A payment order is a series of instructions that the account holder provides to his financial institution so that it proceeds to send funds from his account to a person, company or institution.
Therefore, money orders are nothing more than a way to get money to others, provided that a series of requirements are met. Furthermore, the advantage is that the sender and receiver do not have to be clients of the same bank or reside in the same country. For this reason, they are very useful for imports, since they are the most frequent method in international payments.
Process and advantages of a money order
A money order has two phases. In the first (the issue), once the information has been verified, the bank accepts it and processes it. Make the charge and send the money to the so-called correspondent banks or to the European target 2 systems. In a second phase, the receiving bank pays the money to the beneficiary of the transfer.
The payment order has a number of advantages over other means of payment and is, together with the check, the most widely used international form of payment. Let’s see some:
- First of all it is fast. Usually the money takes between one and two business days.
- In addition, it allows you to pay in any currency, which facilitates commercial exchange.
- It is a secure form of payment, since the entire process is done through banks.
Participants, obligations and expenses
Let’s see briefly how it works and what its components are:
- In the first place we have the payer , who can be an importer, who is going to make the delivery of funds. This must provide your bank with a series of data such as the name and surname of the recipient or their business name. On the other hand, the amount and the currency in which it will be done. In addition, you must provide the information of the receiving bank, such as name, address, swift or BIC code, as well as the IBAN or account number.
- The issuing bank. It is the one that will proceed to withdraw the money from the payer’s account. Depending on whether the transfer is national or not, there will be a series of expenses, which are sometimes shared (SHA) and others are by the payer (OUR).
- The receiving bank. He is the one who receives the funds and credits them to the beneficiary’s account. This can charge certain commissions to your client. In addition, there are a number of expenses for the recipient (BEN) and shared (SHA).
Types of payment order
They can be classified as follows:
- Individual payment order. In this case, the payer does it personally and individually. Either in the physical office or through electronic banking.
- Payment order in files. For example, when you have to make many transfers for payroll or payments to suppliers. In this case, the payer provides a file to the bank that carries out the transfers.