automatically as well as manually based on the criteria of balance adequacy or using First Available First Out (FAFO) method
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-16

3.

4.

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Real Time Gross Settlement

1. 2. 3.

Intraday Liquidity Facility

4.

5.

6.

7.

BI-RTGS participant banks shall file application to obtain FLI with BI Banks shall pledge SBI and or government bonds as collateral so that FLI facility is fully secured BI will determine the maximum FLI that could be withdrawn in a certain period within 1 day. The FLI used by BI-RTGS participant banks as required by the banks real need in an intraday (provided when needed) When a bank receives incoming transfer, the incoming transfer will automatically be used to reduce FLI balance used On certain limitation, FLI facility shall be returned to BI at the end of a day. If the bank could not return it on time, the FLI facility will be transfermed into FPJP overnight On T+1, BI will claim all the bank liabilities by using super priority transaction which will be settled before other transactions At certain time in the morning, if the bank has not settled the payables, the bank will be suspended from BI-RTGS
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-17

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Fedwire (US RTGS) Real-time gross settlement system of the Federal Reserve Used by any institution that has an account at the Federal Reserve Used mainly for large transfers (average: $3.5M) On-line connection (7800 institutions, 99% of transfers)
Direct connection Computer dialup

Off-line connection (1700 institutions, 1% of transfers)

Telephone instructions with codeword

FedLine access from PCs Some services over the Web (not funds transfer yet)
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-18

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Fedwire (US RTGS)

Participants

Depository institutions Agencies and branches of foreign banks Member banks of the Federal Reserve System U.S. Treasury and authorized agencies Foreign central banks, foreign monetary authorities, foreign governments, and certain international organizations; and Any other entities authorized by a Reserve Bank

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-19

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Fedwire (US RTGS)

EVERGEEN BANK (SEATTLE)
9. SEATTLE BRANCH NOTIFIES EVERGREEN. PAYMENT IS NOW IRREVOCABLE.

How Fedwire Works

PNC WANTS TO TRANSFER $1M TO EVERGREEN BANK PNC BANK (PITTSBURGH)
1. PNC SENDS TRANSFER ORDER TO PITTSBURGH BRANCH OF CLEVELAND FED

SAN FRANCISCO FED (SEATTLE BRANCH)

8. SF FED NOTIFIES SEATTLE BRANCH

CLEVELAND FED (PITTSBURGH BRANCH)

2. PITTSBURGH BRANCH SENDS ORDER TO CLEVELAND FED

INTERDISTRICT SETTLEMENT FUND SAN FRANCISCO FED EVERGREEN BANK ... WELLS FARGO WESTERN BANK
7. SF FED ADDS $1M TO EVERGEEN ACCOUNT

6. ISF NOTIFIES SF FED

ATLANTA FED BOSTON FED CLEVELAND FED ... SAN FRANCISCO FED
5. ISF SUBTRACTS $1M FROM CLEVELAND, ADDS $1M TO SF

4. CLEVELAND SENDS ORDER TO ISF

CLEVELAND FED DOLLAR BANK MELLON BANK ... PNC BANK

3. CLEVELAND FED SUBTRACTS $1M FROM PNC ACCOUNT

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-20

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Fedwire (US RTGS)

In 2000,
108 million Fedwire transfers Value $380T (11 times the World Economic Product) New York Fed: 40 million transfers, $209T

Instantaneous (within minutes) irrevocable settlement Payment guaranteed by Fed Operates 18 hours/day on business days No minimum dollar amount Daylight overdrafts permitted (intraday peak: $70B)
Fee charged if not collateralized ($6.94 per million)
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-21

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

CHIPS (Clearing House Interbank Payments System) Private, owned by NY Clearing House Association U.S. dollar leg of foreign exchange (90% share) 128 banks, 29 countries Continuous multilateral netting Each banks position v. every other bank constantly recalculated Irrevocable transactions, end-of-day settlement $1.44T per day, average transaction $6.6M Cost per transaction: $0.13 - $0.40

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-22

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

CHIPS

CHIPS Operation

London Bank L has an account in a NY Bank A Wants to transfer $1M to the account of Bank J in NY Bank B (A and B are on CHIPS) Bank L sends Bank A a SWIFT message Bank A verifies the message, enters it into CHIPS (Bank A has the $1M; doesnt rely on Ls credit) CHIPS verifies that the transaction is within As debit limit and the B-A bilateral limit; otherwise rejects CHIPS notifies Bank B that $1M is being deposited from Bank L through Bank A for Bank J Bank B notifies Bank J that $1M has been added to its account
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-23

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

CHIPS

CHIPS Operation

CHIPS closes at 4:30 p.m. NY time Each settling bank gets a settlement report showing net amount owed or owing Settling banks have until 5:30 to challenge the total or must pay into the CHIPS account at the NY Federal Reserve by Fedwire (US RTGS) Banks with net credit positions are paid by 5:45 All payment orders are final and irrevocable Fedwire is a payment system CHIPS is a clearing system SWIFT is a messaging system
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-24

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

CHIPS
LONDON BANK L
1. BANK L TELLS BANK A TO PAY $1M TO Js ACCOUNT IN BANK B

CHIPS Operation
JACKSONVILLE BANK J
9. CHIPS ADVISES B OF CREDIT AMT CHIPS S W I F T 10. B CREDITS J WITH $1M

S W I F T

2. BANK A VERIFIES FUNDS, ENTERS CHIPS TRANSACTION CHIPS

NEW YORK BANK A (LS CORRESPONDENT)

F E D W I R E

NEW YORK BANK B (JS CORRESPONDENT)

CHIPS
CHIPS
4. AT 4:30, CHIPS TELLS BANK A HOW MUCH TO PAY VIA FEDWIRE

AS ACCOUNT BS ACCOUNT

3. CHIPS VERIFIES CREDIT LIMITS, ADJUSTS ACCTS INTERNALLY

7. BY 5:45, CHIPS MAKES PAYMENT TO B

5. BANK A MUST PAY BY 5:30

FEDERAL RESERVE
As ACCOUNT Bs ACCOUNT CHIPS SETTLEMENT ACCOUNT
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-25

8. FED DEBITS CHIPS ACCOUNT; CREDITS BS ACCOUNT

6. FED MOVES $$ INTO CHIPS ACCT

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

SWIFT

A major international interbank network, transmitting instructions and other information, NOT a fund transfer network. Settlements are conducted through Fedwire, CHIPS, etc.

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-26

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

SWIFT

Society for Worldwide Interbank Financial Telecommunication (non-profit, Brussels) Financial messaging system, not a payment system
Settlement must occur separately

7125 institutions, 193 countries 1.27 billion messages per year: $5 trillion per day Cost ~ $0.20 per message X.25 packet protocol CCITT X.400 store-and-forward standard Moving to full IP network in 2002 swiftML
interoperable with ebXML
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Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

SWIFT

Security Control

There are five central requirements of network security:

(1) Confidentiality: Data should not be disclosed to unauthorized persons;

(2) Access control: Operation of the system is under some control mechanism to prevent illegal access of data;

(3) Integrity: Message information should remain original to carry designated transaction details.
(4) Data origin authentication: Some way is used to prove the source of data; (5) Nonrepudiation: System should provide some features to ensure that nobody can deny involvement in an electronic transaction so that the legal effect of an EDI transaction can be relied on.
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-28

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

SWIFT End-to-end authentication

Security Control

SWIFT provides secret-key and end-to-end authentication; i.e. authentication between two banks detecting any bogus payment message.

Sequence number control

Authentication control does not prevent a message from being replicated, deleted, or stored and retransmitted at a later date. The sequence numbering of messages handles these requirements. A payment message is transmitted with an input sequence number, output sequence number, and transaction reference number. They must be in order separately. The format and the input sequence number are checked by the SWIFT operating center and those messages with format errors or wrong sequence numbers are rejected by operating centers.

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-29

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

SWIFT User access control

Terminals logging into the system must verify their identity using a password issued by SWIFT. The password is sent in two parts in the form of a table.

Encryption between operating centers

To preserve the privacy of the banks' messages, the international lines that connect operating centers and join them to regional processors are protected by encryption.

SIPN level core security solutions

IP Packet filtering IP Encryption Authentication and Integrity Router Authorization Firewalls

Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-30

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Others Fund Transfer System

CHAPS (Clearing House Automated Payment System) is an electronic transfer system for sending same-day value payments from bank to bank. It operates in partnership with the Bank of England in providing the payment and settlement service.

CHAPS

CHAPS was developed in 1984, and is one of the largest real-time gross settlement systems in the world, second only to Fedwire in the US. CHAPS offers its Members and their participants an efficient, risk-free, reliable sameday payment mechanism.
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-31

Electronic Fund Transfer Systems

Electronic Clearing

RTGS

International Fund Transfer

Intro.to FISCAM

Others Fund Transfer System CHAPS Sterling Volumes and Values 1990,1997,1999 & 2000 Q1 1990 Q1 1997 Q1 1999 Q1 2000

Average daily 31,000 62,000 72,000 81,738 volume Average daily 78 139 169 189 value billion billion billion billion Average 2.5 2.2 2.3 2.31 transaction value million million million million Minimum 5,000 0 0 0 transaction value
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-32

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Others Fund Transfer System

TARGET

TARGET, which stands for the Trans-European Automated Real-time Gross settlement Express Transfer system, is the real-time gross settlement system for the euro. TARGET consists of fifteen national real-time gross settlement (RTGS) systems and the ECB payment mechanism (EPM), which are interlinked so as to provide a uniform platform for the processing of cross-border payments. TARGET is more than simply a payment infrastructure; it will offer a premium payment service which will overcome national borders between payment systems in the EU. TARGET is a real-time system: under normal circumstances payments will reach their destination within a couple of minutes, if not only a few seconds, of being debited from the sending participant's account; all payments will receive the same treatment, regardless of their value.
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-33

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Others Fund Transfer System

TARGET

TARGET is a gross settlement system in which each payment will be handled individually. Acknowledgement of the successful execution of each individual payment order will be sent to the sending national central bank in real time. TARGET provides intraday finality: settlement will be final once the funds have been credited. The money received will be central bank money. It will be possible to re-use these funds several times a day. Liquidity will be tied up only for the length of time necessary for real-time settlement to take place. TARGET is accessible to a large number of participants. Hence, most credit institutions will be able to use TARGET to make payments on their own behalf, independently of other participants. TARGET is very easy to use. To initiate a cross-border payment via TARGET, participants will simply send their payment orders to the euro RTGS system in which they participate using the domestic message format with which they are familiar. TARGET will take care of the rest.
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-34

Electronic Fund Transfer Systems

Electronic Clearing RTGS International Fund Transfer Intro.to FISCAM

Others Fund Transfer System

Diskusi
Program Pascasarjana, Universitas Gunadarma, Magister Management , Budi Hermana-35