Have you ever wondered how the global payment infrastructure actually works? How money moves through it, how different payment options and technologies function? Many modern payment services seem to have little to do with traditional banking systems. For example, electronic payment systems like Payoneer or Perfect Money, various digital wallets, QR payment services, and many other modern FinTech solutions don’t require users to have a bank account, yet they allow transactions in U.S. dollars, euros, or other national currencies.
Let’s take a closer look at the global payment infrastructure: its main layers and elements, how they interact with each other, and how they connect to various payment solutions.
Financial Vs. Payment Infrastructure: Differences
First, it’s important to clarify the terminology.
A financial infrastructure is a broad term that includes all institutions and mechanisms ensuring the functioning of the financial system as a whole. It covers not only payments, but also lending, insurance, securities trading, risk management, and regulation.
A financial infrastructure includes banks, clearinghouses, exchanges, payment systems, insurance companies, credit organizations, regulatory bodies, and many other institutions. It facilitates the movement and access to money, regulates financial processes, and protects the interests of all participants.
A payment infrastructure is a part of the financial infrastructure that’s specifically responsible for executing payments and transferring funds. In addition to the above-mentioned entities, it includes processing services, payment gateways, acquiring, and providers of specialized software and equipment, like ATMs, POS terminals, and other tools used to handle financial transactions.
A payment infrastructure serves as the “circulatory system” within the financial infrastructure, enabling the flow of money between all its participants.
Foundation: Central Banks
The global payment infrastructure can be roughly divided into several layers, with the foundational level being central banks of different countries.
A central bank is the primary financial institution of a country. It performs functions that ensure the stable operation of the entire economy, including:
issuing the national currency and managing the money supply in circulation;setting the key interest rate and influencing inflation;organizing and managing interbank settlements;providing liquidity to commercial banks;participating in financial market regulation;storing foreign currency reserves and conducting international settlements.
The central bank plays a key role in maintaining trust in the national currency, which is critical for the functioning of a country’s payment system.
As both an operator and regulator of the national payment system, the central bank ensures its stability, reliability, and resilience. Typically, it develops and approves the regulations that govern the entire payment system and may also introduce innovative tools, such as a central bank digital currency (CBDC), which expand the capabilities of the foundational payment infrastructure.
At the international level, central banks collaborate with one another as well as with supranational financial institutions, such as the Bank for International Settlements (BIS) or the International Monetary Fund (IMF), to maintain global financial stability and facilitate cross-border settlements.
First Level: Commercial Banks
This level includes various types of commercial banks, as well as all credit institutions authorized to create bank accounts and process payments. Their key function is providing access to the payment system, specifically:
opening and maintaining accounts for individuals and legal entities;processing transactions through national and international payment systems by issuing cards and managing cashless payments;conducting payment operations, including cross-border transactions;assessing and managing payment risks.
Also operating at this level are clearinghouses, which service interbank operations — aggregating information on numerous payments and settling accounts between banks after clearing, thereby minimizing settlement risks and reducing the volume of transfers through netting.
A special category here includes global systemically important banks (G-SIB), the largest commercial banks in the world whose functioning is critical to the stability of the international financial system. The list of these banks is compiled annually by the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB). There are approximately 30 such banks globally. Functionally, they don’t differ from regular commercial banks.
Commercial banks operate under the supervision of central banks, which act as regulators and oversight bodies. They monitor the banks’ compliance with existing regulatory frameworks and requirements for financial security, currency control, and anti-money laundering measures. In addition, central banks systematically monitor the financial stability of these banks and interact with them through liquidity provision and withdrawal mechanisms, such as repo operations, credit auctions, and others, acting as instruments of monetary policy.
Direct financial interaction between commercial banks and central banks takes place through correspondent accounts, which are used for interbank settlements and for holding required reserves. Moreover, central banks act as operators of national interbank settlement systems and play an important role in international payment systems by establishing regulatory requirements for connecting commercial banks to the infrastructure that facilitates cross-border payment messaging and settlements, such as the SWIFT or CIPS systems.
Commercial banks serve as a bridge between the foundational layer of the payment infrastructure and all other participants: non-banking financial institutions, FinTech companies, businesses, and retail users.
Second Level: Payment Systems
Operating at this level are payment systems — infrastructure platforms where actual payment operations take place. Specifically, payment systems route and process payment messages, providing the technical means for transactions between banks, as well as settlements on client operations conducted through the banking infrastructure.
Key functions of payment systems include:
receiving and routing payment messages;clearing, or netting obligations between participants;organizing and executing settlements;ensuring operational, legal, and technical interoperability among participants.
Payment systems can be national (like FedACH, Bacs, and STEP2) or international (such as Visa or Mastercard). Typically, commercial banks are directly connected to these systems, and there’s close cooperation with central banks.
There are various technological formats for implementing payment systems — all of them constitute what’s known as payment rails, the infrastructure over which money moves between and through banks.
The main types of payment system architectures include real-time gross settlement (RTGS), deferred net settlement (DNS), and instant payment systems (IPS).
Real-time gross settlement:
is used for large, urgent interbank payments;represents the deepest layer of settlement, closest to the central bank and nearly always operated by it;is technically part of the foundational layer but functionally represents the beginning of the second level — bank infrastructure.
Deferred net settlement:
is used for processing smaller, high-volume payments;settlements occur with a deferred netting process, after clearing;is usually managed by separate operators;represents the second line of the second level — indirect, bulk settlements.
Instant payment systems are a separate segment within the second level, aimed at convenience and speed for retail users. The CP Media team has covered IPS in more detail in a separate piece.
Payment systems, especially those with DNS architecture, play a critical role in reducing operational and settlement risks by standardizing processes, centralizing settlements, and applying obligation-fulfillment guarantees. Meanwhile, RTGS systems enable immediate and final settlement of large, urgent payments, reducing liquidity and systemic risks. The development of IPS improves accessibility and speed in the retail segment, supporting the flexibility and resilience of the overall payment infrastructure.
Third Level: FinTech Companies and Payment Services
This level includes tech companies and services that develop and implement alternative payment methods, making access to financial services simpler, faster, and more convenient for end users, both individuals and businesses. It acts as the “front end” of the financial system, creating interfaces and formats for interaction through which users access tools supported by the deeper layers of financial infrastructure.
Key functions of participants at this level:
simplifying and personalizing the user experience;accelerating payment processing and ensuring 24/7/365 availability;expanding financial inclusion;integrating with commercial and social platforms.
From the classification perspective, this level can be conditionally segmented as follows:
Many FinTech solutions use licenses from partner banks or operate under an agency model. They may use bank accounts, cards, or direct API access to banking infrastructure for processing transactions. Other FinTech services rely on payment systems that provide technical transaction processing.
How this works in practice: a tourist from Europe uses the Google Pay mobile app to pay for a purchase in a store in Thailand. At the moment of payment, the app sends a data package to the Mastercard payment system (the tourist’s card issuer), which is processed in seconds through settlement mechanisms. The seller receives an instant confirmation of a successful transaction.
In this interaction chain, the participants include the app itself, the POS system’s payment gateway used by the merchant, the Mastercard payment network the gateway is connected to, and the sender and recipient banks, without even factoring in the clearing process, which may occur later. Additionally, given the cross-border nature of the payment, currency conversion mechanisms and several correspondent banks are likely involved.
Service providers at this level essentially form the final layer of the payment infrastructure, reducing barriers to indirect banking system access, enhancing the user experience, and driving the digital transformation of the financial sector.
User Level
The final level of the payment infrastructure includes all end users who initiate or receive payments, although technically, they aren’t part of the infrastructure itself. At the same time, without users, the existence of infrastructure becomes meaningless, as it’s ordinary people and businesses that create the demand for payment services and drive their development. Today’s payment infrastructure has become so complex and intricate precisely because of users who want to be able to pay for anything, anywhere, instantly.
“Payment products are incredibly multifaceted, so we have to pay a lot of attention to UX. If you want a user to do something specific the right way, you need to clearly describe the steps and give them intuitive buttons. On the other hand, it’s essential to ensure that the solution interacts efficiently with the payment infrastructure, using as few API requests as possible. In the end, a good payment solution is easy to understand, fast and reliable in operation, and provides the most seamless user experience possible,” said Max Krupyshev, CEO of CoinsPaid, during the Purpose Driven FinTech podcast.
