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What is provisional credit?

October 10, 2022

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Provisional credit is a temporary credit issued from a financial institution into your bank account.  It’s often used in situations where a transaction has not been verified or is being disputed.

If you are the owner of a very successful high-volume, high-cash payment usage business, you are accustomed to having financial peaks and valleys depending upon the day, week or year.  Generally speaking, you are running an operation that is making money and is busy.  However, suppose one day a supplier calls and requests a bank transfer to settle an invoice.  You have the money in your safe to pay what you owe but that particular supplier only accepts bank transfers.  In this case the cash sitting in your safe is worthless—it needs to physically be in your bank account.

The above situation isn’t uncommon and it’s one that provisional credit solves. There are a number of bank-certified devices that accept cash and automatically place it on your bank account before that the Cash-in-Transit (CiT) company physically picks it up.  Why does it matter for your business?

Provisional credit limits cash-flow problems such as bank overdrafts or shortages, decreases operational overhead by reducing the number of CiT pick-ups, and perhaps most importantly, gives you instant visibility into how your business is performing. In some markets, after a CiT pick up, cash might have to wait up to five working days before it appears in the business’s bank account. Assuming that the pick-ups happen every other day it might take as long as 10 calendar days before you are capable of spending the cash you earned.

Financial institutions are just now exploring retail provisional credit and it is not available in all countries. For instance it’s available in the United States, Mexico, Italy, France and Germany, but not in the United Kingdom or Spain. Therefore if you have a multi-national business you might see different versions of it. Some banks will give you real time credit, while others will give it to you after two days.

Provisional credit is here and retailers are starting to realize the benefits associated with it.

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