Collecting bank

Collecting bank
See also

The term "collecting bank" should be understood as a form of non-cash settlements, which consists in the fact that the supplier orders his bank to collect receivables from the recipient under certain conditions (Anzolin 2009, pp.1-4). This conditional form of payment takes into account two parties - the collecting institution, usually a bank acting on behalf of the payer, and the collector of the object of collection (Anzolin 2009, pp.1-4).

The form of collection[edit]

The form of collection is most often used by entities that have long cooperation with their business partners and have full confidence in them. They are not afraid that the partner will refuse to collect the goods or pay a certain amount to pay for them. Within the framework of collection, non-cash money fulfils the function of a means of payment. The bank does not bear any responsibility for a given transaction during the collection process (Musigcha 2008, pp. 3-12).

Object of collection[edit]

Financial documents or documents as such may be the subject of collection. In the case of undocumented collection it will be (Musigcha 2008, pp. 3-12):

  • bills of exchange, including drafts (collection of a bill of exchange),
  • cheques,
  • depository receipts,
  • banknotes,
  • shares,
  • bonds.

In the case of documentary collection, also known as commercial collection, the subject of the operation may be (Musigcha 2008, pp. 3-12):

  • invoices,
  • ransport documentation,
  • certificates of origin,
  • documents evidencing an existing title,
  • insurance documents.

Types of collection[edit]

There are many types of collection, distinguished according to its subject matter, due to the intermediary that settles the collection and the payment term (Watkins, West Maurya; Yusra 2012, pp.5-7):

  • credit collection - not to be confused with collection
  • credit documentary collection - the subject of collection are documents, it consists mainly in debt collection in exchange for documents,
  • undocumented collection - financial collection, the subject of which may only be financial documents,
  • cash collection - collection a vista, consisting of payment for goods (not necessarily cash) in order to own them,
  • acceptance collection - also referred to as
  • term collection - consists in the payment of payments within a specified period of time by the payer,
  • guaranteed collection - the counterparty demands a guarantee from the payer's bank if the latter refuses to pay,
  • immediate collection - consists in immediate payment after the submission of documents,
  • automatic collection - two banks authorize themselves to charge the other party to the agreement and to pay the amount due automatically,
  • goods collection - consists in handing over the goods to a third party by a bank, if the recipient performs the service indicated by the ordering party.

Implemented collection in practice[edit]

The first stage of collection is the shipment of goods by the payer to the payer and submission of documents to the bank, confirming the shipment of goods and authorizing its receipt. The podcasting bank then sends the relevant documents to the intermediary bank, while the collection bank confirms receipt of the documents to the podcasting bank. At this point in time, it may already send the payer a call to buy out the collection together with a copy of the document (Fabijan 2002 pp. 32-35). When they arrive at the collection institution, the payer will receive further instructions from the bank. After their fulfillment, the remitter will receive the documents that are the subject of collection (Fabijan 2002 pp. 32-35). Their receipt is preceded by payment or acceptance of a bill of exchange. When such an obligation is fulfilled, the payer may freely dispose of the goods. It is not for the collecting bank to check the authenticity of documents or to make payments from its own funds (Watkins, West Maurya; Yusra 2012, pp.5-7).


Author: Natalia Jaskot