In the language of payments, the payer is the person who pays the money, and the payee is the person that receives the money. Payments can be either pushed from an account, or pulled from an account. A push payment is a payment organised and executed by the payer. A pull payment is executed by the payee.
There are several types of payment available from a standard current account.
Direct debit – A bank customer can establish a direct debit payment, which is usually used to pay regular bills where the amount can differ from month to month, for example for an electricity bill. This is a pull payment, where the bank authorises the payee to pull the payment from the customer’s account.
Standing order – A standing order is used to pay a regular payment that is the same each time, such as monthly rent, or a payment to a monthly subscription service.
The most popular payments tend to be card payments, and almost every current account holder is entitled to a payment card to make non-cash payments from the account.
Aside from direct debits and standing orders, bank customers can avail of payment cards attached to their current accounts. Over the last several years, there has been a steady rise of non-cash payments, with some countries such as Sweden now using cash for less than ten percent of daily transactions. The Covid-19 pandemic accelerated the use of payments cards as customers and merchants accelerate the use of cards and especially contactless payments.
Debit card: The debit card is the most popular bank card, and is usually attached to any current account. It has effectively replaced the cheque in most countries, and it is in fact a relatively recent invention, from the early 1990s. The debit card can be used to pay money from the customer’s bank account to anyone that accepts card payments. It can also be used to withdraw money directly from the customer’s account, either at a bank teller window or from an ATM. Many countries also provide a facility where a bank customer can also get cash from a supermarket or shop, with the amount of cash provided added to the customer’s bill.
Prepaid card: Some banks offer prepaid debit cards but they are also offered by retailers and a variety of other players including telcos. Several digital banks including Revolut and Monzo offered a prepaid card to customers as a first product.
Checks/cheques: In the US, a current account is generally known as a checking account, and checks (or cheques) remain widely used. The US has a widespread “check cashing” industry that offers to encash checks for people who do not have a bank account. Many ATMs now offer a check deposit system.
Credit card: The credit card is not attached to the customer’s current account, but is a separate account with the bank. When you use your debit card, you are spending money from your current account. When you use a credit card, you are spending money supplied to you on credit by the bank.
Mobile wallets: A relatively recent phenomenon of the last 20 or so years, mobile wallets are digital wallets on a mobile phone which can hold virtual or virtualised plastic cards along with other payment instruments.
Banks typically impose daily transaction limits on current accounts, often in the range of $500 to $1,000 maximum withdrawal per day.
While many bank customers use bank cards to make payments, regulators in some countries have implemented Open Banking standards, which enable fast account-to-account payments.
Traditionally, bank to bank payments can take several days depending on the country or region. Many countries in developed and emerging markets have now implemented faster payments systems which reduce payment times to less than a day, or instant payments systems which deliver payments within a few seconds.