An individual or institution has to pay a certain amount to another person or institution at different times. Such payment is made by using different means or methods or instruments. These means, methods and instruments used by a customer to make payment to another party through a banking system are called modes of payment. Such modes of payment are used to make payment through the banking system, either digitally or by visiting a bank branch or agent. There are different types or forms of modes of payment. These different modes of payment have been discussed below:
- Cheque: Cheque is a payment order issued by the account holder ordering a higher bank to pay the mentioned amount to the mentioned party. The bank has to make the payment to the concerned party either at the counter or through the party’s account using Electronic Cheque Clearance (ECC). There are different types of cheques including bearer’s cheque, account payee cheque, crossed cheque, traveler’scheque etc.
- Draft: Draft is a payment order issued by a bank to another bank on behalf of a customer to pay a certain sum to the person on whose name the draft is issued. Such facility is provided at a certain charge. The use of draft is in a diminishing pattern as compared to other modes of payment.
- Electronic Transfer: This is a payment mode used for making an international payment. Such transfer is made through the international financial system integrating all banks and financial institutions of the world in an integrated payment system. It is mainly conducted through SWIFT or TT. Both these means are used for making payments internationally. SWIFT is used for making payments of a large amount as compared to TT.
- Digital Banking: Different digital banking platforms are used for making different forms of payment. This includesthe use of mobile banking, internet banking, POS, QR code etc. These means are used to transfer money from one account to another account of a person or institution. Such facility is provided by banks with certain charges or fees.
- Letter of Credit: Letter of credit is issued by a bank on behalf of the buyer promising to the seller to pay the amount if the buyer does not make the payment within the stipulated time. This is a mode of documentary guarantee to pay the seller. Letter of credit is issued at a certain charge. It is the most used instrument for making international payments.
- Plastic Money: Banks issue different plastic money in form of cards. This includes debit cards, credit cards, prepaid cards, travel cards, or special cards. These cards are used either to withdraw cash from ATMs or making payments for merchants while buying different goods or services. Some of these cards are developed and designed for using special services either online or offline.
- Branchless Banking (BLB): Branchless banking is a special kind of banking service in which a BLB machine is used to give payment to customers who want to withdraw an amount from their account. This is used for areas where there is no bank branch or bank branch that cannot be established due to geographical or business potential reasons. Such machine is handled by the BLB agent with coordination with the nearby supporting branch of the bank and IT logistics of the branch.
- Other Modes: Apart from above mentioned different modes of payment, there are also other modes of payment available. This includes payment services provided by facilities such as connect IPS, automated teller machines, self servicer machines etc. used to make payment easy, fast and convenient using the banking system.
