Several types of payment instruments are in use for small-value transactions. In developed economies, these include cash, wire transfers (such as SWIFT and TT), and physical checks.
Money management with intuitive planning and budgeting helps reduce inessential expenditures. In corporate finance, this involves the raising and use of capital, based on business strategies. In financial markets, it also refers to portfolio and investment management.
Payment Institutions
In the payments industry there are two types of payment institutions - Authorised Payment Institutions (APIs) and Electronic Money Institutions (EMIs). While both have similar features, the main difference between them is that APIs cannot issue E-money, while EMIs can.
E-money is the digital equivalent of cash stored on an electronic device or remotely at a server. It expresses a monetary claim against the issuer. Payment services that are based on the issuance of e-money include transferring and holding funds, payment instrument provision, remittance services and cash withdrawals from payment accounts. EMIs can also provide IBAN account opening, payment cards and e-wallets.
The EU's new rules on the provision of payment services, PSD2, came into effect in all EU countries in January 2018. It has created a framework that removes legal barriers to entry into the payment services market for new players and increases consumer protection. For example, PSD2 introduced an unconditional refund right for payers of SEPA direct debits within the period of 8 weeks from the date when the funds were debited from their accounts.
Companies that want to offer payment services must decide whether they should obtain a licence as an authorised payment institution or an e-money institution. It is important to consider the specific needs of your company and the type of services you wish to offer when making this decision. In addition to the licence requirements, you will need to take into account various other issues, such as the amount of capital you require and compliance with PCI DSS guidelines.
The Bank of Slovenia recognises payment institutions under the Payment Services, Services of Issuing Electronic Money and Payment Systems Act, which defines what activities they can conduct as their core business and establishes requirements for managing operational and financial risks and meeting organisational, security and personnel standards. It also recognises payment institutions with a waiver, whose payment services comprise only the execution of money orders and do not constitute an integral part of their business. They must substantiate and approve limited requirements for the management of operational and financial risk in their operations.
Cash
Every organization, even if its budget is only a few thousand or a few hundred dollars, needs a money management plan. A money management plan is more than just a way to track spending; it's about building and sustaining good relationships with landlords, suppliers, funders, etc. It's much easier to get things done, make repairs, negotiate a deal on prices or payment terms, and generally manage finances in general when there are good relationships between people.
The term "cash" often refers to physical currency and coins, but it also includes any funds in a bank account that can be liquidated quickly. A business might set up a petty cash system, for example, to pay for postage, office supplies, small repair bills, and other everyday expenses.
Electronic Payments
Electronic payments are any form of money transfer that doesn’t require cash or paper checks. They can be made through credit and debit cards, mobile payment apps (like Apple Pay or Google Pay), online banking transfers, ACH payments, digital wallets (PayPal), or direct debits. These payment methods offer greater convenience for customers and businesses. They can also be processed faster than traditional methods.
In developing countries, where many people lack access to banks, some telecoms are introducing mobile money platforms that let consumers add funds easily at physical recharge points and use those same funds for online transactions. Mobile money transfers are often cheaper, safer, and more transparent than traditional methods of sending and receiving small sums of money, which can be susceptible to corruption. They can also be biometrically authenticated, which helps reduce “leakages” – the tendency of middlemen to steal small amounts of money from financial transfers.
These e-payments have the potential to transform the lives of millions of people on low incomes and provide a pathway out of poverty. They can be used for wages, social benefits, or humanitarian relief and can also help businesses pay workers and suppliers more quickly. This will have a positive impact on business productivity and the overall economy.
By switching to electronic payments, companies can eliminate the need for cash and reduce costs and operational risk. They can also offer better customer experiences and increase their brand equity. However, this transition must be carefully managed. By ensuring that they have a robust payments strategy, including multiple electronic payment options, companies can meet their business needs while keeping their customers happy.
Having an integrated accounts payable solution is crucial for any organization, especially during times of crisis. As more and more consumers migrate away from cash, it’s critical for businesses to adopt a flexible and fast e-payment system. This way, they can process payments quickly and easily — even during the COVID-19 pandemic. This will ensure that their customers remain satisfied, and it will allow them to compete with their rivals. It will also allow them to manage cash flow more effectively, and it will improve their visibility into their payables.
Interoperability
As payment systems become increasingly complex, the ability to communicate and exchange information across different components becomes more important than ever. These different components may be payment systems, or they may be a combination of them and other infrastructure, such as banking networks and point-of-sale (POS) terminals. This is known as interoperability. Interoperability is an important feature of payments that can help improve efficiency, reduce costs, and expand access to electronic retail payment options for consumers. However, there is a lot of confusion about what the term “interoperability” means in payments and how it should be applied. A more structured approach to think about and discuss interoperability can reduce the ambiguity around this concept.
The United States’ payment system is comprised of many different components that effect transactions in various ways. These systems are not connected, but they can communicate and exchange information to enable a variety of transaction types. Interoperability refers to the ability of these different systems to work together, enabling one type of transaction to be completed in one way while another is effected differently. This interaction is commonly referred to as “interchange.”
Interoperability can be accomplished in several ways, but the most basic form is scheme interoperability. This occurs when two or more banks agree to work on an open-loop payments system, or "scheme," allowing payment flows to easily flow between their customers. This can be seen in checks, ACH or EFT systems, and open-loop debit and credit card schemes.
More sophisticated forms of interoperability can be found in parallel system interoperability and network interoperability. In parallel system interoperability, a merchant can accept payment from a number of different schemes through a commercial service provider that acts as an intermediary between the various payments schemes. For example, a merchant can accept Visa, MasterCard, and American Express cards through a card network, or a bank in West Africa can connect to large wallet providers like PhonePe and Paytm through the Unified Payments Interface (UPI).
Network interoperability is an even more complex concept than parallel system interoperability because it involves connecting multiple networks and enabling them to interact with each other. This is currently being accomplished through initiatives such as SWIFT’s Global Payments Innovation (GPI), which provides a fast, secure, and transparent platform for the exchange of messages between financial institutions.