Some of the basic components in “Payments”
- Amount & Currency:
In Banking terms an “Amount” is nothing but the quantity or value of money, whose unit of measurement is Currency.
Ex: 100 INR, 2001.25 EUR, 0.55 USD etc..
Note: ISO length: Field length of 18,5 for Amount and 3 Character is for Currency. Total 18 digit amount and max fraction part is 5 decimal places
- Payment:Payment means “Paying” someone, especially paying an “Amount” to someone is called “Payment”.
Ex: I purchase a book from a shopkeeper and in return, I give him some amount whose value is that of the book. Paying the Amount to shopkeeper is called Payment
- Settlement:Settlement is an act where the due is cleared between the involved parties. Its also termed as an act that discharges the obligations in the form of funds between the involved parties.
Ex: In the above example, when I get the book and when the seller gets the amount, we call the obligations between us are settled. I making payment on receiving the book.
Its an act of buying or selling between the parties. Carrying out a process of selling or buying which involves transfer of funds is called ‘Transaction’
Ex: The act of buying of book from the seller by giving him money is called a Deal or termed Transaction
- Payment System:An infrastructure laid to carry out “Settlement” process successfully and with ease between the involved parties who are part of that “Transaction” is called a “Payment System”.
Payment Systems helps in smooth transfer of funds between the involved parties, it could be between banks, or between customers, or between customer & bank, or between financial institution & a non financial institution, or between buyer & seller, or between supplier and seller and so on..
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