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Clearing

Clearing is the process of exchanging payment instructions and validating obligations before settlement.

Overviewโ€‹

Clearing is the stage where payment participants exchange instructions, perform rule checks, and calculate obligations. It sits between payment initiation and settlement.

For off-us payments, clearing is mandatory. For on-us payments, clearing is often a simplified internal routing/validation step.

What Happens During Clearingโ€‹

  • Message exchange through a rail (NPP, ACH/direct entry, card network, SWIFT chain)
  • Syntax and schema validation
  • Participant and account-level rule checks
  • Duplicate/idempotency checks
  • Position calculation (gross or net)
  • Acknowledgements and status messaging

Clearing Flow (Off-Us)โ€‹

Sending bank releases payment
  -> Clearing network validates and routes
  -> Receiving bank validates and accepts/rejects
  -> Status returned (e.g., pacs.002)
  -> Obligation prepared for settlement

Gross vs Net Clearing Outcomesโ€‹

  • Gross: obligation tracked per transaction (often near real-time)
  • Net: obligations aggregated per participant over a cycle

The clearing design directly affects liquidity and settlement risk.

Common Clearing Exceptionsโ€‹

  • Invalid beneficiary account
  • Unsupported currency/product
  • Cut-off missed
  • Participant unavailable
  • Duplicate instruction detected

Each exception must map to a deterministic status and customer-facing narrative.

Clearing Data Needed for Reconciliationโ€‹

Keep the following keys for downstream matching:

  • Original instruction identifiers (MsgId, InstrId, EndToEndId)
  • Network reference IDs
  • Scheme cycle/batch IDs
  • Participant/member IDs
  • Timestamps for send/ack/accept/reject