Types of Message Flow
To initiate a funds transfer, the sending bank dispatches a payment message, which is subsequently routed to the central bank and to the receiving bank as the system processes and settles the transfer.
V-shaped message flow
Arrangements for routing payment messages in the majority of RTGS systems are based on a so-called V-shaped message flow structure. In this structure, the full message with all the information about the payment (including, for example, the details of the beneficiary) is initially passed to the central bank and is sent to the receiving bank only after the transfer has been settled by the central bank.
Y-shaped message flow
Some RTGS systems, and particularly those that use the Swift network, apply an alternative structure, known as a Y-shaped structure.
In this case, the payment message is transmitted by the sending bank to a central processor. The central processor takes a subset of information that is necessary for settlement from the original message and routes this core subset to the central bank (the original message being kept in the central processor). Upon receipt of the core subset, the central bank checks that the sending bank has sufficient covering funds on its account and informs the central processor of the status of the transfer, for instance, queued or settled. Once settled, the full message containing the confirmation of settlement is rebuilt by the central processor and sent to the receiving bank.
The business information exchanged between the sending and receiving bank is, therefore, not known by the settlement agent.
L-shaped message flow
A third structure (so far adopted only by Chaps) is L-shaped structure, which is conceptually similar to a Y-shaped structure. The payment message dispatched by the sending bank is held at a system gateway attached to the sending bank’s internal processing system and a subset of information contained in the original message (a settlement request) is sent to the central bank. If the sending bank has sufficient covering funds on its account, settlement is completed and the central bank sends back a confirmation message to the sending bank’s gateway. Upon receipt of this confirmation (and only then), the original payment message is released automatically from the gateway of the sending bank and sent to the receiving bank.