What does DNS stand for in payment processing terms?

DNS stands for Deferred Net Settlement in payment processing. This method is used in various payment systems where transactions are accumulated over a specific period (usually a day or several hours) and then settled in a single net payment.

The key feature of deferred net settlement is that it mitigates settlement risk by allowing financial institutions to offset their claims and obligations to each other. Rather than settling every transaction individually in real-time, which can create liquidity challenges, institutions settle only the net differences at scheduled intervals. This practice promotes efficiency, reduces the number of transactions that require immediate settlement, and helps to optimize cash flow management for the institutions involved.

Understanding Deferred Net Settlement is essential in the context of payment processing, as it is widely utilized in various clearing and settlement systems, particularly in interbank transactions and network systems.