Both pay orders and demand drafts are used by individuals to make transfer payments from one bank account to another. The main difference between the two is that while a demand draft is a written order directing the payment to be made to a third party outside your city, a pay order is drawn for the third party within your city.
They both are, however, different from cheques in that they don’t require a signature in order to be cashed. The banking dictionary refers to the person writing the draft as the drawee, the bank making the payment is the drawer, or the payor bank. The beneficiary of a demand draft, the person receiving the payment, is the payee. Charges for demand drafts and pay orders are independent of inter- or intra-city transactions but are calculated as a percentage on the amount of the draft or pay order.