Payment
Tender of value in exchange for goods, services, or obligations.
A payment is the tender of something of value, such as money or its equivalent, by one party to another in exchange for goods or services, to fulfill a legal obligation, or for philanthropy. The party making the payment is the payer, and the party receiving it is the payee. Payments can be voluntary or compulsory, such as fines, and can be made using money, barter, or transfers of value like stock. The word "payment" traces back to the Latin "pacare," meaning to pacify, from "pax" (peace). In the Middle Ages, it came to mean pacifying one's creditors, and through Old French "paier" and Middle English "payen," it retained both the sense of appeasing and settling a debt. Payments are generally made in the payee's local currency unless otherwise agreed, with conversion required for foreign currency. Payees may accept part payment as full settlement, offer discounts for cash or prompt payment, or impose surcharges for late payment or certain credit cards. Payments often follow an invoice, though some industries, like travel, require payment before service. Deposits may serve as partial pre-payment or security, and progress payments allow staged payment for large projects. Accepting payment extinguishes a debt, and creditors cannot unreasonably refuse it, though refusal may occur on Sundays or outside banking hours. A receipt is typically issued, and a guarantee for a debt does not count as payment. Two main payment types exist: exchanging, using cash like banknotes and coins, and provisioning, which transfers money between accounts via a third party. Electronic methods include credit and debit cards, cheques, money transfers, and ACH disbursements, using technologies such as magnetic stripes, smartcards, contactless cards, and mobile payments. A payment may involve multiple parties; for instance, a pre-paid card transaction includes the purchaser, seller, issuing bank, and acquiring bank, while cash requires at least the seller, purchaser, and currency issuer. Global payment providers include Diners Club, Visa, American Express, MasterCard, Maestro, Cirrus, and PayPal, with blockchain also offering digital currency infrastructure.
- Etymology
- From Latin 'pacare' (to pacify), via Old French 'paier' and Middle English 'payen'
- Types
- Exchanging (money) and provisioning (electronic transfers)
- Parties involved
- Minimum two (barter) to four (pre-paid card transaction)
- Global market (2005)
- $40 trillion passed through payment systems
Lore & Background
The root word 'pay' comes from Latin 'pacare' (to pacify), from 'pax' meaning 'peace'. In the Middle Ages, the term broadened to mean 'to pacify one's creditors'. Old French 'paier' retained the meaning 'appease' while gaining the meaning 'to pay'. Middle English 'payen' carried both senses. Payments can be made via cash, cheque, mobile payment, bank transfer, stock transfer, or barter. Payees generally determine acceptable methods, though laws may require acceptance of legal tender up to a limit. Payments are often preceded by an invoice, but some industries require payment before service. Deposits, progress payments, and instalment payments are common. The acceptance of payment extinguishes a debt; a creditor cannot unreasonably refuse payment, but refusal may be allowed on Sundays or outside banking hours. A receipt is usually produced as acknowledgment.
Reader's Guide
Payment is a fundamental economic and legal concept, enabling exchange of value across all societies. Debit cards in the U.S. Mobile payments have seen fast growth, with Google Pay, Apple Pay, and Samsung Pay as main choices. Cheques, historically primary, fell from 25% of U.S. The timing of payment has legal implications for tax and contract law; for example, payment by cheque is deemed to occur on delivery if honoured, while credit card payment takes effect at sale. Late payment penalties are regulated in some regions, such as the European Union's Late Payment Directives. The article also highlights that a payee may accept part payment as full settlement or offer discounts, but may impose surcharges for late payment or credit card use.
Did You Know?
- The word 'payment' derives from Latin 'pacare' (to pacify), from 'pax' meaning 'peace'.
- A cash payment requires at least three parties: seller, purchaser, and issuer of the currency.
- In 2005, an estimated $40 trillion globally passed through some type of payment system.
- A payee may compromise on a debt by accepting part payment in full settlement.
Frequently Asked Questions
What is Payment?
A payment is the transfer of something of value—money, goods, stock, or an electronic credit—from one party to another to settle a purchase, fulfill a legal duty, or make a charitable contribution. It can be voluntary, like buying groceries, or compulsory, like paying a court fine.
Who are the parties involved in a payment?
At minimum, a payment requires two participants: the payer who tenders the value and the payee who receives it. In more complex arrangements, such as a pre-paid card transaction, as many as four distinct parties can be involved.
Where does the word 'payment' come from?
The term descends from the Latin verb 'pacare,' meaning to pacify, which traveled through Old French 'paier' and Middle English 'payen' before arriving in modern English usage.
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