<aside> 💡 A payment is the transfer of value from one end party—the Sender—to another—the Receiver. We think of three elements involved in a payments transfer: the initiation of the payment, the funding of the payment by the sender, and the delivery of payment to the receiver.

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A payment system connects a large number of end parties, formalizes processes or transfer of value and plays some role in managing risk for the participants.

Payment Systems Overview (continued later)

<aside> ➡️ Click here to navigate to the in depth overview of each payment system.

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There are five core payments systems in the United States:

  1. Cash
  2. The checking system
  3. The card systems (charge, credit, debit and prepaid cards)
  4. The ACH (Automated Clearing House) system
  5. The wire transfer systems
  6. RTRP systems or immediate funds transfer systems

Estimation from Glenbrook Partners (2015)

Estimation from Glenbrook Partners (2015)

Note that wire transfers are excluded. If wire transfers had been included, wire transfers would represent less than 1% of the total “count”, but 93% of the total “amount”—because of the high-value financial market transactions that use wire transfers.

Payment System Ownership

Open Loop vs. Closed Loop Systems

Closed loop vs open loop system - PayPal is technically a closed loop but is generally considered a payments system due to its size. Most payment systems are open loop. Examples include ACH, card and wire transfers. An open loop systems allows for rapid scaling.