Today many different forms of payments are known, but basically, they can be merged into two categories – cash and cashless. In the following lines, we will describe some of the forms of payments known and used most often.
The most common payments are cash payments and are used for smaller amounts.
Cashless payments are the transfer of cash from the payer’s account to the payee’s account. They are carried out through the participation of the bank as an intermediary, based on the so-called order by the holder. Cashless payments are used in a variety of areas of life and business. There are many different methods for making cashless transfer and forms of cashless payment.
This form of payment between companies has a number of advantages:
- Cheaper;
- Provide greater security;
- They are faster;
- Allow the payer to use a loan from a bank more easily;
- Limit the amount of cash in circulation, which in turn limits inflation;
Types of cashless payments
- Direct transfer;
- Letter of credit;
- Instant collection;
- Bank guarantees;
Direct transfer – credit transfer
In practice, credit transfer is one of the most commonly used forms of cashless payments. It is most often used in cases where the payer has a stable financial state and a willingness to carry out his payment obligations on a regular basis.
Direct transfer is particularly suitable for payments to the Government budget, State social security, insurance organizations, as well as for transferring amounts from one account to another.
For this form of payments, the payment is initiated by the payer. He orders the servicing bank to make the appropriate payment for the benefit of the supplier. In other words, the bank obliges its value and transfers the amount specified in the order to the recipient’s account.
Letter of credit
In this type of payments, the originator orders a bank to open a letter of credit for the benefit of the recipient. The letter of credit shall be the responsibility of the issuing bank to pay the exporter on behalf of the importer upon regular submission of the documents specified in the letter of credit. It is considered to be one of the safest forms of payments in international trade in the import and export of goods.
Instant collection
In short, instant collection is a form of payments, which is made at the initiative of the supplier, respectively the recipient of the payment or the beneficiary. Here the bank is authorized by the payer to make a payment from his account to a third party, who must submit a payment request. In this payment, there is also an agreement between the payer and the third party, giving the payer the consent to withdraw the money from his account.
Bank guarantees
The bank guarantee is made by the issuing bank and is an irrevocable commitment to pay a certain amount to the beneficiary under the guarantee, in case of non-compliance with a commitment by the originator under the guarantee and subject to the conditions laid down in the guarantee.
Cheque
This is a type of payments in which the cheques are written in forms approved by the BNB and the payer is required to have a checkbook. Cheques issued may not be for a greater amount than the balance in the payer’s account. The cheque is presented for redemption, which can be done in any bank and not only in the one that issued the checkbook.
Electronic payment systems (PayPal, TransferWise, PaySera, Western Union, Skrill, etc.)
There are two main areas of application of electronic payment systems – these are data exchange (requests, accounts, etc.) and electronic transfers of funds, which take place between banks. Electronic payments are made by electronic means of payment using the following three types:
- Type I – a combination of ordinary and electronic payments. Here the payment is made in the traditional way and the confirmation of the holder is sent by e-mail.
- Type II – transmission of credit card numbers electronically and use of so-called smart cards. They can store and transmit all information about their owner. In this case, the whole process is done electronically.
- Type III – includes different types of digital stocks and electronic money. The difference that in this case money is actually transferred, not just information.
Each of the listed forms of payments in the business has its own specifics when posting. We at T&G Consulting rely on our experience and knowledge in the field and are ready to assist you.
