The purpose of electronic payment systems is to make monetary transactions faster and easier.
Because so few consumers use cash or checks nowadays, merchants should have a basic understanding of how electronic payment systems work in order to safeguard their business and ensure a speedier, safer shopping experience for their customers.
For the purpose of simplicity, we have broken down e-commerce payment options into two main categories: electronic credit payments and electronic cash payments.
Electronic credit payments
The first and most obvious form of credit payment is the credit card.
Simply put, this type of electronic payment allows a consumer to use the card (or just the card number in the case of card-not-present purchases) to make a payment.
Credit cards are issued by banks and credit card companies and a cash payment is required later to pay for each transaction.
Smart cards, also called chip cards, were developed as a safer alternative to traditional magnetic stripe cards.
Each “chip” is a tiny microprocessor that makes the cards nearly impossible to clone, thanks to sophisticated encryption technology embedded inside.
The e-wallet (also called a mobile wallet or digital wallet) is a newer electronic payment option that makes transactions faster and easier for consumers by providing a secure place to store multiple credit card and bank account numbers.
Electronic cash payments
Debit cards and direct debit transactions are the most common forms of electronic cash payments.
The card instructs the bank to take money from the cardholder’s account and apply it as payment for goods and services.
E-checks, as the name implies, are an electronic version of paper checks that withdraw money directly from the payer’s checking account.
The funds are the routed through an automated clearing house (ACH) before being transferred to the payee.
Stored-value cards, including gift cards, may also be used as a form of electronic cash payment.
Electronic payment systems are the future of commerce. Is your business ready?
Payment technology continues to evolve to meet the needs of modern consumers, but that also means merchants must be ready to accept these new forms of payment.
Being slow to adapt to new technology could mean missing out on key opportunities to increase revenue, and your business could suffer significant losses as a result.
Not sure if your payment processing system is everything you need it to be?
Call MyWatchmen today at 1-888-256-2845 or schedule a time to meet with us.
Our experts are well versed in the latest payment processing trends, which means we can help your business stay competitive and provide a safe and efficient shopping experience for your customers.