What is RTGS? How central banks settle big payments one by one
By SendPay Business · · 2 min read
RTGS stands for real-time gross settlement. It's a system, usually run by a central bank, where payments between banks are settled one at a time, in full, as soon as they're made. Once settled, a payment is final and can't be reversed.
What the words mean
- Real time: each payment is settled as it happens, not saved up for later.
- Gross: each payment is settled for its full amount, rather than being netted off against payments going the other way.
- Settlement: money actually moves between the banks' accounts at the central bank.
RTGS vs net settlement
Systems like Bacs collect payments over a period, add up what each bank owes the others, and settle only the difference. That needs less money moving, but it takes longer. RTGS needs more cash on hand but removes the risk of a bank failing before the batch settles.
RTGS in the UK
The Bank of England runs the UK's RTGS service, where banks hold accounts. CHAPS payments, used for house purchases and other large payments, settle across it. Other payment systems, such as Faster Payments and Bacs, also settle their net positions there.
Where SendPay fits
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When does a payment settle?
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Value date calculator →What is payment settlement?
The moment money actually moves between banks.
What is payment settlement? →What is a payment clearing house?
The go-between that sorts payments between banks.
What is a clearing house? →Read next
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.