Concepts and definitions

A payment system is used for transmitting payment orders, processing them through clearing, and settling them. The banks in the system settle their claims and liabilities amongst themselves so that money gets from the payer to the payee. There are three types of payment system in general use:

  1. real-time gross settlement systems, where payment orders are settled immediately they arrive in the system, one by one;
  2. deferred net settlement systems, where the final balances of the system participants, or their net positions, are settled at fixed times during the settlement day;
  3. hybrid systems, which combine the continuous processing and settlement of real time systems and the fixed schedule for transmission of information on settled transactions of net settlement systems.

Multiple parties are involved in payments and making transfers of money through payment systems:

  • private individuals and companies who initiate the payments and receive them
  • banks, as the main providers of payment services and users of payment systems
  • payment system managers or operators, who make sure the payment systems function smoothly
  • central banks, which promote the smooth and secure functioning of the systems

Securities settlement systems are used for transactions with securities. The securities market is divided into a primary market and a secondary market. The primary market is where securities are issued. This is generally done electronically and the registration of the securities is run by central securities depositories that record the securities, provide and maintain securities accounts and operate the securities settlement systems. The secondary market, or exchange, is where securities are traded after they have been issued. The financial obligations that arise during trading are fulfilled in the securities settlement system. The national securities settlement system is usually operated by the central securities depository and the Estonian Central Securities Depository keeps the register of securities in Estonia and manages the securities settlement system.

Securities settlements are divided into two types by how the payment is settled:

  1. Delivery versus payment (DVP), where the money and securities move between the investors at the same time;
  2. Free of payment (FOP), where only the securities move, and the money is transferred later or not at all.

Since October 2014 a common T+2 settlement cycle has been used in Europe, where securities are transferred from the seller to the buyer by the second day after the trade is made at the latest.

The principal means of payment are cash and money in bank accounts. Payments in cash do not use any payment system. Payments made with money in accounts use the money in the bank account, a payment system, and various methods of payment like card payments or internet bank payments. Methods of payment are ways that a payment can be initiated and they are based on three main instruments, which are credit transfers, payment cards and direct debits.

Payment instruments

Payment methods

credit transfers

internet-bank payment orders, including e-invoice payment orders


standing orders


e-invoice standing orders


payment order through a bank link


telebank payment order or bank connection


mobile phone payment order


telephone-bank payment order


payment order initiated in an ATM


paper-based payment order


mobile phone payment

payment cards

card payment


e-commerce card transaction

direct debits

direct debit