Money and Payments: The U.S. Dollar in the Age of Digital Transformation
Accessible Versions of Figures
Figure C.1. Overview of a typical payment
In this example, the general public interacts with the “front end” of the payment system by swiping their credit card at a checkout machine or using a mobile app to send money. These payments may (1) flow solely through applications operated by and accounts maintained by banks, (2) originate in a nonbank financial service and then flow through the banking system, or (3) remain only in the records of the nonbank services (though customer nonbank accounts may be funded/defunded by bank accounts).
This graph depicts three paths through which payments can be made from sender to receiver. The first path depicts a payment made through the banking system. Here, the payment goes from the sender’s bank to the receiver’s bank through payment, clearing, and settlement infrastructure run by the Federal Reserve or the private sector. The second path depicts a payment initiated through a nonbank* financial service provider that then flows through the banking system. Here, the sender initiates a payment through a nonbank interface, such as a mobile application, which then follows the same path as a payment made through the banking system. The third path depicts a payment made entirely through a nonbank financial service provider. Here, the payment is initiated, cleared, and settled directly through a nonbank financial service provider.
*Nonbank financial service providers may be involved in various stages of both the front-end and the back-end of the payment chain. For example, there may be multiple paths from a nonbank to the receiver.
Figure C.2. Circulation of Federal Reserve Notes
The graphic depicts the Federal Reserve building and a 100-dollar bill with a magnifying glass over it. Federal Reserve Banks process notes to ensure that they are genuine and fit for recirculation. Suspect counterfeit notes are sent to the U.S. Secret Service. The graphic then shows three arrows pointing to commercial banks, credit unions, and savings and loan associations. The Federal Reserve Banks’ cash offices distribute banknotes to the public through commercial banks, credit unions, and savings and loan associations.