From the course: Fundamentals of Payments
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The four corners model
From the course: Fundamentals of Payments
The four corners model
The four-corner model is the most important concept to understand in payments, particularly domestic payments. It's a simplified open-loop model. Remember that in open-loop systems, intermediaries join the system to transact with each other on one side, and they serve the customers, the end parties, on the other side. Now look at this picture. Each payment service provider is an intermediary between an end party and the interbank system and central bank system. We call them PSP 1 and PSP A to clearly distinguish them. This abstraction is useful because, in general, we study one payment instrument at a time. We do not need a model with all interbank systems. It is enough if we have the interbank system of the payment instrument we are studying. We will consider a few examples to show that the four-corner model is the Swiss army knife to analyze almost any payment instrument. This is the four-corner model for the SEPA credit transfer or any credit transfer. If we compare it to the…
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