What is Deferred Net Settlement (DNS)?

Question

Accepted Answer

Deferred Net Settlement (DNS) is a payment system mechanism where the final transfer of funds between participating financial institutions for a batch of transactions is delayed until a predetermined future time, typically the end of the business day, and is based on the net obligations calculated from all transactions exchanged during the settlement cycle. This system is primarily used for high-volume, low-value retail payments, such as checks, Automated Clearing House (ACH) transfers, and card transactions, as it significantly reduces the liquidity required by participants compared to real-time gross settlement (RTGS) systems.

Deferred Net Settlement (DNS)

What is Deferred Net Settlement (DNS)?

How does Deferred Net Settlement (DNS) function, and what are its core advantages and risks in modern payment infrastructure?

What are the key differences between Deferred Net Settlement (DNS) and Real-Time Gross Settlement (RTGS), and how do they impact financial stability?

Where is Deferred Net Settlement (DNS) predominantly used in the global financial landscape, and what specific payment systems rely on this mechanism?

How has the evolution of payment systems, including the rise of RTGS and instant payments, influenced the role and design of Deferred Net Settlement (DNS)?

Learn More