DEFINITION
Straight-Through Processing (STP)
Straight Through Processing or STP refers to automated end-to-end processing of transactions. This means that there is no human intervention required, leading to significantly faster processing. In the context of banking, Straight-Through Processing is commonly used for standard payments, loan processing, and securities trading. APIs play a vital role in STP, acting as a bridge between disparate systems and facilitating real-time, secure, and efficient communication between systems, applications, and stakeholders.
Synonyms
End-to-end transaction automation
Acronyms
STP
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Synonyms
End-to-end transaction automation
Acronyms
STP
Examples
A customer wants to perform a wire transfer to someone in a different country. They use their bank’s self-serving online portal to initiate the process. Via a Straight-Through Processing system, the bank automatically validates the details of the transaction, ensures compliance with Anti-Money Laundering and Combating the Financing of Terrorism regulations, and sends the payment instructions through the international payment network SWIFT.
The entire process is done within seconds and the recipient’s bank is delivered the funds without the need for anyone to manually check the transaction.
FAQ
What does STP mean in banking?
In banking, STP or Straight-Through Processing means that a transaction can be processed without the need for human intervention. It’s commonly used for payments and security trading.
What are the benefits of Straight-Through Processing?
By automating common financial transactions, banks can significantly lower their processing time. This leads to both a better customer experience and frees up staff to focus on other tasks.
What are the risks of Straight-Through Processing?
The main risk present is human error in cases where a transaction can’t be completed automatically. However, this issue persists across all transaction processing methods. STP can also be expensive to implement as it requires advanced software to be integrated into the bank’s core system. Lastly, STP relies on the system being stable at all times and can be exposed to cyber threats, although this, once again, isn’t native to only STP but rather digital banking in general.
Related Terms
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