Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Citation: Martin, J. R. Not dated. New and old ways to spend and pay or delay. Management And Accounting Web. http://maaw.info/ArticleSummaries/ArtSumSpendandPay.htm
Most of the methods listed below are ways to delay payment rather than ways to actually pay for something we purchase. For example, paying with cash, checks, debit cards and Bitcoin represent payments. Paying with credit cards, and various mobile pay methods represent ways to complete a transaction while delaying payment. The purpose of this brief summary is to provide an introduction to the various ways we currently have to make payments. I have included a number of links to sites that provide more depth.
Some of the Relatively New Ways to Spend and Pay or Delay Payment - Mobile
Advantages: Virtual currency good for untraceable and international transactions. No government, no bank needed.
Disadvantages: The lack of intermediary means there is no one to call if something goes wrong with a transaction. You need some money to start and you need to learn how to mine bitcoin.
For federal income tax purposes, virtual currencies such as bitcoin are treated as property.
Maybe not: Coinbase enables you to register an account, fund it, and then it handles all aspects of transactions with Bitcoin including between your bank and your Coinbase account. http://coinbase.com
Ripple (not the wine) is a real-time settlement system and the third-largest cryptocurrency by market capitalization after Bitcoin and Ethereum. According to American Banker the Ripple system has a number of advantages over cryptocurrencies like bitcoin, including price and security.
Advantages and disadvantages: See Bitcoin above.
Ethereum is a public blockchain platform that provides a virtual machine that can execute peer-to-peer contracts using a crypto asset called Ether.
Advantages and disadvantages: See Bitcoin above.
Advantages: User friendly digital wallet compatible with iOS and Android systems.
Disadvantages: Limited transactions.
Advantages: Web and app-based system that works with millions of international and individual users. Protects against fraud.
Disadvantages: User experience and interface lacking.
Advantages: Easy to use and widely accepted with secure encryption and thumbprint technologies.
Disadvantages: Works only with Apple products.
Advantages: Easy to use and widely accepted with secure thumbprint technology.
Disadvantages: Works only with Samsung Galaxy products.
Advantages: Fairly easy to use tap and pay system.
Disadvantages: You have to open an app, then type in a pin.
Advantages: Easy to use and widely accepted. No pin required.
Disadvantages: Works only with Android phones and does not require a passcode or fingerprint scan to use.
Advantages: It eliminates the credit card firms and allows banks and retailers to set up their own private direct mobile payments networks. This allows a person with a bank app or a brand app to bypass the credit card companies.
Disadvantages: Limited availability. Some U.S. retailers (e.g., Target, Walmart), are working on a merchant-owned mobile payment system.
Advantages: Complete payments infrastructure for the internet. https://stripe.com/
Dashboard for iPhone. Track and manage payments on the go. https://stripe.com/dashboard/iphone
60 Minutes 5/1/2016 segment on Fintech. http://www.cbsnews.com/news/fintech-shaking-up-the-financial-industry/
“The Rise of Fintech." https://www.goodcall.com/personal-finance/fintech/
Disadvantages: I'm not sure if there is an app for Android.
Advantages: Save money when you send money abroad. Transferwise is an app for foreign currency settlement. You enter the amount and recipient, upload the money (debit card or bank transfer) and the app converts it at the midmarket rate, then sends all parties an email confirmation. Separate apps for Apple or Android.
Some of the Old Ways to Spend and Pay or Delay Payment
Advantages: Useful where credit cards and other payment methods are not available.
Disadvantages: Paper money is filthy.
Checks (Including cashiers checks and money market checks)
Advantages: Useful where credit cards and other payment methods are not available and of course to pay your credit card bill.
Disadvantages: Awkward. Bank reconciliations.
Advantages: Rewards programs (e.g., cash, airline miles), protection against loss or fraud.
Disadvantages: Usurious interest rates on balances. Drives personal debt.
Advantages: Very convenient.
Disadvantages: No float.
Advantages: Allow us to purchase things like automobiles that we could not buy any other way.
Disadvantages: There is usually an interest charge.
Short term that are used for home building and other construction. See http://www.bankrate.com/finance/real-estate/how-do-home-construction-loans-work.aspx
Also short term loans. See https://en.wikipedia.org/wiki/Bridge_loan
Home Improvement and Home Equity Loans
Long term loans for home buyers. See http://www.mortgage101.com/about
We pay for many things with insurance. For example, we pay for health care with insurance including Medicare and Medicaid.
Letters of Credit
References not listed above:
Esquire. 2016. The new rules of personal finance: How to spend, save, invest, and not waste any of your hard-earned tender. Esquire: The Money Issue (April): 87-101, 132.
Freeman, M. 2016. Netclearance seeks foothold in mobile payments. The Atlanta Journal Constitution. (April 3): D3.
LaFollett, G. 2015. Expanding your app-titude. Journal of Accountancy (January-December). (Summary).
Peterson, R. and T. Quinn. 2015. Will you be paying by check, or bitcoin. Strategic Finance (February): 10, 12, 61.
Sullivan, T. 2015. Transparency, trust, and Bitcoin. Harvard Business Review (June): 118-119.