Banking System Architecture for Inhouse, LLG, RTGS and Online Transfer.
Basically, in the banking system, there are 4 ways to transfer funds to other accounts, namely: In-house transfers, domestic transfers (LLG and RTGS), and online.
In-house Transfer: This refers to a transfer of funds or money movement between accounts within the same financial institution or bank.
On inhouse transfer the communication between middleware and core banking usually use socket communication or file for communication, file here means that middleware will put the file in a specific directory and the file contains specific format usually fixed length. Care banking system for the old system is using AS 400 but nowadays the core banking supports REST communication.
Basically in transfer transaction the message to core banking is simple, the message usually consist of :
From_account, amount, destination account, and charge of transfer if exist.
LLG (Local Bank Clearing): LLG is a local interbank clearing system used in Indonesia. It involves clearing transactions between different banks within the same region or locality. LLG is often used for bulk payments, salary disbursements, or regular transactions among banks within a specific area. Transactions through LLG usually take a day or two for clearance
In LLG transfer, the process is similar to an in inhouse transfer transaction, the internet banking application will send messages (from_account, to_account, amount and charge) to the core banking application. Instead of sending the amount directly to the destination account, the LLG transfer involves bank indonesia to do LLG transfer to the destination account.
Every bank must have a deposit in bank indonesia in order the bank to be able transfer LLG to another bank. Communication between sender bank and bank indonesia usually uses a file with specific format.
RTGS (Real-Time Gross Settlement): RTGS is a real-time funds transfer system where transactions are processed immediately and settled individually without netting debits against credits. It facilitates high-value and time-sensitive transactions that require immediate and guaranteed settlement. RTGS systems are commonly used for large-value transactions, such as interbank transfers or transactions involving significant amounts of money.
For RTGS transactions the internet banking application will send messages (from_account, to_account, amount and charge) to the core banking application one by one through the RTGS application channel between sender bank and bank indonesia.
It is required for RTGS, that the sender bank must have an amount of deposit in bank indonesia.
Online Transfer: This term generally refers to transferring funds electronically via online banking platforms or mobile banking apps provided by banks. Online transfers allow individuals or businesses to transfer money between their own accounts or to other accounts within the same bank or different banks. These transfers can be instantaneous or may take a short period, depending on the type of transfer, banks involved, and the receiving institution’s policies.
In online transfers, the sender bank must have a deposit from a third-party network provider as a guarantee. The charge of the transfer is collected by a third party network provider, so on the same occasion the third party network provider needs to do a reconciliation, which divides the charge to each bank.
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