Which of the following is an example of an instant payment system that operates on a DNS basis?

The chosen answer illustrates Bacs in the UK as an instant payment system that operates on a DNS (Deferred Net Settlement) basis. Bacs, which stands for Bankers' Automated Clearing Services, is primarily used for bulk payments, such as payroll and supplier payments, and processes transactions in a net-settlement manner throughout the day.

Bacs operates in a way that allows for batching of payments, where transactions are grouped and settled at specific intervals rather than instantly. Although Bacs is not strictly an instant payment system in the traditional sense, it is an example of net settlement, making it a relevant choice in the context of DNS operations.

In contrast, systems like SWIFT, Fedwire, and CHAPS are known for facilitating real-time payments rather than operating on a DNS basis. Fedwire and CHAPS are both real-time gross settlement systems, which settle payments individually and immediately, thus not aligning with the DNS method. SWIFT, while a messaging network that can facilitate immediate transfers, does not itself handle the settlement but operates through linked banks that have their own settlement structures, which also do not typically operate on DNS principles.

Understanding the structural differences between these payment systems highlights why Bacs is the most appropriate example of a DNS operating payment system