Payments
Payments
Payment modes
The two activities are technologically similar. This similarity generates economies of scope that draw lenders into the provision of payments services and payments processors into lending. In the preceding chapters we focused mainly on lending; in this chapter, we shall look at payments.
The payments system is of great importance to the economy. Payments are an inseparable part of trade in goods and services. The lower the transactions cost of making payments, the more trade there will be and the greater will be the gains from trade. How well the payments system does its job has enormous effects on the overall efficiency of the economy.
For example, consider the mail order business. Before the days of the credit card, mail order involved considerable delays. Payment was by check, and the check would spend several days in the mail. Generally, the merchant would not ship the goods until the check had cleared. This, too, would take several days. The substantial delay made mail order relatively unattractive in comparison to buying from a local merchant.
Tags: Basics, Payment, Transactions
