There are a variety of options in the ePayment industry. Here, we examine what an ePayment system is, the different types of electronic payments available, and the pros and cons of implementing ePayments into your business.

ePayment Systems Table of Contents

What Are Electronic Payment Systems?

Electronic payment systems are gateways that allow consumers to make payments for goods and services using digital payment options instead of cash or paper checks. These payment systems can handle a variety of payment types and can be used in most industries. They function by processing electronic funds transfers (EFTs) between customers and merchants.

The first electronic payment service was introduced in the 1970s by American Express. The company created a card that could be used to make purchases at stores and withdraw cash from ATMs. This was the first time that people could use their credit card to pay for goods and services without having to carry cash with them.

Full-service ePayment systems did not emerge until the 1990’s and was brought to market by a company called CyberCash. They were the first company to offer an online payment service that allowed people to pay for goods and services online via card payment.

Today, the most popular ePayment systems in PayPal, Apple Pay, Google Pay, and Amazon Pay.

ePayment Systems for Businesses

Many small and mid-sized companies use ePayment systems in their daily operations. They allow customers to make purchases or subscribe to ongoing services. However, not all payment systems are created equal. Here are some of the most popular ones in the marketplace today:

  • Stripe
  • Square
  • Adyen
  • Braintree
  • PayPal

There have been some hiccups for PayPal in recent months, but it still remains one of the most popular payment systems because it offers versatility. It can do a variety of things all inside one platform, including payment processing, invoicing, and bookkeeping services.

Later in this article, we provide a guide on how to choose the best ePayment processing service for your business. There are a variety of factors to consider, so be sure to check out that section, as well.

Types of Electronic Payments

The ePayment industry continues to evolve and new payment types are being introduced each year. However, there are several types of electronic payments that have become staples in the industry. They can roughly be divided into two categories: credit payment systems and cash payment systems. If you’re looking to add ePayments as an option for your customers, consider the following types of payments.

Credit Payment Types

These payment types allow customers to use credit lines to make purchases. They include payment types such as:

Credit Card Payments – the use of credit cards or lines of credit for purchases

E-Wallet Payments – the use of a digital storage system where customers can save their credit card data to make payments simple and easy in the online space. This can include PayPal, Google Pay, Apple Pay, etc.

Smart Card – a purchasing card that is pre-loaded with funds from another credit or debit account but can be used to make purchases just like a traditional credit card.

Cash Payment Types

Cash payment systems allow customers to make digital purchases using real money, instead of credit lines. This means that the electronic funds are moved from one account to another to cover the purchase, just like using cash without the hassle. These payment types include the following:

Debit Card Payments – a card that is attached to the customer’s checking account

eCheck Payments – the use of the bank account number and routing number to move funds from the customer’s account to the merchant account without using a card

Wire Transfers – these payments use the bank account numbers for the customer and merchant but include a different routing number from that of eCheck payments. This method tends to be faster than eChecks.

ACH or direct debit – a payment method where the customer allows the merchant to do a direct debit from their account. This is often seen in subscription services.

E-Wallet Payments – the use of a digital storage system where customers can save their bank account data to make electronic cash payments simple and easy. This can include PayPal, Google Pay, Apple Pay, etc.

Pros and Cons of Electronic Payments

As is true with most evolving technology, there are pros and cons to using online payment systems. Merchants and consumers can both benefit from payments but should also be aware of the risks associated with electronic payments.

Pros of Electronic Payments

Merchants can reach more customers globally by offering electronic payments to their customers. In the same way, consumers can access far more goods and services by having electronic payments available to them.

Electronic payments are usually efficient and instantaneous. The transactions can often be processed immediately without wasting the merchant’s or the consumer’s time.

ePayments are convenient for both parties involved. Instead of dealing with cash or paper checks, the funds can be transferred electronically and both parties have a record of the time, place, amount, and other details of the transaction.

Most electronic payment systems are highly encrypted and offer a secure option for consumers and merchants. Contrary to popular belief, ePayments are more secure than cash because you don’t have the risk of losing the cash and never recovering it.

Cons of Electronic Payments

Electronic payments are traceable. In most cases, this isn’t an issue for either party, but it should be noted that it can cause problems for consumers who want their activity to be undetected.

Online payment fraud still exists, despite ePayment providers’ best efforts to keep consumers and merchants safe. There is always a risk with processing payments electronically.

Processing fees can be an issue for both consumers and merchants, too. Many businesses pass their processing fees on to their customers who must pay them to complete their transaction. The fees differ from one payment type to the next, but they are not free like paying with cold, hard cash.

How to Choose an ePayment System for Your Business

Choosing the right ePayment system for your business can seem like an overwhelming task. To help you overcome that obstacle, we’ve put together a simple guide to understand the basics. Understanding these concepts will help you ask the right questions and make an informed decision.

Here are some of the most important things to think about when choosing a processor for your business.

Security – The safety of your customers’ data should be your number one concern as an online merchant. Be sure to ask potential ePayment systems to share their credentials for PCI Compliance and data encryption. You should also ask about fraud prevention/detection tools like address verification, 2-factor authentication, and tokenization.

Payment Options – What payment options can the system offer to your customers? Some systems only accept credit cards, which are one of the most expensive payment types for a merchant due to high processing fees. Instead, look for an ePayment system that offers other options like eChecks and digital wallets.

Costs – Electronic payment processing can be extremely expensive, especially if you’re not sure what you need. Most processors have 3 basic pricing models, each of which offers something unique to the merchant. Do some research on the different pricing models: tiered, flat-rate, and interchange-plus. Ask the different processors what they offer and what their fee schedules are. You can then compare them to one another.

Reputation – Read reviews about the business to find out what others are saying about them. If you’re a member of a trade organization, ask for feedback about the processors within that network. You can also ask the processor for some referrals from current clients you can reach out to.

Contract – You may want to use an attorney for this one. Check out the conditions of the contract, the length of time you’re expected to continue using their services, and what the cancellation policy is. Are there costs associated with early termination? These are all important questions to ask when reviewing the contract.

Final Thoughts

ePayment systems are here to stay. If you don’t already have one implemented for your business, you should consider the pros and cons of making a change. As global e-commerce increases, you have the opportunity to reach more customers by offering electronic payments. If you decide to move forward with it, follow our simple guide and ask all the right questions when you speak to potential processors. After all, learning more never hurt any business!