Presentment is a crucial component of the payment process. In the UK, the Bills of Exchange Act of 1882 explains the role of presentment of a promissory note for payment in the following way:
“(1)Where a promissory note is in the body of it made payable at a particular place, it must be presented for payment at that place in order to render the maker liable. In any other case, presentment for payment is not necessary in order to render the maker liable.
(2)Presentment for payment is necessary in order to render the indorser of a note liable.
(3)Where a note is in the body of it made payable at a particular place, presentment at that place is necessary in order to render an indorser liable; but when a place of payment is indicated by way of memorandum only, presentment at that place is sufficient to render the indorser liable, but a presentment to the maker elsewhere, if sufficient in other respects, shall also suffice.”
Presentment rules, which have been expanded upon over the last 140 years, dictate how, when, and why merchants may process a payment request. These rules also outline how that process will be communicated to the acquirer for approval and finalization. Presentment also governs how and when merchants may render online payments, subscriptions, and more, through electronic bill presentment (EBPP).
What Qualifies as Presentment?
Transactions must be initiated through one of various commercial means to qualify as payment presentment. The details of the presentment could be written (i.e., standard mail order), oral (brick-and-mortar), or electronic (eCommerce). The presentment becomes effective when a receiving party requests payment.
Essentially, payment presentment represents a legal agreement. The process of this agreement is typically conducted between four primary parties:
- The buyer
- The merchant
- The acquirer
- The issuer
Additional parties, such as a gateway or a processor, may be involved. They’re not strictly necessary to be a party to every payment, though.
How Does Presentment Work?
Presentment generally describes the process of a merchant seeking remuneration from a sales agreement or payment transaction from their acquiring bank. In literal terms, the merchant “presents“ a signed check or transaction receipt (instrument) to their bank to gain access to the funds exchanged during the original transaction.
If a third party stands as guarantor or responsible body in charge of a payment process, that party will accept presentment transactions on the first party’s behalf.
To illustrate: when a third party initiates a transaction on behalf of a purchaser, the instrument (check or another alternative payment method) must be signed over to the third party by the purchaser. The instrument must then be surrendered to the drawer (processor or financial institution). This is presentment.
Rejecting Presentment for Payment
Payment receivers (i.e. banks) are entitled to reject a payment if the check/receipt is damaged or missing, lacks a necessary signature, or if the buyer can’t be verified. A presentment attempt can also be rejected if it fails to comply with an instrument’s terms and conditions. Rejection is also possible if an agreement has been breached by either party or other applicable rules or laws have been violated.
If the receiver rejects a presentment for payment, it could result from incorrectly entered details or another error. In these instances, the acquirer may have predetermined rules for submitting the presentment a second time.
Is Presentment Final?
Not entirely. Receivers can reverse charges presented to them resulting from credit or debit purchases, otherwise known as a chargeback.
When a chargeback occurs, the party who provided the first presentment can try to present the payment again, along with additional information and documents. Second presentments are commonly referred to as “representment.”
During the representment process, merchants must provide documentation from the original transaction, including any compelling evidence that the transaction was legitimate and should be upheld.