Payments Academy

FLOW-01: Deliver a Cross-Border Correspondent Payment in US Dollars

Flow. Cross-border correspondent payment

A corporate customer in London needs to pay a supplier in New York in US dollars, and the bank must move the money through correspondent banks, apply the agreed foreign exchange rate, deduct the correct charges, and settle on the agreed value date. Today the process depends on manual checks, emailed instructions, and a chain of intermediaries that the customer cannot see, so payments are slow, expensive, and hard to explain when they arrive late or short. In this lab you act as the business analyst for the full flow. You will compare the serial method, where the payment instruction travels with the funds through each correspondent, with the cover method, where the instruction travels directly and the funds settle separately. You will define the routing, the charge bearer options, the foreign exchange rules, the cutoffs, and the settlement steps. You will also define how the bank reports status, handles repairs, and reconciles the nostro account. By the end you will have a complete pack that operations, treasury, compliance, and technology can all use.

0 of 6 steps done. Tick each step as you finish it, your progress is saved in this browser.

  1. Interview the product owner, two corporate customers, and the operations manager to agree what the service must do. Record the pain: slow settlement, unclear charges, and no tracking. Define the corridors, the currencies, and the customer segments in scope, and set three measurable objectives, for example same day value for 90 percent of payments submitted before cutoff, full status visibility, and a 30 percent fall in manual handling. Get the sponsor to confirm the objectives before you write any requirement.

  2. List every stakeholder, from the corporate customer and the relationship manager to operations, treasury, compliance, technology, and each correspondent bank. Build a RACI for the key decisions, naming who is responsible, accountable, consulted, and informed. Walk the current process with operations and draw the as-is diagram, showing every step, system, handoff, and wait. Record the five most common exception reasons and the average time each step takes, so the redesign is based on evidence.

  3. Draw both flows side by side. In the serial method the instruction and the funds travel together through each correspondent, so each bank deducts its charge and passes the balance on. In the cover method the instruction goes directly to the beneficiary bank while the funds settle separately through the correspondent chain. Compare speed, cost, transparency, and risk for each method, and agree with treasury and operations which method applies to each corridor and amount band, with the reasons recorded.

  4. Capture the rules that decide how a payment behaves: the cutoff time in each corridor, the foreign exchange rate lock period, the charge bearer options of shared, sender pays, and beneficiary pays, and the handling of insufficient funds. Write each rule as a single clear statement with its condition and its result, and give it a unique identifier. Walk the rules through with operations and compliance using two worked examples, one clean payment and one that misses the cutoff, and correct any rule the examples prove wrong.

  5. Write the functional requirements as testable statements, each with a unique identifier, a priority, and an acceptance test in mind. Cover initiation, validation, screening, routing, foreign exchange, charges, settlement, and status reporting. Then write the non-functional requirements: response time under two seconds for a status enquiry, availability of 99.9 percent, audit logging of every state change, and data protection for customer details. Review the full set with the product owner and the test lead, remove duplicates, and trace every requirement to a business objective.

  6. Define how the payment settles, how the nostro account is funded and checked, and how the beneficiary bank confirms credit. Design the status messages the customer receives at initiation, acceptance, settlement, and credit, including the message for a delayed or repaired payment. Define the daily reconciliation checks that match each payment to its nostro entry and its ledger entry, with tolerance rules for fees and a clear owner for every break. Present the full pack to business, operations, treasury, and compliance for sign off.

Artefacts you produce.

Worked example. Aldergate Bank, a fictional bank in London, receives an instruction from a corporate customer, Northgate Engineering, to pay 85,000 US dollars to a supplier, Hudson Parts Inc, in New York, with reference NGE-2026-1147. The customer chooses the shared charges option and a same day value date. The payment is submitted at 09:40 London time, before the 11:00 cutoff, so it qualifies for same day value. The bank converts the sterling debit at the locked rate of 1.27 dollars to the pound, screens the payment, and selects the cover method because the beneficiary bank holds a direct relationship with the correspondent. The instruction travels directly to the beneficiary bank as a pacs.008 message, while the funds settle through the correspondent account. The beneficiary bank credits Hudson Parts Inc with 84,960 dollars after deducting a 40 dollar correspondent charge, and sends a pacs.002 status report confirming credit at 15:20 London time. The customer sees each status update in internet banking, and the nostro account reconciles the same evening with no break. A second payment of 12,000 dollars submitted at 11:45 misses the cutoff, so it is queued for the next business day and the customer is told immediately.