Serial and Cover Payments

Serial Payments Vs Cover Payments:

Whenever a customer to financial institution payment is made, it can either fall under serial mode of transfer or else under cover mode of transfer. Its very essential to know what is “Serial” and what is “Cover” and the messages related to them.

Q: What are “Serial Payments”?

Serial Payments means “Funds” and “Information” is passed from one bank to another bank serially.

Ex: Just like passing the baton in 4*100 m relay, 1st person pass baton to 2nd, 2nd to 3rd and finally from 3rd to 4th.

Only one message is exchanged between the banks, namely MT103. MT103 acts as info and funds message.

In the example below, CITI USA customer instructs 345000 INR to be debited from her USD account to pay the beneficiary customer in SBI IND. CITI US with the help of INR correspondent branch in IND CITI as intermediate agent transfers funds to SBI IND. 

Q: What are “Cover Payments”?

Cover Payments means the “Funds” along with “Information”(Info about how to transfer funds in sequence to final bank and via whom) are sent in serial manner from the initial bank next bank, from next to the subsequent bank. An “Information” about last sender of funds to final bank and the details of “Funds” sent is also sent directly to final bank by the initial bank itself.

Ex: Booking an order in, the buyer is an Indian customer, where seller is in China.
Here seller courier partner in China (Chines Postal Service) will inform the GATI Courier service IND that it will send the shipment via HONG KONG postal service. 

GATI Couriers receives an upfront message from initiator regarding shipment arrival via an intermediate agent. The Intermediate agent(HONG KONG postal service) gets the item & info about next handover by the seller’s courier provider i.e., Chinese postal service(A.K.A initiator). Received shipment needs to passed on wards to GATI courier service IND (final agent), who takes care of settling to buyer.

In cover payments, MT103 acts as “Information” message and MT202COV acts as “Funds cum Info” message.

In the below example: CHAS USA gets an instruction from a customer asking to debit her USD account to pay 50000 INR to SBI IND customer. Here CHAS USA sends out an “Info message- MT103” to SBI IND directly. “Funds cum Info message -MT202COV” is sent out from CHAS USA via its INR correspondent in USA i.e., CITI USA. Then, CITI USA uses its CITI IND branch as correspondent to transfer funds to SBI IND as its mutual INR correspondent.


Some of the key pointers to note:
  •  Payment is of “Category 1” or A.K.A “Customer to Financial Institution” Payment
  • Messages involved are MT103, MT202COV
  • MT202 is different from MT202COV
  • First institution which sends MT202COV should have also sent MT103
  • MT103 can exist w/o MT202COV but MT202COV should have a underlying MT103 as its sequence B consists of some mandatory fields of MT103
  • Final receiver of MT202COV/MT910 should also receive MT103
  • If only MT103 is sent, it acts as funds and info message
  • If MT202COV is sent along with MT103 then, MT103 acts as Info and MT202COV acts as Funds

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