A payee is an individual or organisation that receives payment in any form, including cash, checks, or wire transfers.
When making a payment, there are always at least two parties — the payer who makes it and the payee who receives it. Although they are opposite terms, they are both indispensable parts of any transaction. Typically, the payee provides some kind of service or goods to the payer, who, in return, pays an agreed amount of money against a payment request.
Thus the term “payee” can refer to anyone you make a payment to, including your family members, merchants, and state institutions.
The payee is the one with legal rights to payment. Depending on the type of value exchange, businesses, individuals, and government entities may all be payees. For example, if you purchase a subscription to a service, you are the payer, and the payee is the service provider.
Let's look at the other common situations where payees are involved.
Have you ever noticed the Payee endorsement section on checks or money orders? This is where the payee must endorse the check by signing or stamping it. The endorsement authorises the bank to receive funds on the payee's behalf. In the case of several payees, the check must be endorsed by all parties. Once the check is endorsed, the payee presents it to a bank for cashing.
The procedure for transferring funds from the payer to the payee differs depending on the payment method involved (in-app, crypto wallet, check, ACH transfer, etc.), but generally, it is almost the same everywhere. There are three main stages in this process:
Payers usually receive a printed or electronic check as confirmation of payment.
There are situations when the payer needs to ensure that the funds will go to the correct personal or business bank account. In this case, they can use the Confirmation of Payee – a name-checking service that identifies the payee by the provided account details. This service has now been successfully implemented by some UK banks and PSPs to help prevent payment fraud or misdirection.
When you initiate a payment or update the existing one, enter the sort code, account number and the full name of the account you send money to. These details will be carefully checked, and you will get one of the responses:
Once you know the response, you decide whether to proceed with the payment. If you receive a response that you are not satisfied with, you can contact the payee for further details.
By identifying the payee with checking services, you can protect yourself from fraudsters and avoid errors when sending funds.
The term 'representative payee' refers to individuals or organisations receiving Supplemental Security Income (SSI) payments from Social Security. Representative payees manage benefit payments for beneficiaries who are incapable of controlling their own assets, such as minor children or disabled adults.
Being in the status of a representative payee is associated with some requirements and obligations. Thus, representative payees are responsible for using benefits to meet the beneficiary's needs and saving any benefits not needed to meet those needs. The payee must also keep records of expenses. When Social Security requests a report, a payee must provide them with an accounting of how they used or saved the benefits.
