In payment systems, what characterizes settlement finality?

Settlement finality is fundamentally characterized by the irrevocability of an asset transfer. This means that once a payment transaction has been settled, it cannot be reversed or altered. This characteristic is critical in ensuring confidence in payment systems, as parties involved can trust that once a transaction is completed, they are legally bound to it.

By ensuring that completed transactions cannot be undone, settlement finality mitigates risks for all parties in the payment process, including banks and their customers. This attribute is particularly important in high-value transactions, where the stakes are high, and any possibility of reversing a transaction could lead to significant financial instability.

In contrast, while the ability to amend a transaction may sound appealing in terms of flexibility, it undermines the concept of finality, which is crucial for establishing trust and reliability in payment systems. Similarly, the establishment of a secure payment network and the transparency of transaction fees, although important for operational effectiveness and customer satisfaction, do not directly address the key function of ensuring that once a transaction is executed, it is definitive and binding.