What does electronic payment mean?
Electronic payments are a convenient way to pay for purchases online or in stores. Electronic payment systems reduce the amount of paper checks and cash that must be handled during transactions and make it easier for the consumer, who doesn’t have to worry about losing cash or forgetting their chequebook.
Electronic payments are also better for merchants because they eliminate the risk of theft associated with accepting cash and checks, as well as reducing the costs associated with processing paper checks.
Electronic payments can be made in several different ways: credit card, debit card, direct deposit, mobile phone text messaging and stored value cards such as prepaid gift cards or “loyalty cards” that offer discounts on future purchases at certain stores.
What are the types of electronic payment systems?
Electronic payment system can be broken down into three subcategories: one-time payments from customer to vendor, recurring payments from customer to vendor, and automatic payments from bank to vendor. Let’s take a look at each.
A one-time payment from the customer to the vendor
The one-time payment method is used for a single, non-recurring payment. This product is different from recurring payments and generally involves the purchase of a consumer item or service such as an online subscription. For example, if you order an e-book or subscription to a website, your seller will set up an account with your bank or credit card company to process an electronic payment.
A recurring payment from the customer to the vendor
Automated recurring payments are convenient and quickly growing in popularity as more consumers look for ways to simplify their financial lives. By planning ahead and setting up a regular payment plan, you can pay multiple bills at one time, get them out of the way each month, and free yourself from extra paperwork.
An automatic payment from the bank to the vendor
Electronic payment systems are a great way to streamline your business payments. These automated systems allow you to pay vendors and suppliers directly from your bank account or credit card, as well as receive payments from customers.
An automatic payment from a bank to a vendor is when a bank sets up a recurring, scheduled payment. It works the same as a recurring payment from vendor to customer, except that money is coming straight from the bank.
Other popular types of electronic payment transactions include:
Automated Clearing House (ACH)
ACH payments transfer money electronically between bank accounts through payment gateway. For example, if you want your company’s bank to send your payment for $20 for the book you ordered directly to the vendor’s business bank account, that could be an ACH transaction.
Virtual credit card
Unlike conventional credit cards that contain a security code and expiration date, virtual credit cards enable you, as the vendor, to log in to your online banking portal and create a one-time use card. This method gives an extra layer of security over standard credit cards because the card number never gets typed in online.
What are the features of an electronic payment system?
Credit cards
Financial institutions such as banks give credit cards to people for use in business and personal financial transactions.
Your transaction goes through the e-payment system that verifies your identity and that you have the money in your credit card account to pay. If so, the system approves your purchase.
E-wallets
E-wallets store your financial data such as credit card information. In this application, you could use your smartphone to buy groceries. The system recognizes who you are and that you have the money in your credit card account to pay.
Cash payment systems
There are three features of cash payment systems: direct debit, e-check and e-cash. Here are descriptions of each:
A direct debit is when a person or company directly withdraws funds from a bank account. Most of us have and use debit cards. These cards allow us to make purchases without having cash on hand or paying with checks that can bounce if there is not sufficient money in our accounts.
