Real-time gross settlement: the future of interbank payments

Real-time gross settlement systems — the critical infrastructure underpinning interbank payments — are undergoing their most significant transformation in three decades. Central banks from the Federal Reserve to the Bank of England are rebuilding these platforms with continuous settlement windows, enriched data standards, and API-driven access. The changes arriving between 2025 and 2027 will fundamentally alter how banks move money across borders and settlement windows. Real-time gross settlement: the future of interbank payments is no longer theoretical — it's being deployed in production environments now.

For financial institutions, the stakes are considerable. Legacy batch processes, correspondent banking relationships, and treasury operations built around fixed settlement windows must adapt to systems that settle instantly, 24 hours a day. The transition involves substantial infrastructure investment, yet the institutions moving first are gaining meaningful commercial advantages in cross-border payments, securities settlement, and corporate treasury services.

What is real-time gross settlement?

Real-time gross settlement is the continuous processing of interbank payments on an individual, transaction-by-transaction basis, without netting debits against credits. Settlement occurs immediately and irrevocably across central bank accounts. Traditional RTGS systems like Fedwire, TARGET2, and CHAPS have operated during business hours since the 1990s, processing large-value payments between financial institutions.

Modern RTGS infrastructure extends this model with three critical enhancements: continuous 24/7/365 availability, enriched ISO 20022 messaging that embeds structured payment data, and API connectivity enabling real-time liquidity management. The Bank of England's renewed RTGS platform, operational since 2024, exemplifies this shift — processing over £750 billion daily with sub-second median settlement times and programmable liquidity controls. The Federal Reserve's Fedwire modernisation, scheduled for late 2026 phased deployment, follows a similar architectural pattern.

The shift to continuous settlement windows

The most visible change is temporal. Central banks globally are eliminating the concept of 'closed hours' for wholesale settlement. The European Central Bank's TARGET Services reached 24/7 capability in November 2024 for TARGET Instant Payment Settlement, whilst full TARGET2 migration continues through 2027. This enables European banks to settle cross-border euro payments instantly at any hour, removing the liquidity buffers institutions historically held for overnight exposures.

In Asia-Pacific, the shift is more advanced. The Reserve Bank of Australia extended its Fast Settlement Service to continuous operation in mid-2024, settling AU$2.8 trillion in its first operational year. Singapore's MEPS+ processes real-time gross settlement around the clock, directly supporting the city-state's ambition to become the region's instant payments hub. Bank treasury teams now optimise intraday liquidity across multiple time zones without waiting for settlement window openings.

The operational impact is non-trivial. Banks must maintain real-time monitoring, fraud controls, and liquidity management capabilities outside traditional business hours. Several UK clearing banks now operate follow-the-sun treasury desks, with liquidity managers in London, Singapore, and New York coordinating positions as RTGS systems worldwide remain continuously active. This permanent availability also creates new failure mode risks — system outages that once affected a single settlement cycle can now cascade across 24-hour periods if not contained quickly.

ISO 20022 and the data richness revolution

The second transformation is informational. Legacy payment messages carried minimal data — basic routing instructions and numeric amounts. ISO 20022, now mandatory across major RTGS platforms from March 2025 onwards, embeds structured fields for invoice references, regulatory reporting codes, beneficiary detail, and transaction purpose. This data richness enables automated reconciliation, real-time sanctions screening, and sophisticated treasury analytics.

SWIFT's network processed over 9 billion ISO 20022 messages in 2025, with interbank payments representing the fastest-growing category. Banks using the full ISO 20022 data set report reconciliation time reductions of 60-70% for cross-border corporate payments. The enriched data also powers compliance automation, with transaction monitoring systems parsing structured fields to identify sanctions risks or unusual patterns without manual review.

The transition, however, exposes capability gaps. Many banks maintain core banking platforms built before ISO 20022 existed, requiring message translation layers that strip out enriched data before it reaches internal systems. The institutions seeing genuine operational benefits have invested in data pipelines that preserve ISO 20022 fields end-to-end, from corporate treasury portals through RTGS connectivity to internal ledgers. This often means rearchitecting decades-old payment processing logic — a multi-year engineering effort concentrated in 2025-2027 as regulatory mandates take effect.

Cross-border interoperability and linked RTGS platforms

Perhaps the most commercially significant development is the interlinking of national RTGS systems for instant cross-border settlement. Historically, correspondent banking relationships and SWIFT messaging created multi-day settlement delays and opacity for international payments. New bilateral and multilateral linkages between RTGS platforms are collapsing these timelines to seconds.

The Singapore-Thailand linked RTGS project, operational since late 2024, settles cross-border payments between banks in both jurisdictions within 15 seconds. Transaction volumes grew from 8,000 monthly at launch to over 140,000 by mid-2025, primarily corporate payments that previously moved through correspondent banks. The ASEAN region is extending this model — Indonesia, Malaysia, and the Philippines are implementing compatible RTGS interfaces targeting 2026 interoperability.

In Europe, the ECB's TARGET Instant Payment Settlement connects to the Bank of England's renewed RTGS via a technical bridge enabling euro-sterling settlement coordination. Whilst not full interoperability, the arrangement permits synchronised settlement across both central bank systems, reducing settlement risk for FX transactions. European banks processing significant sterling volumes report meaningful reductions in nostro account balances since the bridge became operational.

The Federal Reserve's FedNow Service, whilst focused domestically, is being architected with future international linkage capability. The Clearing House's RTP network similarly maintains technical specifications enabling cross-border extensions. Industry observers expect at least two major bilateral RTGS links involving the US dollar to be announced in 2026, likely connecting to systems in Mexico or the UK. These arrangements enable near-instant cross-border settlement without intermediate correspondent relationships — a structural shift for corporate treasury and trade finance workflows.

Liquidity management and the operational challenge

Real-time settlement eliminates credit exposure but intensifies liquidity demands. In traditional batch-based settlement, banks could net positions and fund once daily. Continuous RTGS requires institutions to maintain adequate central bank balances at all times or access intraday liquidity facilities rapidly. This operational reality is reshaping how banks manage working capital.

Central banks are responding with more flexible liquidity tools. The Bank of England's RTGS offers algorithm-based liquidity savings mechanisms that queue low-priority payments until bilateral offsetting transactions arrive, reducing gross settlement volumes. The Federal Reserve has expanded its intraday credit facilities, enabling banks to pledge a wider range of collateral for same-day liquidity access. These mechanisms work, but they require banks to implement real-time position monitoring and automated liquidity drawdown systems.

Several large European banks now use machine learning models to predict intraday payment flows and optimise liquidity positioning across multiple RTGS systems. These models analyse historical patterns, upcoming corporate payment schedules, and market activity to forecast liquidity needs 15-30 minutes ahead. Early adopters report 20-30% reductions in average intraday liquidity buffers, freeing capital for revenue-generating activities. The technology is complex — it requires direct RTGS API integration, real-time data feeds, and treasury team trust in algorithmic recommendations — but the capital efficiency gains justify the investment for institutions processing high payment volumes.

Implications for banks and financial infrastructure

The modernised RTGS landscape creates strategic choices for financial institutions. Banks must decide whether to connect directly to RTGS platforms — which offers speed and control but requires significant infrastructure investment — or access through intermediaries, which is simpler but introduces dependency and potential cost. The largest global banks are pursuing direct connectivity across major jurisdictions, whilst regional institutions increasingly rely on correspondent banking partners with RTGS access.

Payment service providers and embedded finance platforms see opportunity in the shift. By offering RTGS connectivity as an API layer, these firms enable software companies and non-bank financial services to access instant interbank settlement without building central bank relationships directly. Several European payment institutions now provide RTGS access to fintech platforms, settling corporate payments in seconds rather than the days required through traditional banking rails.

The infrastructure changes also intersect with digital currency development. Many central bank digital currency pilots — including the Bank of England's digital pound exploration and the ECB's digital euro project — assume operation atop modernised RTGS platforms. The programmability and API access being built into current RTGS systems provide technical foundations for potential wholesale or retail CBDC settlement. Institutions investing in RTGS modernisation now are positioning for a possible future where central bank money exists in both traditional and tokenised forms, settled across the same infrastructure.

For corporate treasurers, the practical benefits are emerging clearly. Instant cross-border settlement reduces FX settlement risk, improves cash flow predictability, and enables more efficient working capital deployment. Treasury management system vendors are building RTGS integrations that expose real-time settlement status and enable automated liquidity sweeps across jurisdictions. The corporations seeing the greatest advantage tend to operate across multiple currencies with frequent cross-border payments — precisely the segment where traditional correspondent banking created the most friction.

The timeline for full transformation extends through the end of this decade. Whilst core infrastructure upgrades are largely complete or in late-stage deployment, the ecosystem effects — changes in treasury practices, correspondent banking economics, and cross-border payment flows — will unfold more gradually. Financial institutions that treat RTGS modernisation as purely a technology compliance exercise will miss commercial opportunities. Those that rethink payment products, liquidity management, and client services around instant settlement capabilities will define the competitive landscape of interbank payments for the next decade.