GCRI · Technology
Payment and financial market technology
Payment and financial market technology covers the systems that clear and settle transactions and support trading. Their continuity is essential for economic activity and crisis response. Payments and Market Infrastructure stewards this page for the Nexus Consortium.
Payment and financial market technology on the record.
- 01InstitutionThe Global Centre for Risk and Innovation (GCRI)
- 02The methodWhat payment and financial market technology covers
- 03Reference practicePayment technology is governed by market infrastructure principles and messaging standards
- 04In systemic risk workPayments as the circulation of the economy
- 05Applied inPlatforms that apply this method
- 06StewardshipWho maintains this page
- 07SourcesWhere this page’s references lead
What payment and financial market technology covers.
- 01
Core methods
payment system design; settlement risk analysis; operational resilience testing; liquidity simulation; message standard design; fraud detection.
- 02
Data and instruments
transaction and settlement records; system availability logs; liquidity positions; incident reports; message standard repositories.
- 03
Validation
Systems are tested through failover exercises, liquidity simulations and supervisory oversight. Reconciliation checks the integrity of settled positions.
- 04
Limits
Interdependence among participants and third-party providers can produce unexpected failures. Simulations may not capture behavioural responses under stress.
- 05
Use in risk decisions
Payments analysis shows how operational outages or cyber events can freeze liquidity across the economy. It informs resilience standards and contingency arrangements.
Payment technology is governed by market infrastructure principles and messaging standards.
| Reference | What it sets |
|---|---|
| CPMI-IOSCO PFMI | Risk management for payment and settlement systems |
| ISO 20022 | Financial messaging |
| FATF Recommendations | Integrity of payment flows |
How the process runs.
Process
Payment and financial market technology: Parametric trigger and payment
Parametric insurance pays when an agreed measure reaches an agreed severity, not on assessed loss, and its main drawback is basis risk.
01 Design
- 01Peril and indexDataset · GCRI technical officeThe trigger measure should be objective and modelled, verifiable by a third party right after a disaster, and correlated with actual losses.
- 02Trigger type and loss modelModel · GCRI technical officeA pure parametric trigger uses a physical measure such as wind speed, magnitude or rainfall. A modelled-loss trigger uses model losses.
- 03Trigger and payment structureStep · GCRI technical officePayout amounts are predefined and usually fixed. A policy can have several triggers with different payout levels.
- 04Basis risk assessmentStep · GCRI technical officeBasis risk is the risk that a payout deviates from actual losses, in either direction. Some basis risk always remains.
02 Placement
- 05PricingModel · GCRI technical officePrice reflects expected loss and the cost of capital. Reinsurance multiples are typically above one.
- 06ContractDecision · GCRI technical officeThe contract fixes trigger and payout. Neither insured nor risk taker should be able to influence the trigger, its calculation or reporting.
03 Event
- 07Index monitoringModel · GCRI technical officeAfter an event the index is measured against the trigger. The measure has to be independently verifiable by a third party.
- 08Payment calculationStep · GCRI technical officeThe payout follows the predefined calculation. Without claims adjustment, payouts within two weeks are possible.
04 Use and review
- 09Use of the payoutStep · GCRI technical officeA payout can serve as budget support with few or no restrictions. It typically covers a small share of losses.
- 10Post-event reviewStep · GCRI technical officeAfter an event the payout can be compared with the loss that occurred, and the design reviewed.
Outline of an external standard or method, from its public sources. It describes what the framework says, not a record of any run. It does not show that Nexus or any partner performs, certifies or approves a step. A gate is a step of the method, never a Nexus approval. Catastrophe bonds use the same kinds of trigger. This outline follows the World Bank-hosted Financial Protection Forum note.
Payments as the circulation of the economy.
Payment systems are the channel for salaries, social transfers and emergency assistance. Their outage halts commerce; their exclusion leaves households out of support. GCRI’s interest is resilience and inclusion of payments in crises, alongside GRA’s sector analysis.
- Assess offline and fallback payment capacity.
- Consider cash access in disasters.
- Map concentration of processors.
Platforms that apply this method.
Who maintains this page.
Payments and Market Infrastructure stewards payment and financial market technology: it keeps this description current and reviews how the method is applied across the platforms.
Where this page’s references lead.
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