Types of Payment Systems and Instruments

DéfinitionTypes of Payment Systems and Instruments

1. Cash – is the preferred method for small payments because it involves no credit and therefore no promises. With cash, you can usually purchase goods and services easily as it widely accepted. Carrying too much cash is risky as it can lead to theft and other problems. However, people still carry cash for its convenience and flexibility. From the payee's point of view, transactions are completed immediately and this cash can be re-used for other transactions.

2. Cheques – a cheque is an order to transfer funds from the payer's bank to the account of the payee. Cheques are generally valid for six months after the date of issue. The use of cheques has traditionally dominated Fijian non cash payments. Despite the development of other payment instruments, cheques remain an important form of payment. A cheque is effectively a future promise to pay the amount stated on it and needs to be presented to a bank in order to obtain the payment. Cheque clearance usually takes 3 - 4 working days.

3. Debit Card (DC[1])– is a payment card where the transaction amount is deducted directly from the card holder's bank account upon authorization.

4. Credit Card (CC[2])–enables its holder to buy goods and services with a credit line given by credit card issuer. Funds are settled at a later date. Card holders are billed on a monthly basis and bear financial charges (interest) on outstanding amounts if payments are not made by the due date. Credit cards are issued through commercial banks and/or other issuers.

5. Direct Debit – money is transferred automatically from a payer's to payee's bank accounts. The payer must instruct their bank to make direct debit payments and the payee provides amounts and dates of the payments. This facility can be used for paying different amounts and is useful for paying regular bills.

6. Internet Banking – a fast and convenient way of performing banking transactions such as transferring funds from your savings to current account or to a third party account.

7. Mobile Banking - a service provided through the combined effort of a bank and a mobile service provider, to perform common banking transactions. An active bank account is needed and a mobile phone equipped with features required by the bank.