The diffusion of real-time gross settlement

Payments are an integral part of a modern market economy as most transactions involve the use of cash, checks or electronic transfers. Commercial banks and the central bank provide in a symbiotic relationship the infrastructure through which payments flow. An efficient payment system is a prerequisite for a wellfunctioning economy. Historically, central banks have played an active role in the payment system. They continue to do so both as a provider of payment services and as an overseer of private sector systems. The extent to which the central bank is involved in the payment system varies from country to country. Most central banks at least provide the medium to settle small payments, i.e. cash. In addition, central banks tend to support an interbank payment system that settles large, time-critical wholesale payments. Many central banks, such as the Federal Reserve, also process retail payments including checks and Automated Clearing House (ACH) transfers. However, central banks tend not to issue debit cards or credit cards.