Five Types of Payment Systems

• Cash• Checking Transfer• Credit Card• Stored Value• Accumulating

Balance

•Legal tender defined by a national authority to represent

value

•Instantly convertible into other forms of value without a third

party

•Normally used for small transactions

Cash

Cash (continued)

Positives: Portable, gives consumer instant purchasing power, and virtually

free

Negatives: easily stolen, limited to smaller transactions, provides no float

Checking Transfer

• Funds transferred directly via a signed draft or check from a consumer’s checking account

to a merchant

• They can be used for both small and large transactions

Positives: Provide users with some float, hard to steal

Negatives: they’re not anonymous and require a third party

Checking Transfer (continued)

Credit Card

• An account that extends a line of credit to consumers and allows them to purchase items now and pay later

• Issuing banks issue cards and process transactions

• Processing centers handle verification of accounts and balances

Stored Value

• An account where funds are deposited and withdrawn as

needed

• Examples: prepaid cards, gift certificates, debit cards, and

smart cards

Accumulating Balance

• Accounts that accumulate expenditures and to which

consumers make period payments

• Examples: phone and utilities

Most Common Payment Systems (Based on Number Of Transactions )

Most Common Payment Systems(Based on Dollar Amount)

Online Merchants’ Actual and Preferred Online Payments