Payments Training Hub
Routing begins with the information PAYMENT OPERATIONS STARTED LIVE 01 Routing - payment instruction itself. ACTIVE 02 Hub also - day, because a payment sent after the 3 QUEUED 03 Table also - bank for each currency and country QUEUED 04 Approach - easy to audit, and predictable for customers QUEUED 05 Banks choose a correspondent - clearing system by balancing four factors QUEUED 06 Risk - country under sanctions QUEUED Routing begins with the information in the payment instruction itself. Step 1 of 6 Routing begins with the information STARTED Routing payment instruction itself. ACTIVE Hub also day, because a payment sent after the 3 QUEUED Table also bank for each currency and country QUEUED Approach easy to audit, and predictable for customers QUEUED Banks choose a correspondent clearing system by balancing four factors QUEUED Risk country under sanctions QUEUED Routing begins with the information in the payment instruction itself.
Hub also checks the time PAYMENT OPERATIONS IN PROGRESS LIVE 01 Routing - payment instruction itself. DONE 02 Hub also - day, because a payment sent after the 3 ACTIVE 03 Table also - bank for each currency and country QUEUED 04 Approach - easy to audit, and predictable for customers QUEUED 05 Banks choose a correspondent - clearing system by balancing four factors QUEUED 06 Risk - country under sanctions QUEUED The hub also checks the time of day, because a payment sent after the 3 in the afternoon cut-off for one clearing system may need to wait until the next business day or take an alternative Step 2 of 6 Hub also checks the time IN PROGRESS Routing payment instruction itself. DONE Hub also day, because a payment sent after the 3 ACTIVE Table also bank for each currency and country QUEUED Approach easy to audit, and predictable for customers QUEUED Banks choose a correspondent clearing system by balancing four factors QUEUED Risk country under sanctions QUEUED The hub also checks the time of day, because a payment sent after the 3 in the afternoon cut-off for one clearing system may need to wait until the next business day or take an alternative
Table also holds the correspondent PAYMENT OPERATIONS IN PROGRESS LIVE 01 Routing - payment instruction itself. DONE 02 Hub also - day, because a payment sent after the 3 DONE 03 Table also - bank for each currency and country ACTIVE 04 Approach - easy to audit, and predictable for customers QUEUED 05 Banks choose a correspondent - clearing system by balancing four factors QUEUED 06 Risk - country under sanctions QUEUED The table also holds the correspondent bank for each currency and country, the account number of the nostro account to use, the charges to apply, and the cut-off time for that route. Step 3 of 6 Table also holds the correspondent IN PROGRESS Routing payment instruction itself. DONE Hub also day, because a payment sent after the 3 DONE Table also bank for each currency and country ACTIVE Approach easy to audit, and predictable for customers QUEUED Banks choose a correspondent clearing system by balancing four factors QUEUED Risk country under sanctions QUEUED The table also holds the correspondent bank for each currency and country, the account number of the nostro account to use, the charges to apply, and the cut-off time for that route.
Approach: simple to test PAYMENT OPERATIONS IN PROGRESS LIVE 01 Routing - payment instruction itself. DONE 02 Hub also - day, because a payment sent after the 3 DONE 03 Table also - bank for each currency and country DONE 04 Approach - easy to audit, and predictable for customers ACTIVE 05 Banks choose a correspondent - clearing system by balancing four factors QUEUED 06 Risk - country under sanctions QUEUED This approach is simple to test, easy to audit, and predictable for customers who want to know exactly how their payment will travel. Step 4 of 6 Approach: simple to test IN PROGRESS Routing payment instruction itself. DONE Hub also day, because a payment sent after the 3 DONE Table also bank for each currency and country DONE Approach easy to audit, and predictable for customers ACTIVE Banks choose a correspondent clearing system by balancing four factors QUEUED Risk country under sanctions QUEUED This approach is simple to test, easy to audit, and predictable for customers who want to know exactly how their payment will travel.
Banks choose a correspondent PAYMENT OPERATIONS IN PROGRESS LIVE 01 Routing - payment instruction itself. DONE 02 Hub also - day, because a payment sent after the 3 DONE 03 Table also - bank for each currency and country DONE 04 Approach - easy to audit, and predictable for customers DONE 05 Banks choose a correspondent - clearing system by balancing four factors ACTIVE 06 Risk - country under sanctions QUEUED Banks choose a correspondent or a clearing system by balancing four factors, cost, speed, reach, and risk. Step 5 of 6 Banks choose a correspondent IN PROGRESS Routing payment instruction itself. DONE Hub also day, because a payment sent after the 3 DONE Table also bank for each currency and country DONE Approach easy to audit, and predictable for customers DONE Banks choose a correspondent clearing system by balancing four factors ACTIVE Risk country under sanctions QUEUED Banks choose a correspondent or a clearing system by balancing four factors, cost, speed, reach, and risk.
Risk matters because a correspondent bank PAYMENT OPERATIONS COMPLETE LIVE 01 Routing - payment instruction itself. DONE 02 Hub also - day, because a payment sent after the 3 DONE 03 Table also - bank for each currency and country DONE 04 Approach - easy to audit, and predictable for customers DONE 05 Banks choose a correspondent - clearing system by balancing four factors DONE 06 Risk - country under sanctions ACTIVE Risk matters because a correspondent bank in a country under sanctions, or a bank with a weak credit rating, may be avoided even if it is cheap. Step 6 of 6 Risk matters because a correspondent bank COMPLETE Routing payment instruction itself. DONE Hub also day, because a payment sent after the 3 DONE Table also bank for each currency and country DONE Approach easy to audit, and predictable for customers DONE Banks choose a correspondent clearing system by balancing four factors DONE Risk country under sanctions ACTIVE Risk matters because a correspondent bank in a country under sanctions, or a bank with a weak credit rating, may be avoided even if it is cheap.

Key points of this lesson, in order.

0:00 / 3:06 Step 1 of 6

Message Routing: From Channel to Rail

System Design Deep Dive, Lesson 2 of 7, Narration 3:06, D09 Payment architecture and technology

SettlementClearingCut-off

What you will learn

Your objective. By the end of this lesson, you will be able to explain message routing: from channel to rail. Routing begins with the information in the payment instruction itself.

Why it matters. This matters because the architecture decides what the bank can build, how fast it can change, and where a payment can fail. Most payment requirements live in the architecture.

Chapter objective: Learner applies system design to payments, covering throughput, latency, idempotency, exactly-once processing, and failure recovery, and designs a system for a stated load. Learner practises this skill on realistic banking cases, explaining the reasoning clearly and using correct terminology throughout the work.

Key learning points

  • Routing begins with the information
  • Hub also checks the time
  • Table also holds the correspondent
  • Approach: simple to test
  • Banks choose a correspondent
  • Risk matters because a correspondent bank

Key terms

Settlement: The final movement of funds between banks to discharge obligations created by cleared payments. Settlement is usually made in central bank money or through correspondent accounts.

Clearing: The process of exchanging payment instructions between banks and calculating what each bank owes the others.

Cut-off: The latest time a bank or payment system accepts a payment instruction for processing on a given value date.

Banking architecture diagram showing Message Routing: From Channel to Rail.

Practise this lesson

Exercise

Read ch48s1 Hub components: what a hub is and what it contains. Then explain the routing decision for a sterling payment of 500,000 pounds to a UK supplier.

ch48s1 covers the routing decision: currency, amount, urgency and value date decide the rail. Faster Payments is for smaller sterling payments, CHAPS for high value same day sterling.

  1. What to do. Name the rail, say why, and state what changes if the payment were 500 pounds instead.

Correct result. A 500,000 pound sterling payment to a UK supplier goes through CHAPS, because it is high value and same day. If the amount were 500 pounds, it would go through Faster Payments, because it is below the CHAPS threshold and Faster Payments settles in seconds.

Why. Routing is not a preference, it is a rule. Amount, currency, urgency and cut-off decide the rail, and the same payment type can take a different rail when any one of them changes.

Check your understanding

Practice question

A payment instruction arrives at the hub from the online banking channel. What is the first routing question the hub asks?

Takeaway and next step

What to remember

Read ch48s1 for the full treatment, including the worked routing decision.

Open the message type from this lesson and inspect its fields, then find the field that carries the amount.

Open the ISO 20022 Message Explorer →

Builds on "Payment Hub Architecture Inside a Bank".

Transcript and full text

Show transcript

This topic now lives in ch48s1 Hub components: what a hub is and what it contains, which is the master lesson for the payment hub. Routing reads the destination country, currency, amount, beneficiary bank identifier and urgency, consults routing tables, and balances cost, speed, reach and risk to choose a clearing system or a correspondent bank. Static routing uses fixed rules, and dynamic routing adds live conditions such as cost, cut-off times and nostro liquidity. Read ch48s1 for the full treatment, including the worked routing decision.

This topic now lives in ch48s1 Hub components: what a hub is and what it contains, which is the master lesson for the payment hub. Routing reads the destination country, currency, amount, beneficiary bank identifier and urgency, consults routing tables, and balances cost, speed, reach and risk to choose a clearing system or a correspondent bank. Static routing uses fixed rules, and dynamic routing adds live conditions such as cost, cut-off times and nostro liquidity. Read ch48s1 for the full treatment, including the worked routing decision.

Full lesson text (all scenes)

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