Complete Guide to Electronic Payments (E-Payments) | Tipalti (2024)

Ask any consumer about the holidays and chances are they buy more gifts online every year. Black Friday is slowly being replaced by Cyber Monday as brands compete for a piece of thee-commercepie. That’s because online shopping is a trend that continues to grow year after year. It’s estimated there will be close to2.05 billion global digital buyers in 2020.

Online shopping is growing at exponential rates. Think about it. How many companies now offer free shipping? Competition is fierce and the ones coming out on top are the buyers. That means the faster the sale, the more money to be made. This is whereelectronic payment systemscome in.

What are Electronic Payments(E-Payments)?

The popularity ofelectronic paymentshas skyrocketed in the past decade due to the spread of internet-based banking and online shopping.Electronic payment systemsand payment processing devices are on the rise as people seek to transact in this manner everywhere. As thesepayment processesimprove and provide more secureonline paymenttransactions, businesses will be using checks and cash much less.

You will seeelectronic paymentsabbreviated in many ways like “epayment” or “e-payment” but it’s all the same. People useelectronic paymentsbecause they want to make it easier totransfer moneyand buy things online.

You also don’t have to inputcredit carddetails into a ton of sites. There’s no need to pull out yourVisaorMastercardto buy. E-paying is usually as simple as clicking a button (think PayPal). This is especially the case for sites that makemobile paymentseasy. No one is typing theircredit carddata into a phone.

Electronic payment solutionsusually provide the majority of services for free. You can be charged transaction fees for selling and other actions like invoicing, large payments, and international transfers. Moste-payment servicesmake their money by charging the merchant.

How DoElectronic PaymentsWork?

Electronic paymentsfunction in a few different ways and there are many platforms to choose from. When you open an account, money can be paid into it using abank cardorbank account. When you shop online, money is deducted from the balance. If you’re selling things, it will be transferred like anACHpayment. This is realwebmoneythat can be pocketed in yourbank accountat any time. It typically takes 1-2 business days depending on theepayments systemyou are using.

If you are uncomfortable keeping money online, as long as acredit cardorbank accountis linked to youre-paymentplatform, you can still transact. When something is purchased, the system will go straight to your financial data in the offline account and pull the money from there. All you need to buy or sell is the account details of thee-paymentsservice.

The Pros and Cons ofElectronic Payments

What are the advantages of gettingsuppliers to adopte-payments? Is this a system that could work for your business? How much time and money can be saved?

There are pros and cons to any financial system. Here are a few forepayments:

Pros

  • Streamlinesonline buying. Just click a button and enter a password.
  • Secure payments. No need to give out card details.
  • Usually free and highly cost-effective (especially for international payments).
  • Transactions can be made in seconds, anytime, from anywhere (you just need to be connected).
  • Expense control. You have a transaction history of all online purchases.
  • Anti-fraud tools and safer payments.

Cons

  • E-paymentcompanies are not protected by many government organizations, like the Financial Services Compensation Scheme. TheUnited StatesFederal Reserve also has stipulations.
  • If ane-paymentcompany goes out of business, you could lose money if stored under anaccount numberin their system.
  • Even when using acredit card, you will not get additional protection under section 75 of the Consumer Credit Act.
  • E-commercefraud is growing at arate of 30% per year. There is always the risk of sensitive data breaches.
  • Lack of privacy. Your personal data (like address andphone number), as well as your banking info, is all stored online.
  • If the internet fails, youre-paymentswill not go through. You must be connected to use the service.

Despite there being some disadvantages to anepayments e-walletand other forms of electronic transactions, the global online shopping market size ispredicted to hit4 trillion in 2020. There is no denying how essential this form of finance is.

Types ofElectronic Payments

There are many ways to send a payment electronically. In addition to debit andcredit cards, you can use:

  • Electronic wallets (e-wallets)– A prepaid account that stores user data for online transactions.
  • Bank transfers–ACHtransfers
  • Smart cards– A plastic card with a microprocessor that can be loaded with funds for online transactions. Anepayments prepaid MastercardorVisais usually what is offered. PayPal has a card that can also be used at anyATMforcash withdrawals.
  • BitcoinorLitecoinwallet– These are both forms ofcryptocurrency.

Electronic CashPayment System

  • Direct debit— The bank collects a specific amount of money to pay for goods or services electronically.
  • E-cash –This is anelectronic payment systemwhere money is stored on your device and made accessible for online transactions (think Apple Pay andGooglePay). It’s also called “contactless payment.” Rather than swiping a card, you are tapping a smart device at the point of sale.
  • E-check— A digital version of a paper check. It’s an electronic transfer of money from abank account, without the use of the paper.
  • Stored-value card— Giftcards from a specific brand that can be used online to make purchases in their store.

Securing funds electronically is one of the top globalpayment methodswe have. In 2023,eCommerceretail purchases areexpected to risefrom 14.1% to 22%. The need is only increasing and having ane-payment systemmarried to your online commerce is a must. The more ways you offer people to pay, the better the buying experience. And when people are happy, they always come back.

Complete Guide to Electronic Payments (E-Payments) | Tipalti (2024)
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