The banking and the tech industry is achieving one milestone after another in providing convenience to its customers, which is why the way consumers make payments has been revolutionised. Now, cash is not the only payment method that is widely accepted, alternate payment methods which are internet enabled have come into play and are slowly spreading across every nook and corner to appeal and cater to a wider customer base. This new method of payment is referred to as e-payment, which involves transferring of funds due through the electronic or digital medium in a transaction. There are various methods or modes of e-payments which we will discuss later but first, let’s learn about what is e-payment and its various advantages.
Did you know? India made a mammoth 48.6 billion real-time e-payments in the year 2021, which is approximately about 2.6 times the number of real-time e-payments made by China in the year 2021.
What is E-payment?
As the name itself implies. E-payment definition refers to all kinds of financial operations that are carried out with the help of electronic devices like computers, smartphones and tablets or anything that is connected to the internet. E-payment stands for payment of goods and services without the use of physical cash and is often popularly termed an online payment system.
Generally, e-payments are done through the use of debit and credit cards, bank deposits and also through other alternative means like the use of e-wallets, bitcoin and various other cryptocurrency tokens.
Advantages of E-Payments
E- payments have become increasingly popular among the general masses of our country because of the vast list of advantages it willingly offers, which are as follows:
- E-payments are considered time-saving as purchases made can be easily processed instantly and transactions are completed within a few minutes, which allows consumers to save time associated with arranging cash for the transaction.
- Electronic payments are much more efficient as consumers do not need to stand in long queues outside ATMs for cash withdrawal purposes. Each transaction takes very less time to be processed and e-payments can be used to pay for all kinds of goods and services on online websites, reducing the need to visit physical stores.
- E-payments help in building a cashless economy, especially across the urban areas of the country by reducing the dependency on cash being used for every transaction.
- Cash transactions have certain risks like robbery, and misplacement attached to them but e-payments come with various security protocols that ensure the safety of funds involved in a transaction.
Various types of Electronic Payments
E- payments are becoming increasingly popular among the youth and the masses with each passing day, but did you know that there are different modes of e-payment? E-payments can be done in various ways, which are as follows:
In this method of electronic payment, the amount due is digitally transferred over the internet from one bank account to another through some popular modes of electronic funds transfer such as NEFT ( National electronic funds transfer) which is processed in batches and up to a ceiling limit of ₹2 lakhs, and RTGS (Real-time gross settlement) which are settled individually for transactions above ₹2 lakhs.
Payment through cards
One of the most popular methods of electronic payment, payments through cards are made through either debit or credit cards. In this method, a device that accepts electronic payments helps in initiating online payment through either debit or credit card.
Mobile wallets have become increasingly popular among people all across the country. It is referred to as a virtual wallet in a mobile phone and stores all kinds of card-related information on the mobile device. It is easy to use and offers a hassle-free seamless payment experience to its customers
QR code payments
QR stands for quick response code, a code that contains a distinctive pixel pattern made up of barcodes or squares arranged in a grid-like pattern. Each part of the code contains vital information related to the transaction and the merchant’s details. To make a payment, one has to use their mobile device to scan the QR code available with the merchant, and then seamlessly transfer the amount due electronically without any hassle.
The NPCI (National Payment Corporation of India) has helped in developing an instant real-time electronic payment method to facilitate transactions between different banks instantly in a smooth manner. This payment system is UPI (Unified payments interface). Under this system, users need to create a UPI ID and transactions are processed through the UPI ID, after which a six-digit UPI code needs to be entered to complete the transaction.
One of the fastest growing electronic mode of payment, contactless payments are growing in popularity. These kinds of payments are done through newly developed RFID and NFC technology where individuals need to just tap or hover over the payment device to make the payment. This kind of payment method is also known as “ Tap and go”.
Payments made through wearable devices
Wearable devices are increasingly becoming popular among customers across the country. These devices are generally linked to the bank account of the consumer and are used to make online transactions. One of the examples of a wearable device is a smartwatch.
Payments based on AI
Artificial intelligence and the emergence of machine learning have revolutionised the world. Solutions based on AI are becoming increasingly popular. Payments based on AI like the use of speakers, chatbots, deep learning tools have made it much easier for businesses to maintain all kinds of transparency in an online transaction.
How Does E-payment Work?
Although the entire process of e-payments is considered to be swift and effortless, the process until it reaches the payment stage is considered a bit complex. It requires very detailed and advanced technology and high-security measures to ensure that the e-payments are transacted fast with convenience to the customers, requiring a minimal amount of effort.
The whole mechanism of electronic payments consists of three main stages which are followed for the completion of each and every online transaction to take place, which are as follows:
Initiation of The Payment Process
It is the consumer who starts the payment process. The customer visits the online website of the merchant and adds relevant items like goods or services or both of them combined, and adds them to the cart. Then, the customer is required to fill out a checkout form where he needs to enter vital information like card number, expiration date and CVV number. After entering such details on the merchant’s website, the customer is then redirected to the external or bank’s website to continue the payment process.
Authentication of payment by the operator
The payment gateway runs a check whether the information entered is valid and true or not. If the data is considered correct, the payment process continues and the payment gateway reports the successful transaction to the customer. On the completion of the transaction, the customer receives a confirmation of the payment made to the merchant to avail various goods and services.
Transfer of money to the merchant’s account
After the completion of the transaction, an online payment provider receives the payment from the customer’s bank account and later on, transfers the amount to the merchant’s bank account to complete the transaction.
This was all about what e-payments are and their various advantages, various modes or types of electronic payment method used to complete an online transaction and the mechanism or the functioning of the e-payments process. We hope that with the help of the information shared in this blog, the readers will be able to comprehend and understand more about the meaning of e-payment and its various constituents.
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