Fiduciary money

When a payment is made in cash, monetary units are transferred directly from the payer to the beneficiary without the need for intermediation by a third party. Cash transfers provide immediate finality, so the beneficiary can immediately use the money received to make another payment.

Cashless means of payment

Cashless payments

require the involvement of the payment service providers that hold the accounts of the two parties to a transaction. It is the two service providers that effectively make the payment – a transfer of monetary units – by entering the corresponding amounts in their accounts (for example, by debiting the payer’s account and crediting that of the beneficiary). Cashless means of payment thus initiate transactions between the service providers that hold the parties’ accounts. The transactions are subsequently settled by means of an interbank payment between the providers.

Payment instruments - cashless payments classification

We can classify cashless payments to:

• credit transfers

  based on an instruction from the payer to their payment service provider, the payer’s account is debited and that of the beneficiary credited with a specified amount. Payment instructions are usually transmitted electronically (via online banking orders, file transfers, etc.). In Europe, on 1 August 2014, SEPA transfers permanently replaced the various “national” credit transfer instruments previously used.

• direct debits

  based on an instruction from the beneficiary to their payment service provider, a payer’s account is debited. In Europe, on 1 August 2014, SEPA direct debits permanently replaced the various “national” direct debit instruments previously used. With SEPA direct debits, the payer authorises the beneficiary – under a direct debit mandate – to begin debiting their account. Setting up a SEPA direct debit does not guarantee that the beneficiary will be paid: the payer’s payment service provider may be forced to reject a direct debit if, say, there are insufficient funds in the payer’s account.

• cheques

  written payment orders whereby the holder of a payment account (the “drawer”) instructs the payment service provider (“drawee”) to pay a specified amount to the beneficiary. Although the specified amount in the drawer’s account is legally signed over to the beneficiary as soon as the cheque is signed, there remains a risk that the beneficiary may not be paid if there are insufficient funds in the drawer’s account. For this reason, mechanisms were put in place to prevent cheques without sufficient funds from being issued, and France’s lawmakers appointed the Banque de France to maintain the Central Cheques Register, in which reports filed by banks on payment incidents involving bad cheques issued by their customers are recorded, among other items.

• payment in electronic money

  which is also considered to be a cashless payment method. In Article L. 315‑1 of the French Monetary and Financial Code, electronic money is defined as “a monetary amount that is stored in electronic form and represents a claim on its issuer”. It must also meet a number of conditions, including being issued against receipt of funds and being accepted as payment by a natural or legal person other than the issuer. Holders of electronic money must credit their account with their electronic money institution before they can use it. They can then draw on the account by paying for purchases by card or online, in the knowledge that the total sum of all payments made using the account can never exceed the amount deposited in it. One of the key advantages of the electronic money system is that it is an easy way to make payments up to a given ceiling, making it particularly suitable for e‑commerce.

• commercial paper

  marketable securities representing a commitment to pay an amount of money to the bearer and used for payment thereof. In France for example, this type of instrument includes two main categories: promissory notes and bills of exchange.

  • promissory note

    is a written order whereby a client agrees to pay a specified sum of money on a given date to their supplier, the beneficiary.

  • bill of exchange

    is a written order whereby a creditor instructs a debtor to pay a specified sum of money on a given date to the creditor himself or to a third party (the beneficiary).