Understanding Money Flow and Information Flow in Financial Systems for Product Managers

As a finance‑focused product manager, you are constantly pressured by finance teams while needing a clear view of the entire capital movement: who receives money, how it is transferred, reverse processes, and fault tolerance, even though finance often cares about security but not the time spent on it.

When you use a bank card at a restaurant like Haidilao, the money flow and information flow involve the customer's bank, the merchant's bank, and the interbank clearing handled by the UnionPay network.

Building a financial system inevitably requires discussing both capital flow and information flow, which are crucial for payment system design and the selection of payment channels and fund custody solutions. Understanding these flows also facilitates communication between product designers and finance personnel, allowing early compliance preparation.

Official definitions:

Information flow : the complete transaction process information, including transaction, payment, and settlement instructions.

Money flow : the movement of funds among members of a marketing channel as goods and ownership transfer, i.e., the flow of transaction money.

The term clearing actually comprises two actions: clearing (calculating who owes whom how much after a payment) and settlement (executing the actual fund transfer based on the clearing results).

When you shop online, the money flow and information flow follow a similar pattern, involving the user, the acquiring bank, the clearing network (e.g., NetUnion), and the reserve account.

Key concepts explained:

Central bank : The People's Bank of China, the country's central bank where each commercial bank holds an account.

Issuing bank : Issues bank cards to users and provides related services.

Acquiring bank : Receives payment instructions and holds the user's prepaid funds.

Fund transfer : Internal movement of assets between corporate accounts.

T+1 : Settlement on the next business day (T+0 for same‑day, D+1 for next calendar day, etc.).

Basic payment system concepts include:

Large‑value payment system (HVPS) : Real‑time system for high‑value interbank credit transfers, operating on weekdays 8:30‑17:00 with no amount limit; transactions settle in real time.

Super Netbank system : Complementary cross‑bank clearing system that allows non‑bank institutions (e.g., Alipay, WeChat Pay) to connect, offering 24/7 real‑time settlement with a single‑transaction limit of ¥50,000.

Collection (代收) : Authorized debit without password entry, used by services like ride‑hailing or subscription renewals; typically limited to trusted partners.

Payment (代付) : Disbursement from an enterprise to users or merchants, usually from a reserved fund account rather than a corporate bank account.

Long payment : Over‑collection due to duplicate orders or system bugs.

Short payment : Under‑collection caused by timing differences at day boundaries.

The article concludes the introduction to information flow and money flow in the payment industry, promising a next installment that will guide readers through designing a minimalist financial reconciliation system.