Payment systems are structured systems that are designed to make the transfer of funds between points simple and fast. While there are a number of different systems that accomplish this task, one characteristic they all share is the fact that they electronically transfer funds, rather than physically moving cash from one location to another. Thanks to technological innovations, the range of systems used to transfer funds has expanded greatly in the last few decades.
The oldest of all payment systems is the common draft, also known as a check. This document makes it possible to remit a specific amount that is drawn against an account housed at a specific banking institution. When presented for payment, the check is honored by the issuing bank, assuming that the amount of funds in the account is sufficient to cover the amount of the check. Many people prefer to deposit checks into their own accounts, allowing the two banks involved to complete the transfer.
Charge accounts, including credit cards, are another example of payment systems that many people make use of every day. When an individual uses a credit card, the issuer of the card provides the vendor with the proper amount of payment, usually within one or two business days. The funds are electronically transferred into the business account of the vendor, while the amount of the purchase is applied to the customer’s account. This allows the customer to pay for purchases at a later date rather than when the goods or services are obtained from the vendor.
Electronic funds transfers have become increasingly sophisticated in recent years. Thanks to the innovations in Internet communications, it is possible to quickly transfer funds between active accounts at different financial institutions. In previous years, this process was limited to the institutions themselves, and often involved a somewhat complicated process to manage. Today, a customer can log into his or her account, enter the necessary information to initiate the transfer, then execute the transaction in a matter of minutes. In many cases, the funds are available to the recipient within minutes.
The idea behind payment systems is to allow the secure and timely transfer of funds between two or more parties. Enhancements in these systems has made it possible for much of today’s online commerce to take place, and allowed consumers more control over their bank accounts. Whether utilized as a standard means of doing business or as a way to get financial resources to a loved one across the world, payment systems manage the task without delay, a fact that many people appreciate.