Where money actually settles
Settlement is the operation that discharges a debt between two banks through an actual transfer of funds. Any payment between customers of two different banks creates such a debt. The authorization and the “approved” message are only the visible part. Behind the scenes, the banks now owe each other money and must settle. That settlement takes place in financial market infrastructures (FMIs) that the public never sees, even though they carry trillions of euros every day.
There are two broad families. Real-time gross settlement (RTGS) systems settle each payment individually and continuously in central bank money. They form the core of the system (T2, TIPS). Retail clearing systems, or automated clearing houses (ACHs), aggregate millions of small transactions and settle only the net balance at the end of each cycle (CORE(FR), STEP2). RTGS systems are built for safe, immediate settlement; ACHs are built for efficient bulk processing.
T2, the Eurosystem’s core RTGS
TARGET2 (launched in 2007) was the euro area’s RTGS system until March 20, 2023, when the Eurosystem consolidated it with T2S. The new T2 service took over, running entirely on ISO 20022 messaging, with an architecture that separates settlement (RTGS) from liquidity management (main cash accounts, or MCAs). T2 settles large-value transfers, monetary policy operations, and the net positions of retail systems.
TIPS: instant settlement in central bank money
TIPS (TARGET Instant Payment Settlement), launched on November 30, 2018, settles SEPA Instant Credit Transfers (SCT Inst) in central bank money, in under 10 seconds, 24/7, holidays included. A retail ACH nets on a deferred basis; TIPS settles one payment at a time and continuously. Because settlement happens at the moment of payment, no bank holds a claim on another while waiting for a clearing cycle, even at night or on holidays.
| Criterion | T2 (RTGS) | TIPS (instant RTGS) | CORE(FR) / STEP2 (retail ACH) |
|---|---|---|---|
| Settlement type | Gross, continuous | Gross, one by one, 24/7 | Net, in cycles |
| Settlement asset | Central bank money | Central bank money | Final balance in central bank money (T2) |
| Typical amount | Large-value, interbank | Small instant payments | Cards, credit transfers, bulk direct debits |
| Availability | Business days, extended hours | 24/7/365 | Daily cycles |
| Settlement time | Seconds to minutes | Under 10 seconds | Deferred (hours) |
| Standard | ISO 20022 | ISO 20022 | ISO 20022 / national formats |
CORE(FR)/STET and EBA Clearing, the retail clearing engines
In France, retail clearing runs through CORE(FR) (COmpensation REtail), operated by STET, a company owned by six major French banking groups (BNP Paribas, Groupe BPCE, Crédit Agricole, Crédit Mutuel, La Banque Postale, and Société Générale). CORE(FR) is one of the world’s largest retail payment systems. It clears card payments, SEPA credit transfers, direct debits, and checks, and the net balances then settle in T2. The ECB has designated it a systemically important payment system (SIPS).
At the pan-European level, EBA Clearing (owned by about 50 banks) runs three core systems. STEP2 is the leading pan-European ACH (PE-ACH) for bulk SEPA credit transfers and direct debits, while EURO1 settles large-value payments on a same-day net basis (a systemically important multilateral net settlement system). RT1, launched in November 2017, processes SCT Inst payments in real time. Each French bank chooses its own mix of infrastructures based on its payment flows.
Elsewhere in the world. The same mechanism, elsewhere.
The RTGS system where banks settle with each other in central bank money
In the US, the Federal Reserve’s Fedwire Funds Service settles each transfer individually, immediately, finally, and irrevocably, across the accounts banks hold at the Federal Reserve Banks. Unlike TIPS, it does not run around the clock: the operating day opens at 9:00 p.m. and closes at 7:00 p.m. (New York time), Sunday through Friday, and the service is closed on designated holidays.
https://www.federalreserve.gov/paymentsystems/fedfunds_about.htm
In the UK, the Bank of England itself operates CHAPS and the RTGS system that hosts it. CHAPS payments moved to ISO 20022 messaging on June 19, 2023, about three months after the T2 cutover.
https://www.bankofengland.co.uk/payment-and-settlement/rtgs-renewal-programme/iso-20022
In India, the Reserve Bank of India’s RTGS has run 24/7 since December 14, 2020, whereas T2 still follows business days. Settlement takes place in the RBI’s books and is final and irrevocable. The system is reserved for transactions of at least ₹200,000, with no upper limit.
https://www.rbi.org.in/Scripts/FAQView.aspx?Id=65
Settling instant payments in central bank money, 24/7
In Brazil, the SPI, operated by the central bank, settles Pix payments exclusively in central bank money, 24/7. The Manual de Tempos do Pix sets a maximum of 40 seconds between receipt of the payment order and settlement; beyond that, the transaction is rejected. The quality indicators imposed on participants target 6 seconds at the median and 10 seconds at the 99th percentile.
https://www.bcb.gov.br/content/estabilidadefinanceira/pix/Regulamento_Pix/IX_ManualdeTemposdoPix.pdf
In the US, the Federal Reserve’s FedNow Service, launched on July 20, 2023, processes instant payments 24/7, including weekends and holidays. Unlike under Regulation (EU) 2024/886, bank participation is voluntary, and an institution can even join as a receiver only. The network’s per-transaction limit was raised to $10 million in November 2025.
Federal Reserve, “FedNow Service” (https://www.federalreserve.gov/paymentsystems/fednow_about.htm) and Federal Reserve Financial Services, press release of September 5, 2025 (https://www.frbservices.org/news/press-releases/090525-fednow-transaction-limit-increase)
In Australia, the New Payments Platform runs 24 hours a day, 365 days a year, and the Reserve Bank of Australia supports it with its Fast Settlement Service: every payment on the platform, whatever the amount, settles individually and in real time in central bank money. The platform was built natively on ISO 20022.
https://www.auspayplus.com.au/brands/nppa-the-platform/
Who operates retail clearing: the banks, the central bank, or both
In the US, the ACH network has two competing national operators: the Federal Reserve Banks’ FedACH and the privately owned Electronic Payments Network. Payments are sent in files and processed in batches, and the common operating rules are set by Nacha, a trade association, not by the regulator.
https://www.federalreserve.gov/paymentsystems/fedach_about.htm
In India, the CORE(FR) equivalent belongs to the central bank: NEFT is a centralized national system owned and operated by the Reserve Bank of India itself. It processes payments in half-hourly batches and runs 24 hours a day, year-round. The RBI sets no amount limit, except for cash-based remittances by people without a bank account, capped at ₹50,000 per transaction.
https://www.rbi.org.in/Scripts/FAQView.aspx?Id=60
South Africa splits the roles differently again. The South African Reserve Bank (SARB) directly operates SAMOS, the system in which financial institutions settle with each other, and it regulates and oversees the national payment system as a whole. Day-to-day management of the country’s 18 or so payment systems falls to a recognized industry body, the Payments Association of South Africa.
https://www.resbank.co.za/en/home/what-we-do/payments-and-settlements