Straight Through Processing (STP) is the automated processing of transactions from initiation to settlement without manual intervention. It enables information to flow seamlessly from one party to another throughout the entire transaction lifecycle. STP reduces processing time, minimises errors, and cuts operational costs in financial transactions and trade documentation.
How STP works:
A transaction, such as a payment or trade order, is initiated electronically through various platforms like online banking or trading systems.
Transactional data is captured electronically, either directly entered by users or generated from internal systems.
The system automatically checks the transaction details for accuracy, including account information and amounts.
Additional necessary information (e.g., currency exchange rates) is retrieved and added to the transaction.
The system performs automated risk checks to identify potential fraud or compliance issues.
If the transaction passes validation and risk assessment, it is automatically approved and routed to the appropriate destination, such as a clearinghouse or payment processor.
The transaction is settled electronically, with funds transferred between accounts and relevant systems updated.
All parties involved receive electronic confirmation of the transaction’s completion.