A Quick Guide To Electronic Payments
Electronic or digital payments is the fastest growing payments area, and one of the most commonly used payment methods among consumers. From buying clothes to groceries, from registering for digital services to paying bills online, electronic payment gives users comfort and convenience.
Besides its growing popularity among customers, businesses were also given a heavy push toward electronic payments last year due to the pandemic creating an economic shift.
According to American Express, in 2020, 70% of small businesses started prioritizing e-commerce solutions in order to remain competitive during the COVID-19 outbreak. Two-thirds of businesses now prefer for customers to pay with a card or app instead of cash — 12% will discontinue taking cash in the future because of the pandemic.
What does electronic payment mean?
Electronic payment, also known as e-payment, online or digital payment, is a non-cash payment that’s processed with a credit or debit card online or via Automated Clearing House (ACH) payments.
Here we’ll discuss the first category and you can learn everything you need to know about ACH payments.
Types of electronic payments
Most electronic transactions fall into these two categories:
- One-time customer-to-business payments: The most common type of electronic payment that usually occurs in webshops. During the checkout process, the customer types in their credit card information, which then gets processed by the site, authorized by the customer’s bank and finally, with a confirmation that the payment went through.
- Recurring customer-to-business payments: This type of electronic payment often happens when paying bills online to businesses. For example, setting up an automated payment schedule with a business.
Methods of electronic payments
A payment method is a specific financial tool that is used to transfer funds — in the case of electronic payments, it’s an electronic funds transfer (EFT), which provides consumers with the following options:
- Credit and debit cards: To accept credit and debit card payments, businesses must have credit card terminals, a POS or a mobile payment system, a virtual terminal or an online payment processing option such as, a shopping cart or a hosted checkout page.
- eChecks: These checks are processed digitally, and can be peer-to-peer, business-to-business, or business-to-customer — they provide many benefits for customers and merchants.
Benefits of electronic payments for businesses
Paying online can be convenient for customers, both when done from home or in the store, especially as contactless Near Field Communication (NFC) payments and card-not-present options are on the rise. Therefore, investing in electronic payment is a good choice for businesses as it’s:
- Cost-effective: The handling costs for cash payments can be higher for businesses, making electronic payments a worthwhile choice in many cases.
- An opportunity to increase customers and sales: With digital shopping becoming the primary choice for customers, a business offering an online payment option is instantly in a good competitive position to attract new customers and sell more.
- A great way to improve purchase efficiency: By providing electronic payment options in stores, the speed of payment handling can be quicker; saving time for both businesses and customers.
- A safer transaction option: From manual errors around physical checks to today’s security features (e.g., authentication, encryption), while not promising a 100% solution — as with none of the currently existing ones —, electronic payments are still the safest option when it comes to data protection.
- A more sustainable solution: Compared to paper-based systems, electronic payment — although not necessarily carbon-neutral itself — helps save trees and reduce carbon dioxide emissions.
How to accept electronic payments
Here’s our basic checklist for businesses that decide to start accepting electronic payments:
If you want to outsource the process:
✓ Find a payment processor and gateway provider, such as CardConnect, that will handle the transactions, authorizing legitimacy and ensuring safe and secure processes, providing businesses with the needed certificates and a range of e-commerce solutions
If you want to handle electronic payments in-house:
✓ Set up a secure server
✓ Build a website with SSL (Secure Socket Layer) certificate for data encryption
✓ Get a digital authentication certificate to prove your site is legitimate
✓ Make sure you have a shopping software and building or buying overall e-commerce capabilities for the site
✓ Find a payment processing system and a merchant account with a financial institution
Find a payment provider
Dictated by current customer trends — whether it’s about convenience, safety or sustainability — electronic payments are becoming a required asset among business payment options.
As made evident by the above two checklists, working with a payment provider to accept electronic payments can be much easier and stress-free for businesses. When exploring options, it’s best to set out to find a partner that will not only provide secure payment acceptance integrations but support and resources to help businesses keep growing.
If businesses found the appropriate payment processing system, they can be sure that accepting electronic payments will be less hassle and more smooth operations.