Finality Of Payment

AAA

DEFINITION of 'Finality Of Payment'

Refers to the instant that a payment to another party is completed, at which point the receiving institution has irrevocable access to the money. This is more commonly referred to as the moment when funds are "good" in an account.

The concept and definition are especially important in an environment where one or more banking institutions could cease operations at any given moment. By having a strict operational definition of the finality of payment, a receiving institution does not have to worry about recently received funds disappearing from its account because the transferring institution suddenly became insolvent.

INVESTOPEDIA EXPLAINS 'Finality Of Payment'

With the rise of online bill payment services, many consumers have gotten a practical lesson in the finality of payment. Since many online banking and bill payment services use the Automatic Clearing House (ACH) system to process payments, which doesn't result in an immediate transfer, many companies do not consider a bill paid until after they're assured of the finality of payment. Of course, that has taught many people the painful lesson that initiating an automatic bill payment on the due date usually results in a late payment.

RELATED TERMS
  1. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  2. Automated Clearing House - ACH

    An electronic funds-transfer system run by the National Automated ...
  3. Electronic Payments Network - EPN

    An electronic automated clearing house (ACH) that serves as the ...
  4. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
  5. International Finance Corporation

    The International Finance Corporation is an organization dedicated ...
  6. Charging Bull

    Charging Bull is a bronze sculpture by artist Arturo Di Modica ...
Related Articles
  1. The Federal Reserve
    Economics

    The Federal Reserve

  2. Inside National Payment Systems
    Economics

    Inside National Payment Systems

  3. Get To Know The Major Central Banks
    Forex Education

    Get To Know The Major Central Banks

  4. Demystification Of Bank Accounts
    Options & Futures

    Demystification Of Bank Accounts

Hot Definitions
  1. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  3. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  4. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  5. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena ...
Trading Center