Chapter 30 Working Capital Management 797
bre44380_ch30_787-812.indd 797 10/08/15 10:49 AM
Look now at Figure 30.6. You can see that there are large differences in the ways that
people around the world pay for their purchases. For example, checks are almost unknown in
Germany, the Netherlands, and Sweden.^12 Most payments in these countries are by debit card
or credit transfer. By contrast, Americans love to write checks. Each year individuals and
firms in the United States write about 13 billion checks.
But throughout the world the use of checks is on the decline. For one-off purchases they
are being replaced by credit or debit cards. In addition, mobile phone technology and the
Internet are encouraging the development of new infant payment systems. For example,
∙ Electronic bill presentment and payment (or EBPP) allows companies to bill customers
and receive payments via the Internet. EBPP is forecasted to grow rapidly.
∙ Stored-value cards (or e-money) let you transfer cash value to a card that can be used to
buy a variety of goods and services. For example, Hong Kong’s Octopus card system,
which was developed to pay for travel fares, has become a widely used electronic cash
system throughout the territory.
There are three main ways that firms send and receive money electronically. These are
direct payments, direct deposits, and wire transfers.
Recurring expenditures, such as utility bills, mortgage payments, and insurance premiums,
are increasingly settled by direct payment (also called automatic debit or direct debit). In this
case the firm’s customers simply authorize it to debit their bank account for the amount due.
The company provides its bank with a file showing details of each customer, the amount to
be debited, and the date. The payment then travels electronically through the Automated
Clearing House (ACH) system. The firm knows exactly when the cash is coming in and
avoids the labor-intensive process of handling thousands of checks.
(^12) For a discussion of the changing pattern of payment methods, see “Innovations in Retail Payments,” Committee on Payment and
Settlement Systems, Bank for International Settlements, Basel, Switzerland, May 2012.
BrazilCanadaFrance
Germany
IndiaItaly
NetherlandsSingapore
Sweden
Switzerland
U.K.U.S.
Direct payments Credit transfers Credit/debit cards
Checks e-money
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pe
rcen
t
◗ FIGURE 30.6
How purchases are
paid for. Percentage of
total volume of cashless
transactions, 2013.
Source: Bank for International
Settlements, “Statistics
on Payment, Clearing, and
Settlement Systems in the CPSS
Countries—Figures for 2013,”
December 2014, http://www.bis.org/