Payment market infrastructures
The named systems banks plug into to clear and settle payments — TARGET2/T2, Fedwire, CHIPS, FedNow, CHAPS — and whether each settles gross, nets, or runs instant.
L0 Explain simply
An everyday analogy: think of the big shared systems that banks plug into as a country's motorways for money. Cars — the payments — belong to individuals, but they all travel on a small number of public roads built and policed by someone else. Every country has a few of these roads. Some are express lanes for a handful of very large, urgent vehicles: the high-value systems. Others are broad motorways carrying huge volumes of everyday traffic. And newer ones never close, running every minute of every day for instant trips. The banks own the cars; the state or an industry body usually owns the roads. Learning the names of these roads — and which traffic each is built for — is most of what clearing and settlement infrastructure means in practice.
L1 Core concepts
A payment market infrastructure — often called a financial market infrastructure, or FMI — is a shared system that clears or settles payments between institutions. Two design choices sort most of them. First, gross versus net: a real-time gross settlement (RTGS) system settles each payment individually and finally, while a netting system offsets many payments and settles only the difference. Second, high-value versus instant: some carry large, urgent interbank payments, others round-the-clock retail traffic. In the euro area, T2 — the Eurosystem service that replaced TARGET2 (the Trans-European Automated Real-time Gross settlement Express Transfer system) in March 2023 — is the RTGS, with EURO1 a separate net system. In the United States, Fedwire is the Federal Reserve's RTGS and CHIPS (Clearing House Interbank Payments System) is a privately run high-value system that nets. FedNow is the US instant service. In the United Kingdom, CHAPS (Clearing House Automated Payment System) is the sterling RTGS.
L2 Practitioner view
What separates these systems in daily practice is who operates each, what it is built for, and when it is open. Central banks operate the real-time gross settlement (RTGS) systems and settle them in central bank money: the Eurosystem runs T2, the Federal Reserve runs Fedwire, and the Bank of England runs CHAPS (Clearing House Automated Payment System). Industry bodies operate others: The Clearing House runs CHIPS (Clearing House Interbank Payments System) in the United States, and EBA CLEARING runs pan-European systems including EURO1. Instant systems such as FedNow run every minute of every day, so they have no cut-off in the way a high-value system does; a bank joining one must staff and fund it around the clock. High-value systems, by contrast, have operating hours and hard cut-offs, and a large payment that misses the window waits. Most economies run several of these side by side, and a bank chooses the path by currency, value, urgency, and which system can reach the beneficiary's bank.
L3 Technical details
A closer look at the settlement models shows why the labels matter. Fedwire and CHAPS (Clearing House Automated Payment System) are true real-time gross settlement (RTGS): each payment settles one at a time, with finality, across accounts at the central bank, so there is no interbank credit exposure between participants. CHIPS (Clearing House Interbank Payments System) is different — a netting system that reaches finality continuously through the day using participants' prefunded positions, combining netting's liquidity efficiency with intraday finality. T2 is RTGS but embeds liquidity-saving mechanisms that offset queued payments, borrowing netting's efficiency without giving up gross settlement. Instant systems such as FedNow settle each retail payment individually and immediately, around the clock, typically against prefunded balances held at the central bank. The common thread is central bank money for final settlement; the differences are timing, liquidity, and whether obligations are ever allowed to accumulate.
L4 Standards & sources
Two operator sources anchor this topic, and each system's operator is the authority for its own rules. The European Central Bank's TARGET Services pages describe T2, the euro real-time gross settlement (RTGS) service that replaced TARGET2 in March 2023, and how it settles high-value euro payments in central bank money. The Federal Reserve's Fedwire Funds Service pages describe the US RTGS system for immediate, final, and irrevocable dollar transfers; the Fedwire Funds Service completed its move to ISO 20022 messaging on 14 July 2025. For the other systems named here, the operators are the sources: The Clearing House for CHIPS (Clearing House Interbank Payments System), the Bank of England for CHAPS (Clearing House Automated Payment System), and EBA CLEARING for EURO1. Two cautions: operating hours, cut-offs, and message standards are set by each operator and change over time; and participation tiers — direct versus indirect — mean "a bank uses CHIPS" can describe several different relationships. Confirm specifics against the operator whose system you are studying.
Sources & standards2
- Official requirement
TARGET Services ↗ — European Central Bank · TARGET Services; T2 RTGS in central bank money
T2 replaced TARGET2 in March 2023. Detailed user functional specifications are published separately in the ECB's professional-use documents section.
- Official requirement
Fedwire Funds Service ↗ — Federal Reserve Financial Services · Fedwire Funds Service; real-time gross settlement of US dollar transfers
The Fedwire Funds Service completed its ISO 20022 implementation on 14 July 2025.
SEE THE PAYMENT MOVE
Read the steps as text
- 02ProcessingT2 checks Bank Alfa's available liquidityTARGET2 (T2)
TARGET2 checks whether Bank Alfa's RTGS account holds enough available liquidity — drawing on the Central Liquidity Management (CLM) component — to cover the full amount before it settles anything.
- 03SettlementT2 settles the payment in central-bank moneyBank Alfa (sending bank) → Nordbank (receiving bank)
With liquidity confirmed, T2 debits Bank Alfa's account and credits Nordbank's account at the central bank, one payment at a time. RTGS settles each accepted instruction individually, without any prior netting, and the transfer is final the instant it settles.
- DR Bank Alfa's RTGS account at the central bank — EUR 2,000,000.00
- CR Nordbank's RTGS account at the central bank — EUR 2,000,000.00
- 05PostingNordbank books the incoming fundsNordbank (receiving bank)
Because the interbank leg already settled with finality, Nordbank records the credit on its own ledger without waiting for anything else. The payment is complete end to end.
- CR Incoming settlement account at Nordbank — EUR 2,000,000.00
Read the steps as text
- 02ProcessingCHAPS checks Bank Alfa's available liquidityCHAPS → Bank of England (RTGS)
Before it settles anything, CHAPS checks whether Bank Alfa's settlement account in the Bank of England's RTGS infrastructure holds enough available liquidity to cover the full GBP 850,000.00 amount.
- 03SettlementThe Bank of England settles the payment in central-bank moneyBank Alfa (sending bank) → Nordbank (receiving bank)
With liquidity confirmed, the Bank of England debits Bank Alfa's settlement account and credits Nordbank's, one payment at a time. CHAPS settles each payment individually in central-bank money, without any prior netting, and the transfer is final the instant it settles.
- DR Bank Alfa's settlement account at the Bank of England — GBP 850,000.00
- CR Nordbank's settlement account at the Bank of England — GBP 850,000.00
- 05PostingNordbank books the incoming fundsNordbank (receiving bank)
Because the interbank leg already settled with immediate finality, Nordbank records the credit on its own ledger without waiting for anything else. The property completion is paid, end to end.
- CR Incoming settlement account at Nordbank — GBP 850,000.00
Sources for this topic7
- Official requirement
TARGET Services ↗ — European Central Bank · TARGET Services; T2 RTGS
T2 replaced TARGET2 in March 2023. Detailed user functional specifications are published separately in the ECB's professional-use documents section.
- Official requirement
Fedwire Funds Service ↗ — Federal Reserve Financial Services · Fedwire Funds Service
The Fedwire Funds Service completed its ISO 20022 implementation on 14 July 2025.
- Official requirement
CHIPS ↗ — The Clearing House · CHIPS high-value US dollar clearing and settlement
CHIPS migrated to ISO 20022 messaging in April 2024; participant rules are not fully public.
- Official requirement
CHAPS ↗ — Bank of England · CHAPS sterling RTGS
The Bank of England has operated CHAPS directly since November 2017; participant-facing reference documents are published separately.
- Market practice
Fast payments - enhancing the speed and availability of retail payments ↗ — CPMI, Bank for International Settlements · Characteristics of fast (instant) payment services
Predates several major instant payment launches; this site uses it for concepts, not current statistics.
- Official requirement
EBA CLEARING payment systems (STEP2-T and RT1) ↗ — EBA CLEARING · EURO1 high-value net system
Participant rulebooks and full technical documentation for STEP2 and RT1 are not public; content here relies on the operator's public pages.
- Simplified educational illustration
Payments Signal editorial teaching models — Payments Signal
What this simplifies: The motorway analogy compresses each system's rules to a road, and the named systems are described at a conceptual level; operating hours, participation tiers, settlement models, and message standards are operator-specific and change over time.
Used wherever diagrams, scenarios, figures, or example values are didactic constructions rather than sourced facts; every such use carries a simplifications disclosure. All people, companies, banks, and list entries in examples are fictional.
Deepest material on this page: L4 — Standards & sources. Where a topic stops short of implementation depth, that is a deliberate coverage decision, not an oversight — see coverage.