Slide 9 of 26
The nature of any competent payments system is that it is designed to eliminate failures on the micro and macro levels. In layman’s terms, everything in the end must be in “balance” (debits equal credits). The system must check for and resolve all account discrepancies, whether they occur in an individual’s checking account, a bank’s settlement account, or a government’s payment account, on a daily basis. It is the nature of a payment system that “at the end of the day” (literally and figuratively) all participants must know exactly where their accounts stand. It is a testimony to the effectiveness of the global system that (except in the case of occasional local disturbances) this result occurs every day across the planet.
The rules and processes for international money transfers have become well established and carefully defined over many years (indeed, centuries). To a great degree, development of an electronic payments system happened decades ago as “money” was converted from a “paper-world” to a “cyber-world.” Vestiges of this paper-based transaction society still co-exist with electronic payments, mostly as a result of individual customers failing to progress with the technology. But the functionality of the payment system has been based in electronic exchanges of debits and credits at least since the late 1970’s. Even a bank whose customers cling to the need to receive their canceled paper checks each month has long ago converted to processing the payments represented by those items electronically. Those of us in the business eagerly await the day our customers are satisfied with online access to image files of their canceled checks. We will still be performing exactly the same function, but the different technologies will make it appear to be distinct.
At the core of the international payments system is an elaborate and constantly tended web of contracts, protocols, time-honored practices, consultative mechanisms, and personal relationships, all designed to produce swift and certain results without the need for contentious dispute resolution. To conduct transfers over the established payments system, you must agree to abide by these “rules” which allocate the burden and risk of loss in each transaction. In the case of an error or mistake, all participants know what their rights are, how to enforce them, and the party in error knows that it must accept responsibility to continue as a participant in the system.