In simple terms, what is a clearinghouse?
Payments
Asked by Question Bot10/Jan/20151 answer
1 Answer
F
Faisal Khan
Answered 10/Jan/2015
Consider the following players: Bob, Linda, Mike, Jose, Megan, Patrick, and Eugene.
Now consider the following scenarios:
In the simplest of terms, A Clearing House, does all the above math and settles everyone's accounts for say 1 cent per transaction (Debit/Credit).
Now imagine the above list comprises of say 2,000 people. Each person averaging 5,000-10,000 transactions, you can see how relatively complex the whole situation can get. A Clearing House will do the math. Guarantee the accounting and everyone's balances would be adjusted either in real-time or net-settlement time.
Now consider the following scenarios:
- Bob owes Linda $2.50
- Linda has a payable to Megan and Patrick of $1.25 each
- Patrick owes Bob, Linda and Eugene 10 cents each
- Eugene owes everyone $5
- Jose has to pay everyone 18 cents (except Linda to her he owes $1.98) and yet, Jose has an IOU from everyone else for 63 cents
- Megan owes Mike 83 cents, $1.83 and $9 for the three transactions she did with him.
- Mike owes Megan 11 cents, 81 cents and $1.24 for the three transactions he did with Megan
- Bob, Linda and Mike each owe Eugene and Patrick 3 cents each.
- Mike has 5 IUOs of 8 cents (as receivable) from Patrick.
- Etc.
In the simplest of terms, A Clearing House, does all the above math and settles everyone's accounts for say 1 cent per transaction (Debit/Credit).
Now imagine the above list comprises of say 2,000 people. Each person averaging 5,000-10,000 transactions, you can see how relatively complex the whole situation can get. A Clearing House will do the math. Guarantee the accounting and everyone's balances would be adjusted either in real-time or net-settlement time.