Transaction infrastructure
Transaction infrastructure is the invisible layer of payments: the settlement systems, message standards and system architecture on which millions of payments move every day. This area covers the structures that make instant payments possible around the clock.
From traditional batch processing to real-time settlement
Traditional credit transfers were based on batch processing: banks collected payments and settled them with each other at set times during the banking day. The model was efficient, but it meant that a payment made at the weekend might only reach the recipient on the next working day. With instant payments, each payment is processed individually and immediately, which requires continuously available systems from all parties.
In the euro area, instant payments are mainly settled through two pan-European systems: TIPS (TARGET Instant Payment Settlement), operated by the Eurosystem, in which settlement takes place in central bank money, and RT1, operated by EBA Clearing. Both use ISO 20022-based messages and the rules of the SEPA Instant Credit Transfer scheme.
When payments are instant, errors and outages are instant too. The system architecture must therefore withstand partial failures without payments being lost or booked twice. In the financial sector this is also governed by regulation: the Digital Operational Resilience Act, Regulation (EU) 2022/2554 (DORA), has applied since 17 January 2025.
The message standard enables structured, rich payment data: payer and payee details, references and the purpose of the payment. This improves both automatic matching and sanctions and fraud screening.
The path of an instant payment through the infrastructure
The description is simplified. A real implementation also includes sanctions screening, fraud prevention and liquidity management.
Receiving the order
The payer's bank receives the payment order, checks that funds are available and performs verification of payee.
Creating the message
The bank creates an ISO 20022 message (pacs.008) and sends it to the settlement system.
Reservation and forwarding
The settlement system reserves the funds from the payer's bank's liquidity and forwards the message to the payee's bank.
Acceptance by the recipient
The payee's bank checks the account and returns an acceptance or rejection (pacs.002).
Final settlement
After acceptance, the settlement system records the transfer as final and notifies both banks.
Crediting and notification
The payee's bank credits the account immediately, and the payer is notified that the payment has been completed.
Architectural principles in practice
The following design principles are central to every system that processes real-time payments.
Idempotent interfaces
Every state-changing operation can be repeated safely without side effects.
Event-driven architecture
State transitions are published as events that other systems subscribe to and process.
Immutable ledger
Entries are never modified; corrections are made as new reversing entries.
Timeout handling
A clear policy on what to do when no response is received within the deadline.
Active-active availability
Several sites process traffic simultaneously to guarantee uninterrupted service.
Observability
Comprehensive metrics, tracing and alerts that reveal a problem before the customer notices it.
Infrastructure risks and operational resilience
DORA requires financial entities to carry out ICT risk management, incident reporting, resilience testing and the management of third-party risk.
| Risk | Description | Control |
|---|---|---|
| System outage | The settlement connection or core system is unavailable. | Redundant connections, active-active architecture and tested continuity plans. |
| Uncertain status | The outcome of a payment remains unknown because of a timeout. | Status queries, idempotent retries and a clear process for handling uncertain status. |
| Liquidity shortfall | The bank's settlement account does not hold sufficient funds around the clock. | Automated liquidity management and proactive alerts. |
| Third-party risk | An outage at a cloud or software supplier affects the payment service. | Supplier risk assessment, contractual terms and exit plans in line with DORA. |
| Message errors | An incomplete or incorrectly formatted message is rejected. | Schema validation before sending and consistent mapping of ISO 20022 fields. |
- EPC SCT Inst Rulebook
- The rules of the instant credit transfer scheme defined by the European Payments Council.
- ISO 20022
- The standard for interbank (pacs) and customer-to-bank (pain, camt) messages.
- Regulation (EU) 2022/2554 – DORA
- Digital operational resilience for the financial sector, applicable since 17 January 2025.
- Regulation (EU) 2024/886
- The obligation to offer instant payments, verification of payee and changes to sanctions screening.
Questions: transaction infrastructure
What is the difference between TIPS and RT1?
Both settle SEPA instant payments. TIPS is a Eurosystem service in which settlement takes place in central bank money. RT1 is a system operated by EBA Clearing. A bank can be reachable through either or both.
Why is ISO 20022 so significant?
It replaces older message formats with limited fields with structured data. Richer data improves automatic matching, reduces manual work and makes sanctions and fraud screening more effective.
How does an instant payment system handle a timeout?
The SCT Inst scheme defines a maximum time within which a payment must be executed or rejected. If no response is received in time, the payment is rejected and the payer's bank releases the reserved funds. The system must nevertheless be able to resolve every unclear case afterwards.
Does DORA apply to payment service providers?
Yes. DORA applies broadly to financial entities, including credit institutions, payment institutions and e-money institutions, and, under certain conditions, to critical ICT service providers serving them.
Related topics
Other technology areas and knowledge base guides that go deeper into this topic.
Digital payment processing
The payment lifecycle from initiation to settlement: gateways, processors, account-to-account payments and reconciliation.
Read more → Technology areaSecure authentication protocols
Strong customer authentication (SCA), bank IDs, OAuth 2.0 / FAPI and dynamic linking in the PSD2 environment.
Read more → GuideInstant transfers: SEPA Instant and the EU Instant Payments Regulation
Ten-second payments, verification of payee and price parity. An analysis of the obligations, deadlines and technical implications of Regulation (EU) 2024/886.
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