Have you ever thought about why banks impose administrative fees for transferring money to different bank accounts? It's because the banking system in Indonesia utilizes various money transfer mechanisms between banks that you may have heard of, such as RTGS, clearing, and others.
RTGS serves as a crucial part of modern financial infrastructure, enabling seamless economic and business transactions on a global scale. Through its provision of rapid and secure money transfer services, RTGS strengthens trust in the financial system and promotes sustainable economic development.
Explore more about RTGS in the following discussion.
Definition and Benefits of RTGS
Real-Time Gross Settlement (RTGS) is a payment method where money transfers happen instantly and individually between participating banks. This system ensures that each transaction is processed separately and independently. In this way, the value of each transaction is handled individually without being combined or accumulated with others.
Basically, RTGS enables both large and small fund transfers to be conducted without significant delays. These transactions may involve interbank payments, securities purchases, or other financial transactions requiring instant settlement.
Some benefits of RTGS that customers can enjoy include:
Speed and Efficiency
RTGS allows for fast money transfers, reducing operational costs. Instant transaction settlement means reduced delays and supports efficient economic activities.
Security and Accuracy
This system ensures transaction security through stringent verification processes and robust encryption. Verification processes and risk management features involve high-security systems and ensure transaction integrity.
Flexibility
RTGS supports money transfers in various currencies, facilitating cross-border transactions. This mechanism can reduce risks associated with currency value changes or market fluctuations.
The Difference Between RTGS, Clearing, and Real-Time Transactions
RTGS, clearing, and real-time transactions share the same goal of facilitating money transfers more efficiently, but they have differences. The most fundamental difference lies in the settlement time and transaction handling methods, so these three mechanisms are applied for different needs. Here are some key differences between RTGS and other money transfer mechanisms.
Mechanism
RTGS transactions are gross, with each transaction handled separately. The clearing process involves a third party acting as a clearinghouse to facilitate the exchange of information and funds between banks. Meanwhile, real-time transactions refer to a process or system that allows information or transactions to be synchronized and updated immediately or without significant delays.
Transaction Time
RTGS completes transactions instantly, reducing risks associated with currency or market fluctuations. Clearing takes longer than RTGS. Transactions are gathered and grouped before being approved and settled. Although real-time transactions can occur instantly, they don't always guarantee direct fund settlement like in RTGS.
Transaction Value
RTGS is ideal for large fund transfers because it handles gross values without grouping them with other transactions. For smaller fund transfers, you can use clearing, which can group multiple transactions into one batch for joint approval.
Usage Coverage
RTGS is more suitable for large fund transfers that require instant settlement. Clearing services are generally used for smaller fund transfers with slower settlement times. Meanwhile, real-time transactions can cover various types of transactions, including payments, message deliveries, and instant inventory updates.
How RTGS Works
Real-Time Gross Settlement (RTGS) operates by ensuring fast and accurate transaction processing. Nowadays, RTGS services can be accessed through mobile applications, eliminating the need to visit a bank branch. However, it's worth noting that if you conduct an RTGS transfer at the end of the month, there will be a one-business-day delay. This is because banks undergo month-end closing processes, resulting in the money arriving in the recipient's account on the 2nd of the following month. In general, here are the steps involved in sending money through RTGS.
Initiating a Transaction
The process commences when an entity, individual, or institution decides to initiate a money transfer or payment transaction through RTGS. The sender provides payment instructions to the respective bank, including essential details such as the transfer amount, recipient's account information, and the destination bank.
Verification and Authorization
The sending bank verifies and authorizes the payment instruction transaction. This process is carried out to ensure that the funds to be transferred are available and comply with the given instructions, as well as with the bank's security policies and requirements.
RTGS Mechanism
Once the verification is successfully completed, the payment instruction enters the RTGS mechanism. This system directly processes, forwards the instruction to the receiving bank, and completes the transaction.
Instant Settlement
One of the main features of RTGS is the instant settlement of money transfer processes. Once the instruction enters the system, the money transfer transaction is instantly settled and electronically recorded. The recipient can access and use the received funds immediately after the transaction is completed.
Confirmation and Reconciliation
After the completion, both the sending and receiving banks receive electronic confirmation stating that the transaction has been successful. Reconciliation process is then conducted to ensure that the bank's internal records match the transactions that occurred in the RTGS system.
Risk Management
The RTGS system is equipped with advanced risk management features to identify and address potential security or financial risks. This function involves automatic controls and checks on each transaction to minimize the risks of failure or fraud.
Reporting and Tracking
After transaction completion, the RTGS system records and stores transaction data for reporting and auditing purposes. Tracking is crucial to ensure compliance with financial regulations and policies in Indonesia and globally.
RTGS Limits, Transfer Fees, and RTGS Examples
RTGS transactions have various rules such as minimum and maximum limits, which vary from bank to bank. Here's an explanation.
Minimum Limit
As the central bank, Bank Indonesia sets the minimum limit for RTGS at Rp 100,000,001. This minimum limit corresponds to the concept of RTGS, which is a service for transferring large sums of money.
Maximum Limit
There's also a maximum limit for each RTGS transaction. This limit is set to ensure security and risk control. However, the maximum RTGS limit is determined based on the policy of each bank and varies.
Transfer Fees
RTGS applies transfer fees for each transaction. The fees can vary between banks and are influenced by several factors, including the transfer amount, bank policies, and the type of account used. However, generally, these fees range from IDR25,000 to IDR50,000.
Example of RTGS Transaction
Let's say you want to transfer IDR500 million using RTGS from Bank A to Bank B. The amount is in accordance with and verified based on the applicable policy. Bank A charges a fixed fee of IDR25,000, while the variable fee for RTGS transfer from Bank A is 0.1%. So, you need to prepare additional funds beyond the amount to be sent, which is 0.1% x IDR500 million = IDR500,000 + IDR25,000 = IDR525,000.
The benefits of RTGS service you can get include instant transfer of large sums of money with high security levels. This mechanism makes it easier for you to make transactions for various purposes with large amounts of funds, such as paying for education abroad or for business purposes.
You can access this service through mobile applications like digibank by DBS, which come with several advantages. The entire process is carried out digitally, saving you the hassle of visiting a bank branch. Verification is done through face biometrics; simply have your e-KTP ready for a selfie. With just one app, you can easily handle all your daily transactions.
What's even more appealing is that opening a savings account with digibank by DBS offers high-interest savings and allocation options can be done through 20 Maxi Wallets. There's also a feature for free money transfers with no transfer fee limit using digibank BI-Fast, with a transaction limit of Rp 250 million per transaction per day to any bank account.
Come on, it's time for you to use digibank by DBS for all your banking needs. Get more detailed product information here.
