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Electronic payment systems have evolved over the past few decades due to their unmatched simplicity. As consumer acceptance of electronic payments has exploded, businesses have started to adopt them.
In the wake of the COVID-19 outbreak, the benefits and need for electronic payments have become even more obvious.
Customers look for comfort and businesses are founded to make a profit. Additionally, the idea of profitability as a whole is only realistic if your business accepts e-payments from customers. By transitioning to electronic payments, your company may reduce risk, improve control, increase visibility, and pay vendors more quickly.
But what precisely is an electronic payment method, and how does it benefit businesses? Keep reading on to find out…
What is Electronic Payment?
E-payments or Electronic payments are digital or electronic means of transferring money from one party to another.
This is done without the need for cheques or cash. There are many different types of e-payment, including credit and debit cards, mobile wallets, UPI, internet and mobile banking, and many others. Cryptocurrency and e-wallets are also fairly recent developments used for electronic payments.
If you want to move your business online and start an online store, you need to have an eCommerce payment system set up to accept payments. All you need is a bank account and an internet-capable device to use e-payment solutions and pay for various goods and services.
Methods of Electronic Payment
Electronic payment can be completed in a variety of methods. Here are a few popular ones for businesses:
Credit or Debit Card Payments
When utilizing a card, an electronic payment device is used to initiate the online money transfer. In this mode, a card-based online payment transfer is started by an electronic payment-accepting device.
This is done by electronically transferring funds over the internet. This tool is more frequently used by independent contractors or smaller businesses.
Prepaid accounts are available as electronic wallets that store consumer bank account information. This means you may easily and quickly pay for things online without having to continuously enter your information.
Store Credit Card
Gift cards are the more common name for this type of electronic payment system. Because they have money already saved in them, these cards are also used for money transfers. Gift cards and other prepaid cards fall under this category.
To transfer payments through a smart card, a card with a microprocessor chip or smart card is necessary. It is used in some special locations to make transactions.
This is a method of transferring funds between bank accounts that uses digital technology instead of a physical check.
Many customers use a mobile wallet, an enhanced e-wallet. It is a smartphone app that functions as a digital wallet. The user-friendly layout makes them easier to use. Due to the frictionless electronic payment system experience it offers, customers rely less on cash.
Transactional QR Code
The use of QR codes for payments has skyrocketed in popularity. It is a pixel pattern code made up of barcodes or squares arranged in a square grid. Each component’s information makes up the code. This information might contain details about the retailer, transactional data, etc. Making payments requires scanning the QR code using a mobile device.
Artificial intelligence-based solutions are becoming more and more popular as machine learning and AI transform numerous sectors worldwide. With payments based on AI businesses find it easier to maintain transparency.
How Do Electronic Payment Systems Work?
Digital payment options can be summarised by the three steps that follow:
1. Beginning the Payment
The consumer selects an electronic payment system option and then submits the order form for the good or service to start the transaction. The consumer inputs the necessary data, such as the card number, CVV, personal information, expiration date, PIN, etc., depending on the selected payment type.
2. Payment Authentication
Along with additional details like electronic payment transactions and account information, the operator verifies the information provided by the customer. If all authentications are successful, the operator deems the transaction to be successful. On the other hand, if any of the authentication tests fail, the transaction fails.
3. Payment Settlement
Following a successful authentication process, the online payment service provider sends funds from the customer’s bank into the merchant’s account.
Advantages and Disadvantages of Electronic Payment
Advantages of E-Payments
You can make purchases with simply a tap or swipe when using e-payments. The processing and completion of transactions take a short while.
Thanks to electronic payment technologies, you no longer have to stand in a long line to use an ATM or a bank branch. Additionally, transactions are done more quickly and fewer individuals are waiting in line at the checkout counters.
E-payments help the nation’s urban areas transition to a cashless economy by reducing the demand for physical cash. Due to the fall in cash use in metropolitan regions, banks can provide more cash in rural areas of the nation where e-payments are uncommon.
Robbery, loss, and other comparable circumstances are risks connected with cash transactions. However, credit card security and payment gateway security measures that are included in electronic payment systems ensure that your money is secure.
Your bank statement or digital wallet will show the payments you made using electronic payment methods. Additionally, you get immediate emails and SMS alerts following each transaction. Following the e-payment option you choose, you can check the credit/debit of funds in your account.
Disadvantages of E-Payments
Digital wallet payments are prone to technical problems or outages, just like any other technology-dependent software.
There is a good chance that the online portal will have access to your bank account information or personal information if you frequently utilize electronic funds transfers and are a registered member of that website.
The Cost of Fraud
Just like more and more consumers, cybercriminals are making online purchases their preferred mode of payment. Identity theft, phishing scams, and database attacks are all on the rise.
Electronic payment systems carry several security risks. If proper security precautions aren’t followed, attackers can easily steal sensitive financial data and credit card information.
One of the major difficulties of online payments is the fact that many consumers, especially the elderly population, lack basic computer literacy. Because of their insufficient technological literacy, people avoid using online payment systems. Many of them still rely on conventional payment methods because they are concerned about the challenges involved.
Limits on the Quantity and Duration
The number of electronic payment transactions or the daily maximum amount that can be moved may be capped by some institutions. Additionally, the majority of electronic payment transactions have a deadline that you must meet.
Service Fees and Additional Expenses
When implementing online payment gateways, some businesses may charge setup fees or credit card processing fees to customers using those services.
If you are unable to identify the person’s personal information or any information on them, for that matter you cannot file a claim or ask for a refund. It becomes difficult in these circumstances.
Are Electronic Payment Systems Secure?
Offering online payment options is essentially something that is expected of you as a customer and a business owner.
Even though digital recurring payments are typically regarded as advantageous for many obvious reasons, there are several security issues that you should be aware of. After all, every helpful function in the contemporary digital environment entails a tiny level of risk.
Security should be a top issue for any company, especially if it runs an online store or the internet. To ensure online transactions are conducted safely several security procedures and standards are in place.
What to Consider When Choosing Electronic Payment Types?
Here are some of the considerations that businesses need to account for before choosing a mode of electronic payment:
1. Total Installation and Operational Cost: The cost of switching to electronic payment modes must be reasonable and lower than manual processes.
2. Customer Preference: You need to take the ease of transaction for your customers into account. Provide options that make the process seamless.
3. Payment Failure Rates: This must be the lowest in the option you choose as it is a severe burden for your business.
4. Trust and Safety: For any business, the primary challenge is to maintain safety funds and customer data, thus choosing a system with the highest security factors is a must. Choosing a cloud invoicing and payment management software like Moon Invoice can make the e-invoicing process efficient for your business.
Looking for an Electronic Payment Solution?
With Moon Invoice Software, set your invoicing on autopilot to improve client interactions and make the process more seamless, safe, error-free, and efficient.
Now that you are aware of what an e-payment is and all of its variations, you may choose your preferred payment system for online transactions.
To conduct secure, hassle-free online transactions and accept payment, you can also utilize the credit card, debit card, mobile wallet, or alternative payment methods that your financial institution offers. These online payment options can also be used to purchase a variety of goods on the websites of online retailers, eliminating the need to go to physical stores.