The impact of payment splitting on liquidity requirements in RTGS

This paper examines the impact that payment splitting could have upon the liquidity requirements and efficiency of a large-value payment system, such as the UK's CHAPS. Under payment splitting, a threshold value for payments is defined. Any payments larger than this threshold are split into equal pieces, each smaller than the threshold, and are then settled. This paper does not seek to propose the adoption of payment splitting functionality in the UK but rather contributes to the growing literature on mechanisms for making real-time gross settlement payment systems more liquidity efficient.