Foundations of Financial Technology

Clearing reconciles trade obligations between counterparties (often via a CCP that nets exposures); settlement is the final exchange of cash and securities that extinguishes those obligations.

A batch-based, net-settled US electronic payment rail operated by Nacha/the Fed for low-value credits and debits (payroll, bill pay). Typically settles same-day or T+1, not real-time.

Fedwire is a real-time gross settlement (RTGS) system run by the Fed that moves USD between US bank reserve accounts. SWIFT is not a payment rail at all—it is a secure messaging network that instructs banks to move funds, often via correspondent accounts.

Cardholder pays merchant; merchant's acquirer routes the authorization through the card network (Visa/Mastercard) to the cardholder's issuer, which approves or declines. Funds later flow issuer to acquirer to merchant, less interchange and fees.

A per-transaction fee paid by the merchant's acquirer to the cardholder's issuer, set by the card network. It is the largest component of the merchant discount rate and funds issuer rewards, fraud losses, and float.

Instant, 24/7/365 push-payment rails that settle gross in central-bank money within seconds and are irrevocable on receipt. RTP is operated by The Clearing House; FedNow is the Federal Reserve's competing service launched in 2023.