An electronic payment system (e-payment system) is a system for processing electronic payments through credit cards, ACH payments, and mobile wallets rather than cash or cheques. If you’ve ever placed an online purchase or paid a bill online, you’re probably familiar with e-payment by way of payment processors or payment gateways like Tailored Pay. It’s a fast and efficient way to do online transactions, which is why customers and retailers will surely benefit from electronic payment systems.
In this section, we’ll look more closely at electronic payment systems and what they can achieve for your organization.
Basic Things to Know About Payment Gateways
A payment gateway, which functions similarly to a virtual cash register, handles card payments on behalf of businesses, both online and offline. This entails verifying the legitimacy of the customer’s card data as well as confirming that there is sufficient money available to pay your company.
Differentiating Payment Gateways from Payment Processors
Payment processors, as well as payment gateways, can both have hardware and software components, making it difficult to distinguish between them only based on their components. Even though these phrases seem similar, there are significant distinctions between them.
To put it another way, a payment processor is a company that manages data digitally. In this capacity, it is responsible for evaluating and transmitting encoded transaction data to the issuing banks. An additional function of a payment gateway is to authorize financial transfers between the client and the business, in addition to the data handling functions stated above.
To put it simply, a payment gateway may be thought of as a virtual “Point of Sale” (POS) terminal, whereas the processor is often responsible for the actual processing of the transactions.
Various types of electronic payments
A non-cash payment, such as a paper check or a money order, is referred to as an electronic payment. ACH transfers, mobile payment programs such as CashApp and Venmo, and mobile wallets such as Apple Pay or Samsung Pay are all examples of what is included in this category.
E-payments are commonly made in the following ways:
- Credit card: This is the most popular way of payment for internet transactions. To make payments online, a user just has to enter their credit card information through an online form if they have the right authentication credentials in place to do so.
- Debit card: Payments by debit cards are processed similarly to credit card transactions; however, in the event of fraudulent charges, money is instantly taken from the linked bank account, posing a greater risk to the user than credit card transactions do.
- ACH: Transferring money from one account to another is made possible by automated clearing house transfers, which are direct payments or direct deposits. Depending on the kind of payment, two-factor authentication may be required before the transfer of funds may be performed.
- Mobile payment applications: These apps are integrated into a user’s bank account, credit or debit card, or a combination of these options. Funds may be taken from and paid to other users using the application. This enables consumers to complete purchases without having to provide their bank account details to the merchant directly.
- Mobile wallets: Mobile wallets, which are similar to mobile payment applications, draw funds from a user’s bank account or credit/debit card and utilize that money to make transactions on the internet.
Advantages of Using Electronic Payment Systems
E-payments are a must for every firm that conducts business online. To survive in the e-commerce world, payment mechanisms must be accepted as standard.
With electronic payments, there is no longer a need for currency, and transactions may be completed in a rapid, simple, and accessible manner. If you sell a subscription-based service or accept recurring payments, this is very useful because transactions may be completed automatically.
Aside from providing consumers with more payment alternatives, electronic payments will also supply your firm with more data and insights that will help you increase sales even further. With the data and analytics given by many e-payments systems, you may gain a deeper understanding of your clients and sell them more products in the future.
Risks Associated with Electronic Payment Systems
However, while there are several advantages to employing an e-payment system, there are also concerns that your company must consider, particularly in terms of data security and regulatory compliance.
Ensure that your website is safe and that your e-payment solution is PCI compliant before approving any transactions or asking for confidential information such as a client’s name, address, and payment information such as credit or debit card details or bank account information from them.
You must also inform the user of any information that is saved on the system or shared with other parties. The vendor is responsible for the secure keeping of client information, and it may be held liable if the data of a customer is stolen or otherwise compromised.
You can set up an effective e-payment system with assurance if you keep these points in mind and have robust security policies in place to protect your customers’ information. A reputable payment processing service, such as Tailored Pay, can assist you in navigating the complexities of e-payments and making them more simple for your online business.
The Fundamentals of Electronic Payment Methods and Your Customers
To summarize, the following points should be kept in mind while integrating an electronic payment system into your firm:
- Get to know your customer: Determine which e-payment options they like and ensure that you select one that they can trust with their confidential information.
- Maintain a High Standard of Security: E-payments entail the sharing of sensitive client information, which you must keep secret and secure.
- Provide additional payment methods: Your consumer may prefer one method over another, and having that choice may be the difference in securing the deal.
- Keep it simple: The easier it is for the consumer to pay, the more likely you will obtain the sale. A challenging or malfunctioning system will annoy and drive away prospective clients.
- Prepare for fraud and unauthorized chargebacks: Just like credit card fraud, e-payment fraud may cost you income and put your business in danger. Develop a strategy for preventing fraud and mitigating chargebacks.