What is a payment clearing house? How banks swap payments
By SendPay Business · · 2 min read
A payment clearing house is the middle point that banks and payment firms use to swap payment instructions with each other. Instead of every bank talking to every other bank, each one connects to the clearing system.
What clearing means
Clearing is the step where payment instructions are passed between the sending and receiving firms, checked, and added up so each firm knows what it owes and is owed. Settlement is the next step, when the money actually moves between them.
How a payment passes through clearing
- A customer asks their provider to send money.
- The provider sends the instruction to the clearing system.
- The system checks it and passes it to the receiving provider.
- The providers settle what they owe each other, and the receiver credits the payee.
Examples around the world
In the UK, Pay.UK runs Bacs, which handles Direct Debits and payroll, and Faster Payments, which handles most instant transfers. In the US, ACH payments clear through the Federal Reserve and The Clearing House. Card networks such as Visa and Mastercard run their own clearing for card payments.
Where SendPay fits
SendPay platforms let your customers hold GBP, EUR and USD and send transfers under your own brand, powered by licensed partners who connect to the payment systems. SendPay tells you in writing which licences apply to your platform before you pay.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.