2. What are Payment Systems? Cash flows in and out of a business as value is exchanged. Cash is received through various sources of revenue or from sale of assets. Cash is disbursed (spent) through payment of bills and acquisition of assets. The method used for these exchanges of value is called a payment system.

3. What kinds of payment systems can you think of? Cash Credit Cards Debit Cards Cheques Direct Transfers.

4. Cash Advantages – privacy, convenient for small transactions, simple to use, widely accepted and cash requires little technological support. Disadvantages – privacy, easily stolen, awkward to use in large amounts.

5. Cheques Advantages: Convenient for payments by mail, especially for “one-off” transactions, for suppliers that are not dealt with on a regular basis or for businesses too small to support a large electronic infrastructure. Serves as a source document. Disadvantages: Delay in actual receipt of funds, cheques can “bounce” (known as non-sufficient funds, or NSF)

6. Credit Cards Advantages: Convenient, pre-approved (no risk of NSF), records of transaction available. Disadvantages: High level of credit card fraud leads to high interest rates and high fees. As a business, you must pay a fee for each transaction that you accept on a credit card.

7. Debit Cards Advantages: Receive funds immediately (unlike a cheque) and no risk of NSF. Disadvantages – Requires electronic infrastructure to support transactions, not convenient for small transactions, retailer must pay for each transaction accepted.

8. Direct Transfers Advantages: Convenient for regular transactions and bill payments. Less likely to miss a payment. Electronic record of transaction. Disadvantages: Security, electronic infrastructure can be costly.