Interest-bearing accounts, offered by banks and other financial institutions, allow clients to earn interest on deposited funds. Typically used for short-term savings, emergency funds, specific goals such as travel or major purchases, or as part of a diversified investment strategy, these accounts provide a safer alternative to riskier investment options and offer a convenient solution for saving money while accruing interest. These accounts often work as sub-accounts that can be easily created by account holders in their banking apps.

The return and interest rate and other specific features and benefits of these accounts depend on the account terms and conditions and vary depending on the type of account and the financial institution offering it. They can require minimal deposit or balance, have restrictions on withdrawals and transfers, and can also change over time.

The Pismo platform supports a wide range of interest-bearing accounts, such as savings and checking accounts that perform daily interest calculations and daily payouts. The interest-bearing accounts solution offered by Pismo uniquely stands out in the market because of its robust capability of processing large volumes of daily operations, fully customizable fee and interest calculations, and generation of treasury files and legal reports.

This guide provides information on the available options to set interest-bearing accounts on the Pismo platform and includes common parameters, outputs, and examples.

Interest-bearing accounts on the Pismo platform

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At this time, you need to contact the Pismo representative for assistance with setting up interest-bearing accounts, but Pismo is in the process of releasing the APIs that allow you to perform these configurations yourself. Bookmark this page and check back soon for updates and links to the APIs as they become available.

Core banking by Pismo

If you maintain accounts in the Pismo platform as part of its core banking solution, you have seamless access to the products and solutions offered by Pismo and are uniquely set up to take advantage of their flexible configurations and high-capacity processing.

In this case, work with the Pismo representative to set up interest-bearing accounts.

1. If applicable, set up the fee model in the Pismo platform to withhold any taxes or operational fees.
2. Configure a flexible plan to accrue interest according to your needs.
3. Create the core banking product in the Pismo platform.
4. Attach the product to specific accounts or all accounts in a program.

Pismo integration with other core banking systems

If you maintain accounts in a different core banking system outside of Pismo, you can still utilize the Pismo platform to offer interest-bearing accounts to your clients and to process daily accrual calculations and payments. In addition to the flexibility and high capacity of Pismo platform processing, this solution offers treasury files and legal reports.

In this case, work with the Pismo representative to set up interest-bearing accounts.

1. If applicable, set up the fee model in the Pismo platform to withhold any taxes or operational fees.
2. Configure a flexible plan to accrue interest according to your needs.
3. Configure integration with your core banking system to import daily account balances.

Common configuration parameters

The following parameters are common for setting up interest-bearing accounts.

* Coming soon. Contact your Pismo representative about the specific options available to support your solution.

Output events and files

The Pismo platform generates events and files to support your operations. You can use these files to help perform daily reconciliatory processes and ensure that all calculations align with your system's daily balances.

Events

• Accrual - Interest accrual succeeded
• Status change - Asset status changed
• Maturity - Asset status changed to completed

Treasury and back office files

The platform generates treasury and back office files that can be imported into treasury systems for cash management. These files have fields such as interest plan characteristics and total issued and redeemed amounts. The platform supports the following types of files.

• Issuing
• Redemption
• Reconciliation

Regulatory reports

Contact your Pismo representative for the regulatory reports available in your region.

Examples

Scenario 1

In the first scenario, the principal amount is $10000, floating interest rate is DI (where DI is 10.65% for the whole period), index rate is 103%, accrual rate is daily, and payout frequency is daily. The platform uses the account balance to calculate and generate the yield daily after the cut-off window and credits it to the account the next business day (D+1) based on the configurations. If the account holder doesn't make any deposits or withdrawals, the account accrues the following amounts.

• On day 2, the credited amount is 4.13.
• On day 3, the credited amount is 4.13.
• On day 4, the credited amount is 4.14, and so on.

The platform performs the following calculations to compute the yield based on the unit price (PU) equal to 0.01.

• To obtain the quantity of units, divide 10000 by 0.01.

Units = amount / PU = 10000 / 0.01 = 1000000

• To calculate interest rate, use the 10.65% DI interest rate and apply the 103% index rate.

10.65% * 103%/100% = 10.96% = 0.1096

• To calculate the daily accrued PU, use the following formula.

Accrued PU = x * ((1+y) ^ (period/number of the days of the year))  
           = 0.01 * ((1 + 0.1096) ^ (1/252)) = 0.0100041373

Where:
x = unit value
y = interest rate
period = accrual frequency

• To calculate the full accrued amount, multiply the daily accrued PU by the quantity of units.

Amount = accrued PU * units =  0.0100041373 * 1000000 = $10004.1373

Scenario 2

In the second scenario, the principal amount is $10000, fixed interest rate is 6.17%, accrual rate is monthly, and payout frequency is monthly. The platform uses the account balance to calculate and generate the yield monthly and credits it to the account monthly. If the account holder doesn't make any deposits or withdrawals, the account accrues the following amounts.

• For month 2, the credited amount is 50.02.
• For month 3, the credited amount is 50.27.
• For month 4, the credited amount is 50.51.