Electronic currencies have made it feasible to pay using a bank card and an Internet connection. Previously, transactions were only completed with cash or a check as confirmation of the transfer at the bank. In this essay, we will examine the benefits and drawbacks of international payment systems and determine if the negatives are considerable.
What are the Payment Systems?
International PSs differ. SWIFT and SEPA are exclusively meant for financial institutions. The latter utilize them for overseas transactions. There are also PS that take payments from internet retailers. However, in our post, we discuss PSs that enterprises and citizens may use to register accounts and conduct foreign transactions (such as Transferra and Revolut). Such payment methods are often known as EMIs (Electronic Money Institutions). They have the authority to open accounts, issue electronic currency (not to be confused with cryptocurrencies), and create electronic wallets.
Today payment systems are often called neobanks. This is partially true. It is dependent on the license the latter are utilizing. If it is banking, neobanks can lend and take deposits without limitation. Typically, such neobanks are a different section within a typical bank, therefore they are banks.
If a corporation simply has a financial license, its services will be limited. However, it can brand itself as a neobank.
In addition to the foregoing, payment methods are classified:
- By territory: international (different countries), regional (for example, work only within the EU or Latin America), and national (only work within one country’s borders.);
- by kind of customer service: they focus solely on individuals or legal organizations or serve everyone;
- based on the number of currencies: single and multi-currency.
There are payment systems that serve high-risk businesses, while others work only with traditional areas.
Why are Payment Systems Interesting?
Payment services provide businesses and individuals with chances and potential:
- fast account opening;
- fast international transactions;
- the ability to receive payment and make payments in foreign currency;
- no need to make unfavorable conversions;
- payment options are expanding;
- diversification of cash flows.
Advantages of International Payment Systems
The advantages of using international payment systems include:
- Accessibility: Any Internet user can trade or sell. You need a network connection and login details to your account to do this.
- The payment is made in a few seconds, demonstrating efficiency. This saves you a large amount of time that would otherwise be spent in financial institutions completing the transfer.
- International payment systems’ databases contain encrypted electronic signatures. If access to them is restricted, it is nearly hard to steal them. Modern SSL security is installed.
- Savings, because when exchanging electronic banknotes, the percentage will be minimal. Taxes are not charged on the cash kept in the accounts. And sometimes you can get an Apple Pay refund.
- If you need information, you can get it at any time.
Disadvantages of International Payment Systems
The disadvantages of using payment systems include:
- It is difficult to conduct electronic currency transactions without access to the World Wide Web.
- To use personal wallets online, you must supply the information of the person who owns the electronic banknotes or bank card. In this regard, information is made available to supervisory agencies, the tax service, and others. Confidentiality is not honored. However, security measures are used to prevent information from being sent to an infinite number of people; the data is kept secret. As a result, utilizing this method of payment does not guarantee complete anonymity of information.
- Transactions are possible within established limits. They are set differently for each payment system and user status; you need to check the limits with the security service.
Corporate Account in the payment System
Both individuals and legal entities can open an account in the electronic payment system.
A business account in the payment system can be especially convenient for small and medium-sized companies and entrepreneurs engaged in the remote sale of goods and services, freelancers, and various Internet businesses, regardless of the country of location, as well as the location of their customers.
For companies, payment systems in some cases can become a convenient alternative to bank accounts (as they provide settlement services, card products, and often also payroll projects). However, they do not replace them completely if the company requires not only settlement but also other services provided only under a banking license.
The target category of clients who are interested in payment systems services are freelancers and entrepreneurs working with foreign counterparties. It is not profitable for them to service international contracts in local banks for the following reasons: strict foreign exchange controls, selling foreign currency at an unfavorable rate, and overly bureaucratic processes. Therefore, in the world of the rapidly developing Internet, international payment systems are becoming very popular.