In the previous article on-us transactions were introduced and we looked at them at the level of one bank. In this article, we continue our analysis of on-us transactions but considered now at bankgroup level.
In a wider sense, on-us transactions occur when the originator bank and the beneficiary bank are separate entities but belong to the same bankgroup. A bankgroup consists of many banks located in the same country or in different countries. Below are some examples:
- In France, large mutualist bankgroups like Credit Agricole, BPCE or Credit Mutuel are composed of dozens of regional banks each. And they have subsidiaries located in other SEPA countries as well.
- Many bankgroups in SEPA like Deutsche Bank, ING and Nordea have subsidiaries (with the same brand or with a different brand) in many SEPA countries.
In general, the banks within the same group exchange payment transactions directly among themselves without going through a CSM. These transactions, the intrabankgroup transactions, are settled directly by moving the funds inside the group. But more steps are needed here. It is not the same as for intrabank transactions, where the bank can just debit the debtor account and credit the beneficiary account in its own book. Since two different banks are involved, funds have to go through internal accounts before reaching the beneficiary account.
The model for an intrabankgroup transfer is depicted below. It consists of two different banks linked directly to each other. Each bank is connected to its customer.
This looks like a genuine four-corner model. Doesn’t it? There are exactly four actors and there is no CSM between the banks involved. The reality is slightly different because banks are not connected directly to each other but through a platform as we see in the next figure. The platform belongs in general to the head office of the bankgroup.
An exchange platform is put in place to avoid the creation of many bilateral links between the different banks of the bank group. The platform not only allows all banks of the group to connect to each other but also to share the same connection(s) to one or several CSM through which external banks can be reached.
The routing intelligence is implemented in the exchange platform. It is quite simple in principle. If a payment coming from one bank of the group has another bank of the group as a destination, the platform will route it directly to that bank. But if a payment coming from one bank of the group has as destination a bank outside the group, then the platform will route it to the CSM which will do the final routing to the correct destination.
The volumes of on-us transactions at bank and bankgroup levels are not negligible in large bank groups. They can amount to several thousand or even millions daily. This makes the exchange platform an essential system for the payment services provided by the bankgroup. In the next articles, I will come back to the messages exchanged between the originator and beneficiary bank and draw your attention to a key point. See you soon.