Sooner or later, you will have to draw out your payments blueprint? What is that you ask? The Flow of Funds! Do you know what it is? and how to make one?
Hello. My name is Faisal Khan. I’m a banking and a payment consultant. And today the question that someone has asked is what is a flow of funds and why is it important.
A flow of funds is basically a pictorial, can be also descriptive description, but it’s mostly a pictorial description of how the money originates and how it terminates. Maybe the money is originating in, from a certain transaction in Chicago and maybe it’s going to London and then going to a processor in Singapore and ending up in Manila. So what would the flow of funds look like would tell you how the money has been taking out, is being originated, is it being taken out from a bank account, is it a cash over counter payment, was it a card payment, who got the money, how was it sent to which account, who was processing it, who was aggregating it, who was pooling it, who is wire transferring it, how is it arriving at the destination, it is it being split up, how is it being, you know, being kept in the bank etc.
All of these things are part and parcel of the flow of funds. What are the most important aspects of looking at any payment project is to immediately look at the flow of funds. A flow funds can be considered as the blueprint of a project. So if you want, if I were to go and say hey I’m building a house etc. you know, and I would show a blueprint, you would get it. You would understand how the house is being built, what will it look like. The same thing in a payment system is to look at the flow of funds. The flow of funds is a pictorial representation that will show me everything. You can have a very enhanced flow of funds. We just call it time motion step diagram, where every step of the payment process, where it’s, you know, a payment mechanism changes hands or something happens to that payment, is shown in a pictorial, you know, representation, but with time represented on the X axis. So, a flow of funds is essentially the blueprint of any given project.
I hope I was able to answer that question if you have any comments or any other questions, feel free to ask in the comments below and I’ll be happy to help. Till next time, take care.
This page was last updated on September 1, 2022.