Consumers want convenience; This is one of the reasons for increasing popularity in online shopping. A study conducted by Big Commerce found that e-payments are growing by 23 per cent year on year.
In the coming years, the Asian region is expected to witness a boom in e-payments. The number of digital shoppers in the Asia Pacific is projected to pass the one billion mark for the first time in 2018, accounting for 60 per cent of all internet users in the region. In line with regional developments, the fast-growing Asian market shows optimistic projections for the Indian e-payments industry.
The current active e-payment penetration in India is only 28 per cent, which has a lot of room for improvement. India’s retail e payment CAGR is projected to reach 23 per cent from 2016 to 2021.
This is a great opportunity for the business to expand its brand and significantly increase its revenue. Therefore, you need to know about Electronic Payment Systems.
Whether you’re a consumer or a businessman, here’s everything you need to know about electronic payment systems.
What is e payment system
e-payment is a method of transacting or paying for goods and services electronically without the use of checks or cash. It is also called an electronic payment system or an online payment system.
Electronic Payment System in English:
Electronic payment allows customers to pay for products or services electronically. Electronic Payments allows you to buy everything from mobiles to shoes or pay electricity or cable bills online through your favourite online store.
Why is it important to know about the e payment system?
Electronic payment systems have grown rapidly over the past decades due to the increasing spread of Internet-based banking and purchases.
As the world progresses with technology development, we can see the rise of electronic payment systems and payment processing devices.
Online payments are instant, so it is convenient and saves a lot of time. This is important, especially today when every aspect of our lives is fast.
The percentage of check and cash transactions will decrease as this system grows, improvements are made and more secure online payment systems are provided.
How does an electronic payment system work?
Understanding how electronic payment systems work can be technical because there are many parts involved. So let’s see what are the main parts required for electronic payment transactions:
- Cardholder: A cardholder is identified as a consumer who purchases a product or service online.
- Merchant: A merchant is a person or business that sells a product or service to a cardholder.
- Acquirer, or merchant account provider: The acquirer, or merchant account provider, is the financial institution that establishes an account with the merchant. The acquirer authorizes the validity of the Cardholder Account.
- Payment Processor: The payment processor handles the official transactions between the cardholder and the merchant.
- Payment Gateway: The payment gateway processes merchant payment messages and uses security protocols and encryption to ensure transaction security.
What is the process of an E Payment System?
E Payment System Process:
After knowing all the above-mentioned parts of the E Payment System, now the process behind the payment button is actually complicated, so here are some basic things to understand you better.
The process begins when a customer visits a merchant’s site and adds the item (product or service) they wish to purchase.
They will then need to fill out a payment form with certain information (such as card number, expiration date, CVV code, address).
Depending on the payment method, the customer is either redirected to the external service or the bank’s website or the payment continues on the website or in the app.
Payment Authentication by Operator:
The payment gateway (along with other parties involved) checks whether the payment information is valid or not. If all is well, the process continues and the payment gateway reports back the successful transaction. After that, the customer receives a payment confirmation – the notification is usually displayed in real-time.
Payment to seller’s account:
The online payment provider receives the payment from a customer’s bank and transfers it to the merchant’s account.
Generally, e-payments are considered to be a faster and safer option than traditional payment methods like bank transfers, checks, etc.
How many electronic payment methods are there?
One of the most popular online payment methods is credit and debit cards. In addition to them, there are alternative payment methods, such as bank transfer, electronic wallet, smart card or bitcoin wallet (Bitcoin is the most popular cryptocurrency).
Some of the electronic payment methods are listed below –
1) Credit Card
Using credit cards is the most common form of electronic payment.
When a customer buys a product through a credit card, the credit card issuing bank makes the payment on behalf of the customer and the customer has a certain time period after which he/she can pay the credit card bill. This is usually a credit card monthly payment cycle.
2) Debit Card
A debit card, like a credit card, is a small plastic card with a unique number mapped with a bank account number. Before getting a debit card from the bank, it is necessary to have a bank account.
The major difference between a debit card and a credit card is that in case of payment through a debit card, the amount is immediately deducted from the bank account of the card and hence there should be sufficient balance in the bank account to complete the transaction needed; Whereas in case of credit card transactions, there is no such compulsion.
3) Smart Card
The chip is installed. It has the ability to store customer work-related and/or personal information. Smart cards are also used to store money and the amount is deducted after each transaction.
The smart card can only be accessed using the PIN that is assigned with each customer. Smart cards are secure, as they store information in an encrypted format and are less expensive / provide faster processing.
e-Wallet is a prepaid account that allows a customer to store multiple credit card, debit card and bank account numbers in a secure environment.
This eliminates the need for account information keys that are required every time you make a payment. Once the customer registers the e-wallet profile, he can make fast payments.
e payment This is another popular method of payment. It is an easy way to pay for online purchases directly from the customer’s bank.
It uses the same method as a debit card to pay for the money already in the customer’s bank. Net banking does not require the user to hold a card for payment purposes but requires the user to register with his/her bank for the net banking feature. The customer just needs to enter his/her Net Banking ID and PIN while completing the purchase.
Advantages and disadvantages of using e-payment system
The e-payment system has become essential for the online consumer – to make shopping and banking more convenient. But it comes with many advantages and disadvantages, such as:
What are the advantages of using the e-payment system?
Advantages of an e-payment System
- Reaching more customers from all over the world, resulting in more sales.
- More effective and efficient transactions – This is because transactions are done in seconds (with one-click) without wasting customers’ time. It comes with speed and simplicity.
- Facility. Customers can pay for items on the e-commerce website anytime and anywhere. All they need is an internet-connected device. as simple as that!
- Spending control for customers, as they can always check their virtual account where they can find the transaction history.
- Today it is easy to add a payment to the website, so a non-technical person can apply it within minutes and start processing the payment online.
Disadvantages of an e-payment system
- E-commerce fraud is increasing at 30% per year. This shouldn’t be a problem if you follow the security rules, but when a merchant chooses a payment system that isn’t highly secure, there is a risk of sensitive data breaches that can lead to identity theft.
- For most, this isn’t a problem, but you need to remember that some of your personal data is stored in the payment system’s database.
- Internet Access Required – As you know, if the internet connection fails, it is impossible to complete the transaction.