Serial Payment

A serial payment is a method of making a cross-border transfer through correspondent banking in which the customer payment instruction travels from one bank to the next along the chain, and each bank settles with the following one before passing the instruction on. The payer's bank sends the message to its correspondent, that correspondent forwards it to the next bank, and so on until it reaches the beneficiary's bank, which credits the payee.

Serial payments are one of two main ways of routing an international payment through correspondents. The other is the cover payment method, in which the customer instruction goes directly to the beneficiary's bank while a separate bank-to-bank message moves the funds through intermediaries. In SWIFT's traditional formats, a serial payment uses the MT103 customer credit transfer at every step; in ISO 20022, the equivalent is the pacs.008 message.

Consider a company in one country paying a supplier in another, where the two banks have no direct account relationship:

1. The ordering customer instructs its bank to pay the supplier, giving the beneficiary's account and bank details.
2. The ordering bank sends a customer credit transfer message to its correspondent bank in the currency's home market and debits its own nostro account there, or the correspondent debits the ordering bank's account on its books.
3. The correspondent forwards the same customer instruction to the next bank in the chain, such as the beneficiary bank's correspondent, settling with it across their accounts.
4. The beneficiary's bank receives the instruction, is credited by the bank before it and credits the supplier.

Each bank in the chain sees the full payment details, including the names and accounts of the ordering customer and beneficiary. Each also settles in turn, so the payment moves at the pace of the slowest link.

In a cover payment, the ordering bank sends the customer instruction directly to the beneficiary's bank and separately sends a bank-to-bank transfer, historically an MT202 COV and now pacs.009 with cover details, through the correspondents to move the money. The beneficiary's bank waits for the cover funds before crediting its customer, unless it chooses to take the risk of paying early.

The two methods have different strengths:

• Transparency. In a serial payment every intermediary sees the full customer data and can screen it. Cover payments once hid this data from intermediaries, which led SWIFT to introduce cover message formats carrying originator and beneficiary information, in line with wire transfer transparency standards.
• Speed. Cover payments can reach the beneficiary's bank faster because the instruction does not wait at each intermediary, while serial payments depend on each bank processing in turn.
• Charges. In serial payments, intermediaries often deduct their fees from the amount as it passes through, so the beneficiary may receive less than was sent unless the payment is marked for the sender to bear all charges.
• Reconciliation. With serial payments, the ordering bank's account is debited by an entry that links directly to the customer payment, which makes tracing simpler.

Because each intermediary institution can apply its own fee, serial payments are the main source of the deductions that surprise beneficiaries of international transfers. The charge option chosen by the sender determines who pays: under the OUR fee option, the sender is meant to cover all fees; under shared charges, each side pays its own bank and intermediary fees are usually deducted; under the beneficiary option, all fees come out of the amount. Long chains increase cost and delay, which is one reason banks try to route payments through as few intermediaries as possible.

Traditional serial payments were hard to track, since each bank handled the message separately and the sender could not see where a payment was delayed. SWIFT gpi added a unique end-to-end transaction reference that every bank in the chain must carry and status updates that each bank reports to a central tracker, letting banks and customers follow a payment step by step. The migration of cross-border payments to ISO 20022 has also improved the quality of data travelling with each step, supporting sanctions screening and automated processing.

Serial payments remain common for commercial transfers, particularly in currencies where several intermediaries are needed, while large banks with extensive networks may use cover or direct routes where these are faster or cheaper.