Changing the clock: practical approaches to extend payment system operating hours
Highlights
- Several real-time gross settlement (RTGS) systems have extended operating hours in recent years and have experienced notable adoption of the additional hours by participants. With the extended hours, payment system participants can offer better services to end users, such as 24/7 fast payments. Many more RTGS systems are evaluating or planning to extend operating hours in the near to medium term.
- Involving payment system participants, a broader set of stakeholders or sometimes the general public from the onset and throughout such a project is critical to its success.
- RTGS systems that have successfully extended operating hours to 24/7 often did so gradually. Their experience in overcoming operational, technical and risk management challenges provides important insights to other payment system operators.
Introduction
Real-time gross settlement (RTGS) systems typically settle wholesale financial obligations in central bank money. Most of them are owned and operated by a central bank. They provide the safe and efficient foundation on which retail payment systems and cross-border payment arrangements rely. Limited RTGS system operating hours and gaps between jurisdictions' operating hours due to time zone differences can lead to delays in settlement of cross-border payments. This is one of the key frictions identified by the G20 cross-border payments programme.
Improvements in the safety and efficiency of domestic payments are likely to be a key motivation for the extension of RTGS operating hours by individual jurisdictions. However, operating hour extensions can also contribute to enhanced cross-border payments. An extension and alignment of RTGS system operating hours across jurisdictions may facilitate the interlinking of payment systems across borders, improve liquidity management, reduce settlement risk and help to speed up cross-border payments.
The benefits and drivers for extending operating hours have been covered extensively in previous CPMI reports. This CPMI Brief follows on from such analyses and outlines practical approaches that have been used to address some of the key challenges of extending or aligning RTGS system operating hours. It is based on the experience of 14 jurisdictions represented on the CPMI Community of Practice on Payment Systems. The Community of Practice, sponsored by the CPMI, is a forum of exchange for central banks on developing or upgrading their payment systems, factoring an international dimension into them and discussing innovative developments. It has representatives from over 40 jurisdictions (more than half from outside the G20) as well as from regional and international organisations.
