A hybrid model for real-time retail systems could improve the way that payments are settled, according to researchers at the Singapore Management University.

In a paper titled 'Near Real-time Retail Payment and Settlement Mechanism Design', authored by Zhiling Guo, Robert J. Kauffman, Mei Lin, and Dan Ma from the School of Information Systems at Singapore Management University, say that a ‘hybrid priority queuing mechanism' for faster payment settlement systems could improve the way payments are currently settled.

The research, which is affiliated with the Swift Institute, puts forward the proposal for a hybrid model for real-time retail systems, combining the benefits of a real-time gross settlement system (RTGS) with those of a deferred net settlement (DNS) system.

According to a statement from Swift, the research develops a solution for the rapidly increasing volumes of payments, particularly low-value retail payments. Retail payments are usually processed through DNS. RTGS, on the other hand, is seen as an attractive option for cases in which large dollar volumes accumulate, especially for high-value payments. However, both systems entail certain risks.

Swift states that the paper proposes a mechanism that “supports centralised queuing, permits payment prioritisation, reduces payment delays, enhances liquidity, and optimises the settlement process, including a modelling framework and experimental simulations to evaluate the proposed approach”.

The research paper is available in full here.