FINANCE

Understanding the Payment System and Its Benefits

There are still many people who do not know about the meaning of the payment system, even though it has developed very rapidly in Indonesia, even international payments. There are various payment system models that have emerged to facilitate the transaction process between parties.

Its existence brings great changes in people’s lives. Conventional payment methods are no longer used and people prefer to use digital payments as of today’s payment methods.

With this diversity, everyone needs to know the meaning of payment systems in order to make it easier for them to understand the payment systems that are developing in Indonesia.

Understanding Payment Systems and Classification

The payment system is a system used to transfer funds from one party to another.

In essence, payment systems are concerned with processing payments for things such as services, goods, bills, and so on.

Payment methods are divided into two, cash and non-cash payment methods. The cash payment method is a payment process that occurs directly between one party and another.

This method is a conventional method that we often do where, face to face and hand over money.

Over the years, cashless payment methods have evolved. This payment system is provided by various institutions with various advantages that can be felt by customers.

Therefore, this method is preferred by many people because it is practical and easy to do anywhere and anytime.

Each payment method has its own advantages and is tailored to its individual needs.

The Role of Bank Indonesia in Overseeing the Payment System in Indonesia

To oversee the payment system in Indonesia, Bank Indonesia plays an important role in supervising it. That way, the existing payment system can run smoothly and safely for everyone.

In supervising and maintaining the smooth running of the payment system in Indonesia, there are 4 principles outlined in the law and implemented by BI, such:

  1. Security

All risks that exist in a payment system such as credit, liquidity, and fraud must be managed very well by the organizer in a payment system.

  1. Access equality

BI does not approve of all kinds of monopolistic practices in the implementation of a system that could hinder other economic actors from entering and operating the payment system.

  1. Consumer protection

BI must be able to provide guarantees for aspects of consumer protection, namely guarantees of legal certainty to consumers and service makers in the consumer protection division.

Consumers and service providers can submit complaints to BI if they experience adverse things.

  1. Efficiency

BI must ensure that the payment system can run efficiently, can be used widely and by many people and the costs borne by the community will be cheaper.

Based on the 4 principles above, BI is tasked with overseeing the payment system in Indonesia. In addition to the principles, the following are the roles of Bank Indonesia in maintaining the payment system:

  • BI has the authority to give permission and approval to service provider bodies to participate in the payment system regarding who can issue or process such payment instruments.
  • Supervise payment systems in Indonesia (both banks and non-bank institutions).
  • Provide provisions for certain standards on payment instruments and determine what payment instruments may be used in the payment system in Indonesia.
  • Control policies on efficiency, risk, governance, and others.
  • Authority to run the BI system – Real Time Gross Settlement (BI-RTGS). This system itself functions to make high-value non-cash payments. According to data from Bank Indonesia in 2010, transactions carried out by BI-RTGS alone have reached at least 174.3 trillion Rupiah.
  • Authority as the operator of the interbank clearing system for certain types of payments through the Bank Indonesia national clearing system or SKNBI

Payment System Principles

A good payment system must be able to provide a level of comfort and security for all users, both in cash and non-cash.

As the institution in charge of running the payment system in Indonesia, Bank Indonesia has set four principles of the payment system, namely:

1. Efficient

This principle emphasizes the level of implementation of the payment system which must be carried out more broadly. Thus, the costs that will be borne by the community as users will be more affordable.

2. Aman

Every risk contained in the payment system must be managed and also better mitigated with the existence of a payment system, be it credit, fraud, and liquidity risks.

3. Consumer Protection

The payment system must be well maintained in terms of maintaining the amount of cash in circulation or its condition that is still fit for circulation. This is often referred to as a clean money policy.

4. Equality of Access

Bank Indonesia does not want monopolistic practices in payment system activities, as this will prevent other users from participating.

What are the Types of Payment Systems?

In addition to the definition of a payment system, there are 3 types of payment systems, namely cash payments, non-cash payments, and international payments.

To understand both, the following will be explained.

1. Cash Payment System

Cash payment instruments such as money are the most crucial means of payment for the community. With this money, you can do your every transaction, such as shopping at the market, at the shopping center, buying food, and more.

In addition, this cash payment instrument also includes physical money consisting of currency and coins. Although this currency is often used for conventional transactions, this type of cash has drawbacks.

For example, when you buy a product, and the amount of cash you give is large, maybe some sellers will find it difficult to give you a change of cash.

In addition, the financial risk in carrying out a cash payment system also tends to be a lot of behavior by irresponsible people who commit fraud by counterfeiting money and also criminal acts in the form of theft.

2. Non-Cash Payment System

The definition of a non-cash payment system can be in the form of a card or an application that provides barcode scanning.

Making non-cash payments, tends to be more efficient because the type of use is personal and when doing so, you only need to check or scan in less than 1 minute.

The types of non-cash payment instruments are checks, current accounts, debit notes, credit cards, and others. In addition, the notion of a non-cash payment system also has many benefits and advantages.

One of them is having a very practical nature.

By using this non-cash payment tool, you no longer need to carry large amounts of cash, because everything is stored securely in your wallet or electronic card.

In Indonesia itself, the trend of payments using non-cash payment instruments is certainly increasing. Moreover, with the existence of electronic payment or e-payment mechanisms on digital platforms.

Doing types of payments and bills is enough just to use a gadget.

Some examples of non-cash payment instruments are as follows:

  • A check is a transaction medium that states order from a customer to the bank to withdraw an amount of money or funds on behalf of the customer or it can also be in the name of an appointed person. Generally, there are three types of checks that are often used, namely checks on show, cross-checks, and checks on behalf of.
  • Current accounts are almost the same as checks. However, a current account is not an order to withdraw funds, but an order to transfer funds from one account to another customer account whose name has been designated in the current account.
  • A credit card is a non-cash transaction tool issued by a bank with a debt mechanism. By having a credit card, customers can make payments by first borrowing funds from the bank and then being able to pay bills sent by the bank.
  • A debit card is a type of non-cash transaction tool that uses a customer balance mechanism. This card is usually issued by the bank where the customer opened an account. Each debit card has a different limit and time limit, depending on the type of savings selected by the customer.
  • A debit note is a letter that is used to collect customers from other banks through clearing.
  • A credit note is a letter intended to transfer or send a number of funds to another bank customer through clearing.
  • Electronic money or often known as e-money is a relatively new type of transaction tool and has several elements in it.

3. International Payment Instruments

As we all know, every country has its own currency, although some are the same. However, how to make a transaction if the currency is different.

So, in order to carry out non-cash international transactions, you generally have to exchange the same money at the prevailing exchange rate.

Some examples of international standard non-cash payment instruments are as follows:

  • Check – a payment system made by check via the seller’s bank from the seller’s country.
  • Credit card – Payment by credit card can be done in many countries, especially if you have a card with Union Pay network, MasterCard, Visa, etc.
  • Postal money orders – The buyer can carry out postal money order transactions to send money from within and also abroad. The organizer of international postal money orders is the Money Order Union.
  • Online payment – ​​in that it is almost the same as electronic money where users have to deposit cash into an account. You can also connect a credit card to an online payment account, such as PayPal.

Payment System Components

There are several components of the payment system, the following is an explanation.

• Organizer

The first component is a provider, this component is an institution that can ensure the final settlement of all transactions that occur in its use.

• Infrastructure

In this component, infrastructure is a physical facility that supports the operational process of the payment system carried out by the person conducting the transaction.

•    Regulator

The regulator is a component that has the authority to regulate the rules, regulations, and policies that bind all components in the payment system.

• Instruments

Next is the instrument component. In this instrument component is a means of payment made either in cash or non-cash which is agreed upon by the users in conducting a transaction.

• Consumers

And this last component is the user. This user is a component of the payment system which is a consumer utilizing the payment system.

Payment System Benefits

Basically, money has several primary functions. The first is as a medium of exchange. Compared to having to run a barter system, money is the most practical and convenient alternative.

The second is as a unit of account because it has a value. This is certainly fairer than the barter system.

Let’s use the following example. In the old days, say you only had a pair of leather shoes as an instrument that could be used for barter.

However, you only need a handful of rice. If a pair of leather shoes were exchanged for rice, it would be one-sided, wouldn’t it?

Third, money also functions as a store of value. That is, money can be used to shift purchasing power from the present to the future.

In other words, money can also be read as an investment tool. It’s just that with a note, the inflation that occurs is not too high so that the value of money is still relevant.

Based on some of the explanations above, money as part of the payment system has an important role in everyday life.

If it is concluded further, then the existence of money together with other components that make up the payment system has greater benefits.

A payment system will support the creation of the financial and banking stability of a country. If financial conditions are stable, people will find it easier to meet their needs.

In addition, of course, the state will also find it easier to carry out development and realize its goals.

Of course, the payment system will continue to develop, especially following technology and societal trends.

Therefore, as a business owner, you must continue to adapt the payment methods you provide to the various technologies available today.

The trick is that there is now a payment gateway solution that you can use to receive payments from various channels or sources of funds.

More simply, a payment gateway can be analogized as a gateway for payments originating from various channels or financial products.

By using a payment gateway, sellers and buyers can still carry out financial transactions practically, even if they do not use the same type of financial product.

For example, you are a seller who uses Bank A, while B is a buyer who uses Bank C. Well, a payment gateway allows you and B to still complete payments more easily, practically, and at low costs.

So that every financial payment of your company can run smoothly, and there are no errors in calculating it. You also need to use an accounting system. Not only that, but the online tax application from Jurnal by Mekari is also very helpful in helping you manage finances, including tax issues. May be useful!

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