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Features of Electronic Payment System: What Are These Key Capabilities? Share:
Electronic payment systems play a significant role in the business and financial world. Commercial companies recognize the need to integrate viable payment methods to stay relevant in today’s digital era. Enabling effective online transactions can give your business the competitive edge it needs. If you want to power your company, you should consider the key features of electronic payment system before adoption. In this article, you’ll learn what to look for in a provider.
An Electronic Payment System (EPS) is a digital infrastructure that enables the online transfer of funds between individuals or entities. It has become an alternative to traditional cash transactions by offering speed, convenience, and efficiency. No wonder the global electronic payment system market is projected to grow from USD$42 million in 2022 to USD$53 million by the end of 2030.
The existing systems can be split into three categories. First is a one-time payment between a consumer and a vendor. For example, you purchase a bag online, which happens to be a one-time operation. You are not going to purchase another bag in the near future. Second is a recurring payment between a consumer and a vendor. For example, you regularly purchase favored office supplies online. You may even subscribe to a supplier’s product to receive the same order once or twice a month. The last is an electronic payment between a bank and a vendor. In this case, the bank creates a recurring payment, enabling future transactions to be made directly from the bank account.
All three categories are widely used for commercial purposes. Based on various technologies (online banking, mobile payment apps, and electronic point-of-sale terminals), they enable smooth online transactions for consumers and businesses.
Commercial companies should enable fast, secure, and convenient transactions to retain their customers. Understanding the primary components of e-payment systems can help them select the best options on the market.
Payers and Payees: The payer is the individual or business making a payment, while the payee is the recipient.
Financial Institutions: Banks or other financial institutions facilitate the transfer of funds between payer and payee.
Electronic Devices: Computers, smartphones, or point-of-sale systems help both the payer and payee interact with the system.
Communication Networks: These networks transmit payment data between devices, financial institutions, and gateways in real-time.
Payment Gateways: A payment gateway securely processes and encrypts payment data between the payer’s financial institution and the payee’s account.
Mobile Payment Apps: Apps like Apple Pay or Google Wallet allow users to make payments using their smartphones.
Businesses and consumers get access to multiple electronic payment systems. Each of them has its own individual purpose. Here are the main types to choose from:
Credit cards allow consumers to borrow funds from a bank or credit provider to make online purchases. They are widely accepted globally, with 2.8 billion credit cards in circulation.
Debit cards allow consumers to access money directly from their bank account. Banks issue these cards for online purchases and cash withdrawals from ATMs.
Virtual payment cards generate a temporary card number for online purchases to protect the actual card details. It’s a secure way to do online shopping without exposing sensitive data.
Online banking allows consumers to manage accounts, transfer funds, and make payments via their banking platform. It’s a convenient way to handle financial transactions remotely.
Electronic Funds Transfer (EFT) is the process of transferring money from one bank account to another electronically. It includes various payment methods like direct deposits, bill payments, and wire transfers.
Automated Clearing House (ACH) is a network that processes large volumes of credit and debit transactions in batches. It’s commonly used for payroll, direct deposits, and recurring payments.
Bank transfers (B2B and B2C) enable funds to be moved between bank accounts. Widely used for larger transactions, they can be processed domestically or internationally.
Real-time payments allow immediate transfer of funds between banks, offering faster settlement times than traditional systems. This is ideal for urgent payments, such as emergencies or quick business transactions.
Mobile wallets, like Apple Pay or Google Wallet, keep payment card data stored on smartphones. They allow consumers to make quick, contactless payments through their mobile device.
Cryptocurrencies like Bitcoin enable peer-to-peer digital transactions using decentralized blockchain technology. They act as an equivalent to traditional payment systems with increased security and privacy.
Businesses need to improve transaction management to stay competitive in the market. Let’s see the key features of electronic payment system that will optimize efficiency, enhance security, and provide a smooth customer experience.
Electronic payment providers must comply with strict security protocols based on industry and regional regulations. They must implement strong security measures to protect sensitive data from fraudsters.
Encryption is an effective instrument for encoding personal and financial data so that only authorized users can read or access that data. Two-factor authentication (2FA) is another way to keep electronic payments safe. It means a second form of verification (e.g., phone message or email) is required upon logging into the system. There are even more instruments to prevent hacking, phishing, and identity theft. When selecting an e-payment system, make sure it protects both your business and your customers’ data from potential cyber threats.
Round-the-clock availability allows businesses and consumers to process transactions at any time. Payment data is stored in the cloud, so you can easily access special records, reports, and transaction details without delay. Constant accessibility increases payment workflows since businesses don’t have to work within traditional banking hours. Customers are free to make purchases whenever they want.
As e-commerce continues to expand, electronic payment systems play a significant role for all parties involved. They enable businesses and consumers to send and receive money across borders without delay. Companies looking to grow internationally should choose an online payment provider that can facilitate cross-border transactions while complying with international regulations. This approach allows them to expand their market reach and serve a global audience effectively.
Businesses should provide alternative payment options to meet the various preferences of their customers. Most systems support credit and debit cards. However, the availability of mobile wallets (e.g., Apple Pay, Google Pay), mobile wallets, and cryptocurrencies can help them cover a larger audience. Offering a variety of payment methods also enhances the customer experience, increases convenience, and reduces the number of failed transactions.
Businesses can work with international customers and suppliers, using wire transfers, mobile wallets, and other methods. They don’t have to bother about currency exchange. With the right electronic payment system, online transactions can be processed in national currencies. The more you can process, the better. Customers paying in their local currencies can avoid foreign transaction fees, which encourages them to make repeat purchases.
Businesses accepting card payments must comply with Payment Card Industry Data Security Standards (PCI DSS). They must meet twelve requirements in order to protect customer data from fraudsters, maintain network security, implement access restrictions, and complete system monitoring on a regular basis. EPSs compliant with the highest standard (PCI DSS Level 1) can raise your customer satisfaction and contribute to your business growth in the long run.
Electronic payment systems typically perform quick calculations, such as currency conversions, tax adjustments, and discounts. This way, they ensure accurate transactions and prevent errors that could slow down the process or frustrate customers. Automated calculations also help businesses save time and eliminate the need for manual input, which reduces the risk of mistakes. In addition, quick calculations enhance financial reporting by providing up-to-date transaction data. Thus, businesses can handle complex payments more efficiently and improve overall operational accuracy.
Electronic payments offer benefits to different industries, including retail, healthcare, food and beverage, education, etc. When checking functions and features of electronic payment system, focus on those that make your business achieve greater efficiency and time savings. By speeding up transactions and improving accuracy, your company can strengthen relationships with suppliers, reduce operational costs, and enhance cash flow management. The right system can provide better visibility into the payment process, allowing your company to track and manage funds more effectively.
Modern e-payment solutions keep repetitive and manual tasks automated. Invoice processing, reconciliation, and transaction tracking don’t require manual verification anymore. Automation ensures that payments are processed quickly and accurately. Businesses get more time and resources for more critical functions, such as improving customer service, optimizing supply chains, and pursuing strategic growth. As a result, they can improve their performance in the long run.
Regardless of the built-in security algorithms, electronic payment systems are still vulnerable to fraud. Unauthorized access, inaccurate credentials, or illegal activities can occur, meaning
financial losses for consumers and businesses. When looking for the best solutions, pay attention to strong security and card industry standards. It’s crucial to protect sensitive financial information from cyber threats to gain stakeholder trust, prevent significant financial losses, and maintain proper business functionality.
Increased online shopping demands and technological advances have driven the evolution of electronic payments. Each of them offers unique advantages and disadvantages that must be carefully evaluated based on a business’s specific needs. To remain competitive, companies must embrace the key features of electronic payment system in e-commerce strategies. Implementing these systems not only increases efficiency and reduces errors but also aligns with digital payment trends. Thus, businesses can enhance operations and position themselves more effectively in a highly dynamic and competitive market.
