A payment hub is one system inside a bank that sends and receives every kind of payment: UPI, cards, NEFT, RTGS, bill payments and international transfers. It is also called a payments hub or a payment engine. It checks every one of these payments for fraud.
Why does a bank need one system for all of them? Each kind of payment travels over a different network and follows different rules. UPI payments travel through UPI, which NPCI runs, and they complete within seconds. NEFT and RTGS are run by the RBI. NEFT sends payments in batches every half hour. RTGS sends large payments, of ₹2 lakh or more, one at a time and immediately. Card payments arrive from a card network. Payments to and from other countries travel through correspondent banks, which are banks that hold accounts for each other in different countries. In the past, a bank often built a separate system for each of these. A payment hub handles all of them in one place.
Here is a typical case, seen from the hub. Imagine a brassware exporter in Moradabad who receives ₹4 lakh from a buyer by RTGS. The payment arrives at the exporter's bank as an RTGS message. The hub reads the message, checks that the exporter's account exists, and sends the payment to the core banking system, which credits the account. The same afternoon, the exporter pays a metal supplier ₹35,000 by UPI. The request reaches the hub through its UPI switch. The hub asks the core to debit the exporter's account, and replies to NPCI in about a second.
On every payment, the hub asks a fraud detection system whether the payment shows signs of fraud. It also sends the payment details to AML transaction monitoring. AML means anti-money laundering. This software looks for signs that someone is moving money earned from crime.
For card payments, the hub does both halves of authorisation and settlement. It approves or declines each card payment in a fraction of a second. Later, it processes the settlement files that tell the bank how much money to pay or receive.