Domestic Fund Transfer

Commercial Activities and Funds Transfers

Delivery of funds without having to deliver cash to recipients in distant location is called funds transfer.

As an individual or a corporation engages in a commercial transaction, a debtor-creditor relationship arises. For example, if it is a selling of goods or services, the debtor-creditor relationship is dissolved by the buyer who bought a product or a service paying a fee to the seller. This is called "settlement."

In general, a settlement is made by paying cash. However, if the amount is high, the risk of theft and loss accompanying the delivery of cash increases. Funds transfer is a method of delivering funds between distant locations without directly sending cash. Since fund transfers eliminate the use of cash, safe and speedy settlements are possible.

Funds Transfers and Banks

Banks provide funds transfers by increasing or decreasing the amount in customer accounts of the sender and recipient, respectively.

Funds transfer consists one of the three primary commercial banking businesses, along with deposits and loans, in Japan.

Funds Transfers through Clearing Systems

If a fund transfer is conducted between two accounts opened in the same bank, the bank decreases the account balance of the sender of funds and increases the account balance of the recipient. In this case, a funds transfer is completed without actually moving any money.

figure.1: fund transfer in the same bank

However, to conduct a funds transfer between accounts located in different banks, the sender's bank must pay funds to the recipient's bank at some point. A system of structure for this is the clearing system.

figure.2: fund transfer between different banks

The Japanese Banks' Payment Clearing Network (Zengin - Net) is a clearing agency which exchanges customers' funds transfer advices as well as clears funds between banks that accompany said transactions. Operations among its participant banks are defined in the rules "Domestic Funds Transfer System" which is established by Zengin - Net.