Payment instruments and payment systems Flashcards
What are payment service providers?
They are institutions that can transfer funds.
- credit institutions
- payment institutions
- other institutions
What is a credit transfer.
Is a payment instrument:
- the payer sends a payment order to a bank requesting a defined amount of funds to be transfered to another person’s account.
What is direct debit?
Direct debit is a payment instrument:
- the beneficiary requests the bank of the payer for a sum of money to be drawn from his/her account to the beneficiary.
What is a payment card?
A payment card is a physical or virtual instrument that can be used to perform payment tranzactions.
What are the payment tranzactions?
- withdrawl of money from ATMs
- to make payments to merchants that accept cards
- to make payments to fiscal authorities (bills etc)
What are the credit card classifications?
- by function
- by the issuer
- by the technology
- by the settlement date
Payment card function classification:
- credit card (draw funds up to a limit, with grace period)
- debit card (draw funds up to the available funds in client’s account)
- debit card with overdraft (same as debit but with a fund extension)
- prepaid card (rechargable or non rechargable card)
Payment card issuer classification:
- bank card (issued by a bank)
- store card (issued by retailes and service providers, they usually offer clients discounts at shopping)
- co-branded card (issued by a bank in partnership with a retailer, it offers discounts to clients and income for both partners)
Payment card technology classification:
- card with magnetic stripe
- smart card (with microchip)
- dual card
Payment card settlement date classification:
- pay now (debit cards)
- pay before (prepaid cards)
- pay later (credit cards)
What is E-money?
E-money is money that exists in the banking computer system
What is a cheque?
It is a document trough a client gives an order to a bank, to pay another person upon pressenting the document.
What is a bill of exchange?
A bill of exchange is a document trough which a client gives an order to another person to pay at maturity, an amount of money to a 3rd party.
What is a promisory note?
A promisory note is a document trough which the issuer agrees to pay an amount of money at maturity, in a certain place.
What is a letter of credit?
It is a contract trough which a bank agrees on behalf of its customers to authorize another bank to make a payment to the beneficiary.
What is a bank letter of guarantee?
It is a guarantee made by a bank on behalf of a client. If the client fails to deliver the payment, the bank will pay the debt.
What is RTGS?
RTGS (Real time gross settlement) is a payment system that settles large value payments on one-to-one basis.
What is ACH?
ACH (Automated clearing house) is a payment system that settles low value and large value (retail) payments
What are the large-value payment systems in the eurozone?
- TARGET 2
- EURO 1
- STEP 1
What are the retail payment systems?
- STEP 2
- SEPA
What is TARGET2?
TARGET2 settles payment tranzactions one-by-one
It settles:
- monetary policy operations
- interbank transfers
- other large-value or urgent euro payments
(it is one of the largest payment systems in the world)
What is EBA?
EBA is a private provider of euro clearing systems, offering both high and low value clearing trough:
- EURO1
- STEP1
- STEP2
What is EURO1?
EURO1 is a large value payment system for domestic and cross-border payments in euro
What is STEP1?
It is a payment service for individual commercial payments
What is STEP2?
It is a retail payment system in euro (up to 50000 euro/transaction)
What is SEPA (Single European Payments Area)
SEPA enables customers to make non-cash euro payments to any beneficiary located anywhere in the euro area
What are the objectives of SEPA?
- the create a single domestic payments market
- to eliminate the differences between domestic and cross-border payments in euro
- to bring constructive economic outcomes and opportunities
