when you hear the term real time it means the settlement happens as soon as it is received so in simpler terms the transaction settles in the receiving bank immediately after it is transferred from the sending bank gross settlement means transactions are handled and settled individually so multiple transactions aren t bunched or grouped together this is the basis of a real time gross settlement system 
an rtgs system is generally used for large value interbank funds transfers operated and organized by a country s central bank these transfers often require immediate and complete clearing as mentioned above once transactions are settled they cannot be reversed in 1970 the u s fedwire system was launched it was the first system resembling a real time gross settlement system it was an evolution of the telegraph based system used to transfer funds electronically between u s federal reserve banks 1the british system called the clearing house automated payment system chaps is currently run by the bank of england france and other eurozone nations use a system called trans european automated real time gross settlement express transfer system target2 other developed and developing countries have also introduced their own rtgs type systems 23real time gross settlement lessens settlement risk also referred to as delivery risk overall as interbank settlement usually occurs in real time throughout the day instead of simply all together at the end of the day this eliminates the risk of a lag in completing the transaction rtgs can often incur a higher charge than processes that bundle and net payments rtgs vs bankers automated clearing services bacs a real time gross settlement system is different from net settlement systems such as the united kingdom s bacs payment schemes limited which was previously known as the bankers automated clearing services bacs transactions that take place between institutions with bacs are accumulated during the day at the close of business a central bank adjusts the active institutional accounts by the net amounts of the funds exchanged 4rtgs does not require an actual physical exchange of funds a central bank will often adjust the accounts of the sending and receiving bank in electronic form for example sender bank a s balance will be reduced by 1 million while recipient institution bank b s balance will be increased by 1 million 5benefits of rtgsrtgs systems increasingly used by central banks worldwide can help minimize the risk to high value payment settlements among financial institutions although companies and financial institutions that deal with sensitive financial data typically have high levels of security in place to protect information and funds the range and nature of online threats are constantly evolving rtgs type systems help protect financial data by making it vulnerable to hackers for a briefer time window real time gross settlement can allow a smaller window of time for critical information to be vulnerable thus helping mitigate threats two common examples of cybersecurity threats to financial data are social engineering or phishing tricking people into revealing their information and data theft whereby a hacker obtains and sells data to others 6