A.

Traditional international payment instruments

I. Cheque/Check
- Definition: A cheque (check in American English) is a document that orders a bank to pay a
specific amount of money from a person’s account to the person in whose name the cheque has
been issued.
- Contents:
§ Regulations:
· Have money in banking account and paying account at the bank.
· Issued check with value is less than the value of the account.
· Must have a heading.
· Date and time need to be written clearly.
§ Main items:
· Drawer: the person/entity making the cheque.
· Payee: recipient of the money.
· Drawee: bank or other financial institution where the cheque can be present for payment.
· Amount: the currency amount.
. Procedure:
§ International commercial cheque:
§ Through a bank:
o The exporter ships the cargo to the importer.
o The importer issues cheque for the exporter.
o The exporter shows the cheque to the bank.
o The bank credits account for the exporter and then debits account for the importer.
§ Through 2 banks: 2 ways
First way:
o The importer issues cheque for the exporter.
o Cheque is collected through export bank by the import bank.
o The export bank presents the cheque at the import bank.
o Import bank pays for the cheque and debits account for the exporter.
o Export bank credits account for the exporter.
Second way:
v Importer buys banking cheque to pay the transactions.
v Import bank debits account for the importer.
v Import bank issues cheque for the importer.
v The exporter present cheque at the export bank.
v The export bank credits account for the exporter.
v Proceed clearance between banks.

II. Bill of Exchange/Draft

- Definition: BE is an unconditional order written by a drawer/exporter instructing a
drawee/importer or its agent to pay a specified amount of money at a specific time to a specific
party/beneficiary, thus it is the exporter’s demand for payment from the importer.
- Important features:
§ Transferability.
· To be negotiable instruments:
o Must be payable to order or to bearer.
o Must have no marks indicating non-negotiable.
· Proper transfer:
o Endorsement: “pay to order” draft.
o Handover or blank endorsement: blank draft.
§ Legal protection of payment.
· “Holder in due course”.
· If the drawer dishonors the draft, payment must be made to any holder in due course by
any prior endorser or maker.
-Functions:
§ Provides granting of trade credit in a lawful format by allowing payments on agreed
prospective dates.
§ Facilitates format evidence of the claim for payment from a seller to a buyer.
§ Facilitates the seller with access to finance by allowing them to transfer their debts to a
bank/financer by simply endorsing the bill of exchange to that bank/financer.
§ Allows the financier/banker to retain a convincing legal claim on the buyer as well as the
seller.
-Parties in BE payments: drawer, drawee, beneficiary and endorser/assignor.
-Special characteristics:
§ Must be in writing.
§ Needs to be signed by the maker.
§ Must contain an order.
§ Must be unconditional.
§ Must direct a certain person.
§ Pays a certain sum of money.
§ Must be properly stamped.
-Elements:
§ Heading of BE.
§ BE value.
§ Place of presenting Draft.
§ Time of presenting Draft.
§ Time of Draft payment.
§ Place of Draft payment.
§ Name of beneficiary.
§ Draft drawee.
§ Draft drawer.
-Procedure:
§ At sight BE diagram:
· Exporter delivers goods to the importer.
· Exporter issues BE and entrusts export bank to collect it.
· Importer pays through the import bank after seeing the BE.
§ After sight BE:
· Exporter delivers goods and commercials documents.
· Exporter issues BE and entrusts the bank to require importer to sign acceptance.
· Export bank returns accepted BE to the exporter.
· Export bank requests importer to maturity BE.
· Importer pays expenses of BE, import bank debits account of the importer and export
bank credits account for the exporter.
-Types of BE:
§ Based on the issuer:
· Trade BE.
· Bank BE.
§ Based on attached documents:
· Clean BE.
· Documentary BE.
§ Based on transferability of BE:
· Order BE.
· Nominal/Nominated BE.
· Bearer BE.
§ Based on duration payment of BE:
· At sight BE/On demand BE.
· Time BE/After sight BE.

III. Promissory note

1.Definition: A promissory note is a legal instrument (more particularly, a financial
instrument), in which one party (the maker or issuer) promises in writing to pay a determinate
sum of money to the other (the payee), either at a fixed or determinable future tine or on demand
of the payee, under specific terms. If the promissory note is unconditional and readily salable,
it is called a negotiable instrument.
2.Features of a promissory note

● This note should be documented. A verbal agreement/contract wouldn’t count.

The borrower needs to issue a written contract which he promises to abide by.

● The note should mention the amount to be paid to the creditor.

● Along with that the note also needs to mention who will pay the amount and to
whom.

● The note should also mention the date within which the borrower promises to
pay.
 ● If the payment would be made in installments, it should be mentioned as well in
the note.

● Even the place of commitment should be mentioned in the note.

● One should remember that a promissory note is not an order and there’s no-one
to accept it. Rather it’s a promise made by the debtor to the creditor through a
written contract.
3.Parties involved in the promissory note

● Drawer: In a note, the drawer is the debtor or the borrower. The drawer issues
the promissory note and promises to pay a certain amount to the lender within a
stipulated period of time. The drawer is also called the maker.

● Drawee: Drawee is another party involved in the note. Drawee is actually the
lender or the creditor who would receive the money from the debtor or the
borrower. In certain cases, drawee can also ask for a security for the loan (usually
an asset). In that case, if the drawer is unable to pay off the said amount within
time, the drawee would take claim of the asset. Drawee is also called the payee.
4.How to Create Promissory Notes?
The following essential steps are required to write a promissory notes, which are as under;-
-Phrase of Promissory Notes
The word “promissory note” must be there in the instrument and show the way of verbal
communication.
-Parties
There must be at least two parties in creating a promissory notes:
Maker and Payee
-Principal Amount
It is essential to mention a particular principal amount in the instrument.
-Interest Rate
It is also necessary that interest rate should be fixed and shown in the instrument.
-Maturity Date
The date of disbursement must be fixed and shown in the instrument.
-Terms & Condition
It is also essential that both the parties are agreed upon terms & conditions, which is fixed
though mutual consent.
-Signature
Promissory notes must be signed by the maker.
5.Regulations with PN payments
- Regulations of BE is also used for promissory note
- Promissory note duration is written clearly on promissory note
- Promissory note can be issued by many people
- Promissory note need to be guarantee by a financial organization
- Only one of Promissory is issued.

IV. Payment card

1.Definition
A payment card is a device - usually an embossed plastic card-that allows its owner (the
cardholder) to make an electronic payment.
2.Characteristics of using payment card
-Convenient and safe: reduces the need to carry cash or use an ATM
-Lost or stolen cards are quickly replaced and unauthorized purchased are refunded.
-Chip and PIN technology makes it difficult for an unauthorized person to use your card.
-Payment cards and current account statements provide a record of spending to hepl manage
finances.
-Payment cards are wildly accepted and thus reduce the need to purchase foreign currency or
travelers cheques.
3.Type of payment card
-Based on using place: Domestic card & International card.
-Based on issuer: Card is issued by financial organization & Card issued by non financial
organization.
-Based on technology: Embossing card, Magnetic Stripe card & Smart card.
-Based on payment capacity: Debit card, Credit card, Cash Card(ATM)
-Other types of payment card: Travel card, Entertainment card, Gold card, Standard card,..
4.Procedure
B. "new" ip instruments(_ex:PayPal;Verify_) and it
benefit over traditional one
1. What is new international payment instrument? – Online payment
Online payment refers to money that is exchanged electronically. An online payment system is
an Internet-based method of processing economic transactions.
It allows a vendor to accept payments over Internet connection. When you collect a payment
over the internet, you are accepting an online payment.
Online payment usually is the transaction that results in transfer of monetary funds from the
customer bank or credit card account to your bank account. The online payment can be done
from a credit card, checking account or other methods through Paypal, Verify... for example.
Online payment systems, nowadays, have become increasingly popular due to the widespread
use of the internet-based shopping and banking.

2. Characteristics of international online payment

Online payment systems typically are run by third-party corporations, such as PayPal, Google
or Click2Pay. These companies make a profit by taking a small percentage of every transaction,
or by signing contracts with institutions that need to make a large number of transactions.
The typical online payment process has the following stages:
Customer => merchant => OP gateway => payment processor and returns
· Customer submits the payment information to the merchant. For example customer
completes the payment form on the merchant website and submits the information.
· The merchant submits the payment information to the online payment gateway.
· The online payment gateway submits the payment to the payment processor.
· The payment processor authorizes the payment and responds to the payment gateway
· The payment gateway responds back to the merchant
· The merchant responds back to the customer showing if the online payment was successful
or not and taking the appropriate action.

3. Types of online payment systems

1. Net Bank

Net Bank is a virtual counter of the bank. It provides network technology with some traditional
services such as opening an account, inquiries, transfer, online securities, investments and financial
management.

2. Paypal
PayPal is the most popular third-party online payment system in the world. It has 8 million
transactions every day and has over 137 million PayPal accounts in 193 markets and includes 26
currencies that it can transfer all over the world

3. Google Wallet

Google Wallet is defined as a peer-to-peer payments service produced by Google. Unfortunately,

Google Wallet card was abolished on June 30, 2016.

4. Amazon Payment

Amazon Payment was launched in 2007 and owned by Amazon.com. The customer does not have to
leave the site to complete a transaction.

5. Authorize.Net

Since 1996 there are around 375,000 merchants and more than 88 billion dollars transactions in
2015.

6. Wechat Wallet

China – one of the largest market in the world has its own online payment system.

Services: Quick Pay, QR Code Payment, In-App web-based payment, In-App payment.

7. AliPay

In 2013, AliPay overtook PayPal as the world’s largest mobile payment system. It is used by more
than 5 percent of world’s population. Up to now, there are 270 million user accounts. People
nowadays call it “super app”.

4. Advantages and Disadvantages

Agreatly expand the reach of business

- Online payment systems greatly expand the reach of a business and its ability to make
sales. It’ve leveled the playing field of international payment. It is generally cheaper, easier
and faster than other payment methods. As a merchant, you don’t have to worry about currency
conversion or high commission.

Highly effect
- OP enables users to increase the effectiveness of online sales, support banks. It reduces the
pressure of managing card payment transactions from customers, reduce the amount of cash
circulation, ... Due to online transactions are through third-party vendors, no business should
rely entirely on a single supplier for online transactions. Diversification in the use of online
payment systems is key, play an important role to a stable business's cash flow.

Alternative to traditional
- Online payments are considered a fast and secure alternative to traditional payment methods
D Geography
The reach of Internet are huge, but many payment methods are restricted by national law or by
the unwillingness of some vendors and consumers to work with residents of countries with
their national regulation.
For example, Nigeria is infamous for having no enforceable fraud protection, which leads many
vendors to disallow transactions originating from that country. (Viet len slide)
Cost money

Most of online payments are provided by and depend on the third-party. So it takes buyers money when
use the services. In some risky case, their money maybe loss.

Technical problems and vulnerability to cybercriminals

Online payment relies on smart phone, Internet.. telecommunication. So, when technology got
something wrong, people may be have to pay twice or loss their money.

Information of payers, in case of leaking, brings many unpleasant, sometime danger attacks.

5. Online payments and Traditional Payments

Online Payments Traditional Payments

In order to conduct e-commerce In traditional commercial

transactions, it is necessary for the
parties to use electronic means
with telecommunication network,
The form of
to help people move the message of
implementation
individuals and organizations in the
form of data. electronic materials.
activities, the main form is to
ask the parties to meet each
other directly to conduct
negotiations, transactions
and to sign contracts
through documents and
papers ...

E-commerce activities no longer Participants must meet

exist in terms of geographical and each other directly to
cultural boundaries, but only one negotiate, exchange and then
market that is a global market, sign, buy and sell goods.
where anyone anywhere can join.
Range of activities and conduct commercial activities
with reduced transaction costs as e-
So it’s difficult to bring the
commerce has a wide coverage. For
business outside their
businesses with small investment, e-
boundaries.
commerce is an effective tool to
help them expand markets
including domestic and
international markets.
 In contrast, in e-commerce, there In traditional trade, a
must be at least three subjects transaction must have at least
involved in the transaction. In two participants including
addition to the participants in the buyers-sellers, investors-
transaction, in e-commerce, there investors ...
must be an additional third party
who is network service providers
and authentication agencies. Since
electronic data messages can be
Participant transmitted between parties, there
must be a network service provider
in place to connect the participants.
Moreover, security security is the
most important factor determining
the success of the transaction, so it
must involve the certification body
to confirm the reliability of the
transaction information. in e-
commerce.

Thanks to the use of electronic

means with modern technology and
wireless transmission technology ..., limited time
help participants to automate a
number of steps in e-commerce
Available time of transactions (such as online
transaction purchases via the website) and
eliminating the time difference
between countries. Therefore,
wherever you are, at any time,
individuals and businesses can
conduct transactions.

UNLIMITED time

C. “New” ip instruments effect on traditional one and

answer main question
1. Preferred payment methods of online shoppers between PayPal and
Credit Card
Most popular payment methods of online shoppers worldwide as of 2016 in North America
and Asia
The statistic gives information on the preferred payment methods of global online shoppers in
2016, by global region. During the survey period, 71 percent of online consumers in North
America and 67 percent of online consumers in Asia used credit cards as a method for making
online purchases.
Preferred payment methods of online shoppers worldwide as of March 2017

The statistic gives information on the preferred payment methods of global online shoppers as
of March 2017. During the survey period, 42 percent of online shoppers worldwide stated that
they preferred to pay via credit card.

2. User statistic

2.1. PayPal’s statistic

Number of PayPal's total active registered user accounts from 1st quarter 2010 to 4th quarter
2018 (in millions)
This statistic shows the number of total active user accounts on the online payment platform
PayPal. In the fourth quarter of 2018, there were 267 million accounts active worldwide,
representing a 17 percent year-on-year growth.

2.2. Credit cards’s statistic

Value of revolving credit outstanding in the United States from 1995 to 2017 (in billion U.S.
dollars)
This statistic presents the value of revolving credit outstanding in the United States from
1995 to 2017. Revolving credit is a type of credit that does not have a fixed number of
payments, in contrast to an installment credit. The most common examples of revolving
credit used by consumers are credit cards, although some credit cards are non-revolving,
i.e. require users to pay off the full balance at the end of each month. In 2017, the revolving
credit outstanding in the U.S. amounted to almost 996 billion U.S. dollars.

3. Conclusion
Answer the question: will the traditional international payment instrument be replaced completely
by "new" international payment instrument ?
The statistics show that the new international payment instrument will change the percentage of
each kind of but it can’t be the completely replacement for the traditional payment instrument.