what are payment systems? cash flows in and out of a business as value is exchanged. cash is...
TRANSCRIPT
Payment Systems
What are Payment Systems?Cash flows in and out of a business as value
is exchanged.Cash is received through various sources of
revenue or from sale of assets.Cash is disbursed (spent) through payment of
bills and acquisition of assets.The method used for these exchanges of
value is called a payment system.
What kinds of payment systems can you think of?CashCredit CardsDebit CardsChequesDirect Transfers.
CashAdvantages – privacy, convenient for small
transactions, simple to use, widely accepted and cash requires little technological support.
Disadvantages – privacy, easily stolen, awkward to use in large amounts.
ChequesAdvantages: Convenient for payments by
mail, especially for “one-off” transactions, for suppliers that are not dealt with on a regular basis or for businesses too small to support a large electronic infrastructure. Serves as a source document.
Disadvantages: Delay in actual receipt of funds, cheques can “bounce” (known as non-sufficient funds, or NSF)
Credit CardsAdvantages: Convenient, pre-approved (no
risk of NSF), records of transaction available.Disadvantages: High level of credit card
fraud leads to high interest rates and high fees. As a business, you must pay a fee for each transaction that you accept on a credit card.
Debit CardsAdvantages: Receive funds immediately
(unlike a cheque) and no risk of NSF.Disadvantages – Requires electronic
infrastructure to support transactions, not convenient for small transactions, retailer must pay for each transaction accepted.
Direct TransfersAdvantages: Convenient for regular
transactions and bill payments. Less likely to miss a payment. Electronic record of transaction.
Disadvantages: Security, electronic infrastructure can be costly.