Payment Rail Systems
Karthikeyan Sundaram
Karthikeyan Sundaram
June 5, 2024

RIX-RTGS and RIX-INST: Exploring Sweden's Payment Systems

In this article, we explore Sweden's advanced payment systems: RIX-RTGS and RIX-INST. We'll understand their unique features, benefits, and how they serve the Swedish financial infrastructure.
RIX-RTGS and RIX-INST: Exploring Sweden's Payment Systems

In Sweden, as in many other countries, the Riksbank provides a centralized payment system that banks and other financial institutions use to conduct transactions between one another. The Swedish payment system is known as RIX, and its participants include banks, clearing organizations, the Swedish National Debt Office, and the Riksbank itself. The RIX system features two settlement services: RIX-RTGS and RIX-INST. RIX-RTGS handles large payments and operates on weekdays from 7am to 6pm, while RIX-INST is designed for smaller, instant payments and is available 24/7, every day of the year.

RIX-RTGS

RIX-RTGS facilitates high-value payments with specific daily transfer limits that vary by participating financial institutions. RIX-RTGS is tailored for large transactions between participants, with around SEK 550 billion traded daily and an average payment value of about SEK 20 million.

A payment in RIX-RTGS goes through several stages: it is verified, sometimes cleared, and then settled. The verification ensures that the payer is authorized to make the payment and that there are sufficient funds in the payer’s account. Clearing involves reconciling payments before they are sent for settlement. Settlement, the final step in the payment process, means that the payment is finalized and the participants’ accounts are adjusted accordingly.

Value of Payments in RIX-RTGS over the years

How does settlement in RIX-RTGS work?

Transfers between participants’ accounts in RIX-RTGS are conducted electronically based on the principle of real-time gross settlement (RTGS). This means transfers are made individually, and the funds received are immediately available for other transfers.

RIX-RTGS also includes functions that allow multiple transfers to be offset against each other simultaneously, enhancing system efficiency. This hybrid system combines the risk reduction benefits of gross settlement with the liquidity savings from offsetting transfers. To further promote system safety and efficiency, the Riksbank can provide intraday credit, known as overnight credit, in RIX-RTGS, but only against adequate collateral.

The primary advantage of RIX-RTGS is its ability to handle large transactions securely and efficiently, ensuring immediate settlement and minimizing counterparty risk. The system operates under robust security measures and is backed by the Swedish central bank, enhancing its reliability and trustworthiness.

However, RIX-RTGS transactions are typically subject to higher fees, which can be a drawback for frequent users. Additionally, the system operates only during specific business hours, limiting its accessibility for urgent transactions outside these periods.

RIX-INST

RIX-INST is the Riksbank’s system for instant payments. Unlike RIX-RTGS, RIX-INST operates continuously around the clock, every day of the year, and provides instant settlement. Payments made through the Swish mobile application are settled on RIX-INST.

How Does Settlement in RIX-INST Work?

There are two models for settling payments in RIX-INST: the “Standard Settlement Model” and the “Single Instructing Party Settlement Model (SIP model)”.

  • Standard Model: In this model, the amount is reserved in the payer’s account in RIX-INST, and a payment request is sent to the payee. The reserved amount is locked and cannot be used for other payments. If the payee accepts the payment, the reserved amount is released, and the transaction is completed immediately. Both the payer and the payee receive confirmation that the transaction is finished.
  • SIP Model: This model, used by the Swish mobile application, works differently. No reservation of the amount is made, and the payee does not need to authorize the payment; the transaction occurs immediately after the payment instruction is approved by RIX-INST. Both the payer and the payee receive confirmation through an authorized agent.

RIX-INST supports real-time transactions with daily transfer limits set by individual participating banks.

A significant advantage of RIX-INST is its 24/7 availability, allowing for continuous, real-time fund transfers, even on holidays and weekends. This system is highly convenient for both businesses and individuals needing immediate payment solutions. The quick settlement process enhances liquidity management and reduces the time to clear funds.

However, potential transaction fees for each transfer can add up for frequent users. Additionally, while RIX-INST is designed for instant payments, it may have lower transaction limits compared to RIX-RTGS, making it less suitable for very high-value transactions. The reliance on stable internet connectivity can also be a limitation in areas with poor network infrastructure.